Peninsula economy stable, diverse

The Kenai Peninsula is characterized by stable, steady growth, a diverse economy, a relatively low cost of living and a wide variety of jobs and supporting industries, a state economist contends.

Alyssa Shanks, economist for the Alaska Department of Labor in Anchorage, said the diversity of the Peninsula’s economy is a benefit that has helped it grow at a rate just slightly faster than the rest of the state for several years. Shanks said a diverse economy means more opportunities for residents living in the area and a bigger draw for those looking for somewhere to live.

Diversity also means the economy of an area is better able to handle shocks to one industry.

“It is good because you don’t have all your eggs in one basket,” Shanks said. “So if one of your industries gets hit, if you are all about tourism and you have a really bad tourism year, well then your whole community has a bad year.

“The other nice thing about being diverse is you attract a population of people who can do all sorts of different things, so it adds diversity to your population and it makes you more attractive,” she said.

The Kenai Peninsula has several strong industries including health care, oil and gas, fishing, the public sector — such as education and government — and tourism. Shanks is quick to also mention the professional business service industry that supports the area’s main sectors. These are jobs like engineers, geologists and surveyors.

The Peninsula’s structure and diversity is unique for a community its size, Shanks said.

“I think that location is definitely on your side — you are near natural resources but you are also near another large population center,” she said. “I think people refer to the Kenai as Anchorage’s playground and that kind of thing, so that’s definitely a help in terms of bringing money in and bringing an industry in.”

However, Shanks said looking only at diversity can give a false sense of security when considering an economy.

“If you look at jobs and industry data, you’ll get a sense that a community is more diverse than it really is,” she said. “What I mean by that is, yeah you have jobs in all these different industries so it looks diverse, but when you actually look at what brings money into a community, you are not.”

The backbone for the Kenai Peninsula’s diverse industries comes back to oil and government — mostly federal — which is much the same support the state receives as a whole.

“When you look at what is keeping the other industries afloat, and what pays the bills in that area, if you can trace the money back to only one or two industries then you are vulnerable,” she said.

However, that fact can make both the state’s and the Peninsula’s economies susceptible to slumps. But it can, at the same time, help during a recession.

“In terms of speed of which we would feel it, I don’t know if it would be that different, but when we look at helping or hurting in a recession, it really depends on what caused the recession,” she said. “So if the recession was caused by something related to oil and gas then it would be felt here just like anywhere else. If the recession was caused by the housing bubble, because we are so dependent on oil and on federal dollars, then we’ll be OK.”

The Peninsula’s employment growth has remained consistently above the state’s through the years — in the 2000s Shanks said that growth was 1.4 percent for Kenai, compared to the state’s 1.1 percent.

The area’s employment growth from 2010 to 2011 was 1.65 percent. But growth for 2012 — if it continues the same growth for the last quarter of the year — will be up 2.7 percent from 2011, Shanks said.

“That’s way more than I thought,” she said. “I thought it was going to grow by 1.3 percent.”

That growth is coming in areas like health care, oil and gas and professional services — “the places you would expect it to come from,” she said.

“I kept being asked about all the activity that’s going on, oil and gas on the Peninsula, ‘Do you see it, is it in the data?’” she said. “For the longest time I did not and it wasn’t showing up in the data.”

For 2013, Shanks predicted employment growth of about 2 percent, up slightly from 2012’s estimated 1.3 percent job growth.

“There’s a lot going on,” she said. “… The smaller communities have a lot of things going on that, in the grand scheme, aren’t that big, when you put them all together, they make a difference.”

“I think the (Peninsula’s) amount of growth is the biggest change,” she said.

The Kenai Peninsula Borough’s unemployment rate in November 2012, the most recent data available, was 7.9 percent, compared to the state average of 6.6 percent and the national average of 7.7 percent. In November 2011, the borough’s unemployment was 8.9 percent.

The borough’s health care sector grew 1.47 percent year-over-year through the third quarter of 2012, which is less than its previous 3.2-percent growth through the last three quarters of 2010 and 2011. This year’s growth is surprisingly less than the U.S. healthcare system’s growth of 2.27 percent, Shanks said.

“It looks like a lot of that growth is coming from the smaller clinics and outpatient health care,” she said.

The Peninsula’s average income —$42,156— from an earned paycheck is higher than the national average, but lower than the state average of $48,851 and the Mat-Su’s $37,460.

“I think that in terms of how much people are getting paid and how much it costs to live there … it seems like a decent wage on average,” she said.

Kenai’s homes are some of the most affordable in the state, Shanks said. According to statistics, the number of average jobs needed to afford a single family home on the Peninsula is 1.21, compared to the state average of 1.32 jobs or the Matanuska-Susitna Borough’s 1.66 jobs.

 

Brian Smith can be reached at brian.smith@peninsulaclarion.com

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