Trends 2016: Despite state downturn, peninsula economy looks to stay steady

Though the economy looks grim elsewhere in the state, the Kenai Peninsula’s diverse economy has somewhat shielded local employment.

While the state faces budget cuts and employee layoffs and the oil and gas industries stall, employment in other sectors of Alaska’s economy has grown slightly since last year. Though the major moneymakers are in oil and gas, most of the workforce on the peninsula is in retail and hospitality, both of which are showing growth.

The peninsula’s economic growth has consistently outpaced the state’s growth since the 1960s, said Alyssa Rodrigues, an economist with the Alaska Department of Labor & Workforce Development. Since 2010, the peninsula’s economy has grown at a rate of approximately 1.5 percent, while the state’s grew at approximately 1 percent.

“The edge the Kenai has (over the state) shrunk over time, but it still outperforms the state,” Rodrigues said. “I am curious as to what it is that makes the Kenai continue to outperform the state even though the economic structure is so similar in both cases. You’re an anomaly. You’re a Rubik’s cube in pants.”

Employment is project to shrink in 2016, though less than statewide, she said. In the first three quarters of 2015, there was growth in the hospital, retail trade, manufacturing, professional & technical and federal government sectors. However, there were also losses in state government, health care, local government, oil and gas and construction. Rodriges said she would guess that employment losses for 2016 would be between .5 and .8 percent on the peninsula.

However, one of the advantages the peninsula has is the variety of economic activities the residents engage in, said Barbara Sheinberg, a senior planner at Juneau-based Sheinberg Associates, a community planning firm that was contracted to complete the 2015 Situations & Prospects report for the peninsula.

“People have refused to be pigeonholed on the Kenai — it’s one of your assets as a people and as a place,” Sheinberg said at the Industry Outlook Forum in Kenai in January. “Hardcore slope workers also have B&Bs. Charter boat operators do welding jobs in the off season. Teachers raise sled dogs. Medical professionals dabble in trapping.”

The central peninsula is becoming a center for commerce, especially Soldotna. Sheinberg and Associates tracked the average daily traffic at particular sites on the peninsula, and the traffic at the Soldotna Y intersection increased sharply between 2003 and 2013, reaching more than 18,000 cars per day.

Soldotna, K-Beach and central and north Kenai have seen the most commercial growth in the central peninsula, according to the report. However, the gross sales in the borough by amount have grown most outside the cities, becoming a clear majority between 2003 and 2014. Total gross sales across the peninsula came out to $4.33 billion in 2014; $2.61 billion of that took place outside the cities.

“I like to look at gross sales because that tells you, ‘Where is commerce happening?’” Sheinberg said. “You can see a trend over time (of sales outside the borough) going up. … Most of that is going to be oil and gas related.”

Sheinberg said gross sales saw a sharp growth recently outside the borough, likely due to oil and gas as well, but those sales are likely to drop “by an equal magnitude” because of the decline in oil and gas activity.

Mining and quarrying — which includes oil and gas extraction — are on the decline, along with construction contracting, wholesale trade, retail trade and professional, scientific and technical services, Sheinberg said. However, the residential property rental, finance and insurance, hospitality, restaurant and bar sales and water guiding sectors saw gains in the first three quarters of 2015 compared to the previous year, she said.

Besides the decline in oil, a stronger national economy, a stabilizing federal government and an aging population will be among the driving factors for the economy in 2016, she said. Sheinberg encouraged local business owners to think of ways to draw more tourists with “deep pockets” to vacation on the Kenai.

“The economy, compared to how it’s been, is doing much better,” Sheinberg said. “What you’re seeing as a result is a lot of interest in travel … so I think that boom in tourism you’ve been experience in on the Kenai, my guess is that’s going to continue and it’s going to be another good year this year.”

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