Labor Department: Oil industry will top job losses again in 2017

  • By ELWOOD BREHMER
  • Thursday, January 5, 2017 9:02pm
  • News

Alaska’s economy is going to get worse before it gets better, state economists predict.

The Alaska Department of Labor and Workforce Development is projecting the state will lose another 7,500 jobs this year after shedding about 6,800 in 2016. Job losses in the 7,500 range would be about 2.3 percent of the state’s workforce. The losses in 2016 were about 2 percent employment contraction.

The figures are found in the annual employment forecast released Thursday morning as part of the Labor Department’s monthly Alaska Economic Trends publication.

The state expects about 2,800 of those jobs to come from Anchorage.

The statewide unemployment rate was 6.8 percent in November, which is the most recent data available. That’s up from 6.4 percent a year ago and basically unchanged from 6.9 percent in October.

Not surprisingly, the department attributes the continued economic downturn primarily to lasting fallout from the sudden decline in oil prices in the second half of 2014, which doubly hit Alaska via the state’s budget and one of its largest industries. To that end, the biggest losses are expected to come from the oil and gas, construction and state government sectors. Combined, the three could lose about 4,000 jobs, according to the report.

While the oil and gas industry headlines the unfortunate list with projected losses of 1,500 jobs in 2017 — more than 10 percent of total sector employment — that would still be much better than the 2,800 oil and gas jobs shed last year, according to preliminary Labor numbers.

Also, oil industry employment in the state peaked in 2015 at an average of 14,200 jobs just before price-induced layoffs took hold, due in part to aging large North Slope fields that require more labor to produce oil.

It is worth noting that even with the current struggles Alaska has had a uniquely steady economy. If the workforce shrinks in 2017 it will be just the sixth year of statewide employment contraction since 1969, which, starting with the $900 million state oil and gas lease sale that year, marks the start of the Alaska’s modern oil-centric economy.

The first of those rare years of employment decline immediately followed completion of the trans-Alaska pipeline and “lacked the somber tone of most recessions because the drawdown was expected,” the report notes.

Continued state budget cuts will likely result in 1,400 less state employees by the end of the year, a projection that includes University of Alaska personnel.

Federal employment, which provides more than 15,000 jobs in Alaska, is expected to hold steady. Local governments that employ about 41,000 Alaskans are projected to lose about 200 positions.

The 1,200 construction jobs expected to be lost are largely another symptom of less state spending, the report notes, as work from the last capital budgets inflated with major discretionary state spending in fiscal years 2013 and 2014 begins to wrap up, the report notes. Alaska’s construction industry lost about 1,500 jobs in 2016, according to the Labor Department.

On the other hand, about $600 million in federal defense capital spending approved for Interior military bases in 2017 should help Alaska contractors somewhat in the coming years.

The retail sector is expected to lose about 1,000 jobs over the next 12 months “as the ripple effect of job losses impact aggregate demand and consumer spending,” Labor Commissioner Heidi Drygas wrote in the January Economic Trends issue.

Despite strong-as-ever visitor numbers — a 2 percent increase in tourists is predicted for 2017 by the Alaska Travel Industry Association — the leisure and hospitality industry is projected to take an 800-job haircut.

That is due primarily to decreased local consumer spending at restaurants and bars across the state, which make up about two-thirds of businesses in the industry, according to the employment report.

One of the few bright spots should again be health care, with 500 more jobs, as the state’s aging population continues to need more care. The sector grew by 900 positions in 2016 and that was attributed largely to Gov. Bill Walker’s choice to expand Medicaid services in the state, which is bringing in more federal money.

Any federal health care policy changes made in the coming year shouldn’t immediately impact funding or jobs because money for health care assistance programs has already been appropriated for most of 2017.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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