OVER TWO YEARS, ONE OUT OF EVERY 24 JOBS DISSOLVES
Unemployment in Alaska rose to 6.8 percent in November, compared to 4.6 percent nationally.
Today, Alaska has the highest unemployment rate in the nation, having shed 6,800 jobs in 2016.
That’s significantly more job losses than the Alaska Department of Labor had predicted at this time last year.
Labor publishes an employment forecast each January, and last year predicted a loss of 2,500 jobs for 2016.
That turned out to be a rosy scenario. An additional 4,300 jobs went away, making the State’s guesstimate off by more than 225 percent.
Readers will be forgiven, then, for looking askance at the January 2017 prognostication by the Department of Labor, which says another 7,500 jobs will be shed.
If the department’s forecasting has as much wiggle room as it did a year ago, actual job losses could be closer to 18,000 this year.
This possibility is not far-fetched. Experienced economists know that the Department of Labor tends to underestimate sharp changes in employment, partly due to its statistical sampling techniques and partly due to an institutional reluctance to go out on a limb.
As a result, the State’s official forecasts tend to “play it safe,” which at times like this can result in overly mild prognostications.
Even if Labor’s numbers are correct, by this time next year Alaska will have lost 14,300 jobs within a two-year timeframe.
That’s one out of every 24 Alaska jobs.
According to the Department of Labor’s forecast narrative, this recession in Alaska is beginning to resemble that of the 1980s, “but without the pre-crash bubble.”
That’s an important statement: There is no real estate and banking bubble to burst. Nonetheless, this recession is beginning to look disquietingly serious.
Long-time Alaskans may recall that the sharp job losses of the late 1980s did not stabilize until impacts from the Prince William Sound oil spill clean-up activity began to ripple through the economy. But this time around, with (hopefully) nothing quite like that on the horizon, Alaska could see several years of steady decline, as the economic impacts of reduced state spending and the likely imposition of broad-based taxes exert a steady drag on employment.
The losses started in the oil patch but have now spread more broadly across the economy. Retail and service sectors, as well as Alaska’s important construction industry, are getting pulled into the downdraft.
An important lesson from past Alaska downturns is that job losses here do not result in rising unemployment rates to nearly the degree that they do elsewhere. Rather, the victims of job losses tend to “vote with their feet” and leave Alaska in search of greener pastures.
For example, Alaska’s unemployment rate in 2016 averaged 6.8 percent, which is actually lower than 2014’s 7.0 percent even after shedding 14,300 jobs. It could be inferred from these data points that net population loss since 2014 exceeds 20,000.
Had the displaced workers remained in Alaska, we would instead be experiencing a statewide unemployment rate approaching 11 percent.
Policy makers in Juneau have their work cut out for them, as they grapple with the twin demons of a massive fiscal deficit and a sharp, widespread economic downturn.