Alaska’s economy is recovering, but it is hampered by negative demographic trends

Alaska’s economy shows signs of prosperity. But it’s also facing an emerging crisis. 

A veteran economist described these contradictory forces  in a presentation Wednesday at an industry conference in Anchorage.

“We have the strangest and weirdest economy that I’ve ever seen, and I’ve been following the economy for a long, long time,” Neal Fried of the Alaska Department of Labor and Workforce Development told the Resource Development Council for Alaska.

By many measures, Alaska’s economy is in good shape, said Fried, whose economic presentations have become a staple at the annual RDC conferences.

Unemployment was down to 3.5% at the end of summer, compared to a high of 12.2% in May of 2020, he said. Alaskans’ incomes have been rising steadily since 2010, he said. Oil prices, key to state revenues, have shot up.

But there is a stubborn problem that is dragging down the Alaska economy as a whole: the dearth of workers needed to keep companies and industries functioning normally.

Blame Alaska’s demographic facts, Fried said. The state’s working-age population, considered to be between the ages of 15 and 64, is shrinking.

“It’s just kind of math, and why this problem isn’t necessarily going to go away too soon,” he said, displaying graphs created by state demographers. “You can see that population is just simply smaller in Alaska, and has gotten smaller, and probably will continue to get a little smaller into the future.”

The problem is less about young people exiting Alaska – something that has been common in the highly mobile state – but more about the reduction in young people moving in, he said. Thanks to the resulting net out-migration that has occurred over the past nine years, Alaska has had the steepest decline in that population segment of all states except West Virginia and Wyoming, he pointed out.

For various reasons, the post-pandemic economic recovery in Alaska has also lagged progress in all but three other states, and that is part of why Alaska is not attracting young workers from the Lower 48, he said. “When you can find opportunity close to home, you are not necessarily going to move. And that’s had a big impact on us. As long as that is what’s going on, as long as the rest of the country’s economy is performing better than us or doing relatively well, it’s going to be really hard to attract that workforce to Alaska,” he said.

The shortage of workers predates the COVID-19 pandemic, he said. It was evident in Alaska employment statistics from 2016 to 2018, a time of both recession and tight labor markets in the state, he said. “One characteristic of a recession, typically, is you have a lot of people that can’t find jobs. That did not happen during that recession,” he said.

Meanwhile, those working adults who are in Alaska are aging, Fried said.

“Let’s face it: This was a Baby Boomer state,” he said. The biggest population influx was in the oil boom years of the 1970s and 1980s, he said. “A lot of you in this room with gray hair or no hair had a lot of hair then, and that’s when you came. And you stayed. But you aged,” told the audience.

Fried ran through summaries of some key industries’ performances and outlooks, and the picture was mixed. Oil and gas employment that peaked at 15,300 in 2015 was down to 7,500 this year, despite the high oil prices. Mining employment, in contrast, has been steadily rising, despite the pandemic. The tourism industry, hard-hit by COVID-19, is well on the way to recovery, he said. But the commercial fishing industry is expected to take a serious hit from the crash of crab stocks in the Bering Sea and the subsequent closures of most Bering Sea crab fishing.

An analysis of industry sectors and their 10-year job outlooks was published in the October issue of the department’s monthly magazine, Alaska Labor Trends. A detailed forecast for 2023 is in the works, Fried said.

The challenge of attracting workers and filling key jobs was a theme repeated through the first day of the two-day conference.

The oil industry is among those affected both by the inability of contractors to find key workers like truck drivers and by staff shortages in regulatory agencies, said Kara Moriarty, executive director of the Alaska Oil and Gas Association. There are backlogs for air-quality permits, for example, not because of any deliberate slow-rolling at the state Department of Environmental Conservation but because “there’s just not the personnel to issue those permits,” she said.

One session was devoted to discussion of possible workforce solutions.

Former Gov. Sean Parnell, who is now chancellor of the University of Alaska Anchorage, spoke in the session about accelerated education opportunities like the Alaska Native Science and Engineering Program, or ANSEP, which allows secondary students to start earning college credits and offers academic enrichment to students as young as elementary ages.

Others discussed opportunities for vocational and technical training, which for rural Alaskans includes necessary housing.

Joelle Hall, president of the AFL-CIO of Alaska, described outreach to military service members who are on the verge of discharge. “We’re going to have more and more people exiting the military who are looking for a reason to stay,” she said. “They seem like great catches.”

Tim Dillon, executive director of the Kenai Peninsula Economic Development District, called for broader support of young workers. “Transportation, housing and childcare need to be part of the conversation,” he said.

Dave Karp, an executive with a transportation company who is finishing up a term chairing the nonprofit Alaska Resource Education organization, said he feels fortunate that his four children returned to Alaska after graduating from college in the Lower 48. But getting more young people to come to Alaska or stay here will require investments in quality of life that go beyond financial incentives like low taxes and loan-forgiveness programs, said Karp, who moderated the session. “Look at that entire universe and look at it holistically,” he said.

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