Breaking down the AEDC 3-Year Economic Outlook report

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ANCHORAGE (KTUU) -


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A view of 4th Avenue, in downtown Anchorage, on a cloudy day.

Methodology:
Data is sourced from the Anchorage Economic Development Corporation, the Municipality of Anchorage and the McDowell Group Estimates.

When looking through the charts, note that the changing y-axis scale may not always begin at zero.

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Story: The Anchorage Economic Development Corp.'s annual 3-Year Outlook Report, which sheds some light on both recent economic performance in the city and potential performance in the coming few years, has been released.

Here's a miniature breakdown of the full report.

The basics

Anchorage's economy, as measured by total employment, continues its decrease from the 2015 peak, according to the report.

"It is clear," the report states, "that Anchorage has experienced a significant economic downturn, and that further trouble probably lies ahead."

As for what's next, "the local economy is in uncharted territory," according to the report, "experiencing what is expected to be three consecutive years of employment decline after generally steady growth of the previous 20 years."

The report credits much of this to another year without a fiscal plan for funding state government and critical related groups and agencies.

That being said, Anchorage's economy is more diversified than ever, especially compared to the 1980s. Included in that are an older population with more financial stability and thus greater ability to be flexible during tough economic times; stronger commercial and residential real estate markets, in general; and a larger public sector, which is typically slower to reduce employment than are private firms.

Jobs

The latest estimates from available data put unemployment in Anchorage up about 3 percent, over the past two years.

That rate continues to inch upward, but is considered to be at a "reasonable level," according to the report, which also notes a loss of about 3,000 jobs in 2016 compared to 2015.

In 2016 in the oil and gas sector alone, employment in Anchorage declined by 22 percent as compared the 2016. The preliminary data from the first half of 2017 reportedly shows employment in the sector has become relatively stabilized.

In construction, AEDC projects employment to bottom in 2018. This year's numbers show continued employment declines, following a shrinkage of 900 jobs from 2015 to 2016.

State government employment in Anchorage also showed a decline, which AEDC expects will continue. Retail jobs were fewer as well and could suffer more severely should consumers continue reduced spending.

Professional and business services are approaching a more sustainable level of employment, according to the report.

Healthcare employment is showing signs of continued growth, which AEDC expects to continue, particularly with changes to the Affordable Care Act and Medicaid funding up in the air. Leisure and hospitality has also seen growth and will likely see further growth based on early 2017 numbers.

A return to growth overall is not projected by the AEDC, until the year 2020.

Income

Total income declined by about 1 percent in Alaska in 2016, according to the Bureau of Economic Analysis. Anchorage-specific data is not yet available for 2017, though the city economy is projected to see a similar decline.

As for 2015 and 2016, wages fell about 3.8 percent over that time period.

Additional decline of about half a percent is expected for the remainder of 2017, as total wages trend down. Personal income is also expected to show a similar decline in 2018, but then have slow growth returning in 2019.

Population

Between 2015 and 2016, Anchorage's population change included 4,572 births, 1,673 deaths and an estimated net-out-migration of 2,578 residents.

And, consistent with national trends, Anchorage's population is aging with the current average age slightly higher than 34 years old.

The next official population estimate for Anchorage won't be released, until 2018.

Real estate

Residential and commercial real estate values appear to be generally stable. Anchorage has an opportunity to tap unmet housing demands, as well in meeting needs of young professionals and seniors.

On the residential side, in 2016, 423 units were added to the Anchorage housing market, while the Mat-Su Borough added 821 units.

The foreclosure rate in Alaska is at about 0.3 percent, lower than the national average of 0.8 percent. Anchorage saw 230 foreclosures last year, while the five-year average was 300 foreclosures.

Visitor industry

During the summer of 2016, 1.86 million people visited Alaska, demonstrating a 4.3 percent increase compared to 2015. Anchorage took up 48 percent of the Alaska total, and AEDC anticipates the 2017 visitor season to be on par with 2016.

From 2015 to 2016, bed tax declined by $1.2 million, while car and RV rental tax increased by about $250,000.

Anchorage hosted about 700 conferences in 2016 and is expected to do the same this year.

A record 5.5 million passengers also enplaned, transited or deplaned Ted Stevens Anchorage International Airport in 2016, and a consistent or upward trend is expected to continue, according to the report.

Oil

The anticipated average oil price for 2017, according to the AEDC, is $52 per barrel. The projected average for 2018 is $56 and the projected average for 2019 is $60.

North Slope oil prices averaged $43 per barrel in 2016, a 17 percent decline from 2015. Prices this year have averaged $52 thus far.

The Trans Alaska Pipeline system also celebrates 40 years of operation in 2017. There was a two percent increase in barrels from 2015 in 2016, with it putting out about 518,000 barrels that year.

The oil industry may have reduced employment but the sector continues to spend billions in Alaska on new and continuing projects.

Consumer Confidence

AEDC has a scale called the Anchorage Confidence Index, or ANCi, that’s measured on a scale of 0 to 100, and it gauges Anchorage households’ confidence in the health of the local economy and their personal financial situation, as well as expectations for the future. The data is collected by sampling at least 350 random households in the Anchorage area.

Comprising three categories – Local Economic Confidence, Personal Finance Confidence, and Future Expectations - the ANCi came in at 47.5 this quarter, both dropping from the previous quarter and hitting a new low for a quarter and 6 month average.

Local Economic Confidence also dropped to a new level, hitting 46.9.

As is stated in the ANCi report, the results “reflect a deepening crisis in confidence among Anchorage consumers that has been growing significantly in recent months.”

The report also cites private sector job losses over the last 18 months and lack of certainty, when it comes to new taxes and cuts to state government services going forward.

At the same time, U.S. consumer confidence fell overall, with the Conference Board’s Consumer Confidence Index dropping 6.7 points from March to June.

To view the full report, follow this link