Alaska jobs growth hurt by sequestration action

March 03, 2013

The Alaska Department of Labor and Workforce Development published an Employment Forecast in January. The 19 page analysis is superbly done and insightful. Yet the recent moves from Washington to impose sequestration cuts amounting to about 7% of federal spending may reduce employment more than expected.

Alaska Employment Trends for January 2013 highlights a number of developments and trends in the Alaska Labor Force:

• Employment has continued to grow throughout the state, particularly in Anchorage and statewide in key sectors such as health care. Overall, the Department anticipates 4,200 new jobs in 2013, a modest growth of 1.2 percent.
• Public construction had been the bright spot. The State of Alaska FY 2013 capital budget reached $3.4 billion.
• Declines in federal spending on construction was a drag in 2012 and the amounts are expected to fall further in 2013. The report notes that military construction projects both on and off base have declined substantially due to budget cuts that could deepen in 2013. The most recent announcement of $85 B in sequestration cuts was not known when the Dept.of Labor report was written. These cuts will basically amount to about $1B in reduced federal spending in Alaska.
• The report shows federal employment at 16,400 declining to 16,100 in 2013, a loss of 300 jobs. The sequestration effect will likely be much be much larger.
• State-wide the unemployment rate stands at 6.6% in December, compared to the national average of 7.8%. Alaska is doing better than the nation as a whole. Certain communities have extremely high unemployment (Skagway, South-west Alaska, Hoonah, Denali Borough). The major urban centers fare the best.

Commentary

In the short term the federal sequestration cuts will cause higher job losses than anticipated in January. The State would be lucky if the job losses were only a few hundred people. More likely a $1 B federal expenditure cut would affect about 1,150 jobs.

In the medium term Alaska has some projects in the mining sector (Donlin in 2016), the oil and gas sector (Shell drilling offshore in 2014) and the giant Susitna-Watana Hydro project toward the end of the decade to count on for economic activity and extra employment. Tourism seems to be picking up as well.

Sources

• a)http://labor.state.ak.us/trends/jan13.pdf



• b)http://www.novagold.com/upload/pdfs/presentations/2013-02-25_NGPPT_BMO_Florida_FINAL3.pdf