- Associated Press - Friday, January 29, 2016

ANCHORAGE, Alaska (AP) - A 2016 economic forecast prepared for the Anchorage Economic Development Corp. projects a loss of 1,600 jobs in Alaska’s largest city, including 600 in the oil and gas sector.

The city of just under 300,000 could see a net 1 percent jobs decline, according to the report’s forecast. Cost-cutting by petroleum companies and a projected decline in state government spending are among factors in the projected job loss.

“It is definitely going to be a year that is a bit of a pinch in the local economy, but luckily it’s not a punch,” said Bill Popp, president and chief executive officer of the nonprofit group formed to encourage growth and diversity in the Anchorage economy.

The report forecasts a loss of 500 government jobs and 500 construction jobs. It forecasts a loss of 400 “business services jobs” such as engineers, marketers, lawyers, architects and management professionals due to reduced spending on large-scale construction projects.

On the plus side, it forecasts 300 more health care jobs with Medicaid expansion and the aging of Alaska’s baby boomers. The report forecasts 200 more jobs in “leisure and hospitality.”

The report was prepared by McDowell Group, an Alaska-based economic consulting company, using data produced by the Alaska Department of Labor and Workforce Development. The report was one of six economic reports released by the corporation. BP sponsored the Anchorage jobs forecast.

People hear 1,600 lost jobs and it seems like a big number, Popp said. A 1 percent reduction, however takes the city back to 2012 levels.

“It’s a setback but it by no means the economy going into freefall,” Popp said.

Alaska petroleum jobs are expected to follow a national decline because of persistent low prices and global oversupply. For much of 2015, Anchorage had 3,700 people employed by oil companies. By December, that already had fallen by 300, Popp said.

A decision by Royal Dutch Shell PLC in September to cease Arctic offshore drilling “for the foreseeable future” meant the loss of about 400 Alaska jobs, according to the report. BP in January announced it would reduce 4,000 jobs, including some in Alaska. But ConocoPhillips, the report notes, released a 2016 Alaska capital budget of $1.3 billion and plans two more drill rigs.

Upward of 90 percent of the state government budget is dependent on the oil industry. The price of Alaska North Slope crude oil Jan. 21 was just under $27 per barrel. Adjusted for inflation, that’s the lowest price since 2002, when production averaged more than 1 million barrels per day. This month, production is about 566,000 barrels per day.

The top issue for the Alaska Legislature, which convened last week in Juneau, is how to deal with a projected $3.5 billion gap between projected income and spending. Anchorage lost 400 state government jobs in the second half of 2015, Popp said, part of a statewide loss of 1,600 positions.

“When you cut over $800 million of the state budget, there are consequences,” he said. The report tries to forecast additional job losses based on Gov. Bill Walker’s proposed budget and the deficit.

The downturn in Anchorage could be countered in part by growth in other sectors, Popp said. The visitor industry is constructing hotels in Anchorage. A strengthening national and lower energy costs should make Alaska an attractive destination and the corporation is projecting a record tourism year.

State Department of Labor economist Neal Fried said Friday the report projects more job loss than the department’s own forecast a month ago but does not vary greatly.

Alaska has seen moderate growth since 1988 was largely untouched by three Lower 48 recessions, Fried said. Two great uncertainties not present before - legislative action on the state budget and petroleum companies’ reaction to low oil prices - make it a tough time to figure out what is going to happen in 2016. The sectors of job loss are easier to predict than the degree, he said.

“There isn’t really a playbook for this,” Fried said.

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