Introduction
In the 12 years AEDC has been preparing 3-year economic outlook reports, there have never been greater
challenges facing the Alaska economy or more uncertainty about the path ahead. As this forecast is being
presented, employment in Anchorage is 16,000 jobs below the same time last year, a loss of 10%.
Unemployment stands at 12%, more than double the rate one year ago. The leisure and hospitality sectors have
been hardest-hit, along with transportation providers, many retailers, and personal services providers, but nearly
all segments of the local economy have suffered.
The COVID-19 pandemic has caused massive economic disruption in Alaska, the U.S., and around the world.
The U.S. is now several months into what promises to be a slow, multi-year recovery. Public health and economic
recovery will be closely intertwined, and how we balance health risk with “reopening” the economy will be key.
The Congressional Budget Office forecasts the U.S. economy will recover to pre-pandemic levels by mid-2022.
Other forecasts paint the same general picture of slow recovery of the U.S. economy over the next two years.
How closely Alaska and Anchorage will parallel the U.S. recovery is uncertain. Anchorage entered 2020 still in
recession. December 2019 employment was 930 jobs below December 2018. About half of that loss was in retail
trade, a sector experiencing long-term decline for reasons mainly unrelated to the strength of the Anchorage
economy. In any case, the outlook for recovery would be stronger if there was pre-pandemic economic
momentum.
The flow of federal funds into Alaska has been critical in mitigating the economic damage inflicted by COVID19. CARES Act funds, the Payroll Protection Program, Economic Impact Payments, expanded unemployment
payments, and other federal programs have pushed half a billion dollars into the Anchorage economy over the
past few months. The pace of recovery will depend in part on how Congress chooses to fund these and related
programs going forward.
The sharp drop in oil prices adds another layer of concern. While prices have rebounded from historically low
levels in April, the current ANS price of about $40 is well below the price needed to sustain State services at
their current levels. Permanent Fund earnings are now an important part of the state government funding
picture, but the oil industry remains an essential source of revenue. Just the threat of new taxes on the industry
is depressing an already difficult investment environment.
The news is not all bad. Anchorage is fortunate to have the steadying and important source of economic activity
provided by the military. The volume of air cargo through the airport reached record levels in the second quarter
of 2020, as freight typically carried in the belly of trans-Pacific passenger jets was diverted to air freighters.
This 3-year forecast articulates the uncertainty ahead and AEDC’s best assessment of the strength and timing
of economic recovery. It also begins the conversation about rebuilding a more resilient economy and more fully
leveraging our assets in a world that has been dramatically changed by recent events.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 1

 Population
Anchorage’s population totaled 291,845 in 2019, down about 2,600 residents (0.9%) from the prior year. While
there were 3,900 births and 1,800 deaths in 2019, the city experienced net migration loss of 4,800. An overall
loss of approximately 9,200 residents since the peak population of 301,037 in 2013 has brought the Municipality
back to 2010 levels. As the statewide recession bottomed in 2019, continued population declines in Anchorage
were likely related to reduced employment opportunities in-state and historically low unemployment in the
Lower 48.
Due to the pandemic, AEDC is revising its expectations of Anchorage population trends. AEDC expects some
moderation of population losses in 2020 as residents who may have otherwise left Anchorage pause these plans
due to uncertainty. Population losses are expected to trend higher in 2021 if the Alaska economy lags behind
the recovery in the Lower 48 economy. Population trends through 2023 are anticipated to be impacted primarily
by the pace of recovery in the Anchorage economy, with room primarily on the downside.
Prior to the pandemic, AEDC had expected the trend of population loses to extend into 2020 before flattening
through 2022. Several key factors were expected to shape population change in Anchorage over the short term:
•

A shrinking labor force prior to any pandemic impacts may have signaled continued population decline
in 2020. Through March of this year, the size of the local labor force was down 1.4% from the same
period in 2019 (about 2,000 workers). Between 2014 and 2018, the total labor force decline of about
11,100 workers mirrored declines in the working age population of about 11,500 people. 1

•

Alaska’s economy, and subsequently its population, has historically been counter-cyclical to the Lower
48. Alaska generally experiences population increase during periods of economic downturn in the Lower
48, such as population increases between 2007 and 2008 as the rest of the nation faced greater impacts
from the Great Recession. Conversely, Alaska has lost population when the national economy is
comparatively strong. Prior to the pandemic, national unemployment rates hit record monthly lows
around 3.5% compared to an average 5.1% in Anchorage. In 2019, Anchorage’s net outmigration to the
Lower 48 was about 2,200, which represented lower outmigration compared to the previous three years
(2016-2018) but still reflected the relative strength of the job market outside Alaska.

•

Further State budget cuts in 2020 and 2021 are expected to result in population decline. The enacted
FY2021 budget (July 1, 2020-June 30, 2021) shaved an additional $1.12 billion from the reduced FY2020
budget, which is expected to result in a reduction of 250 state government positions statewide.
Additional jobs will likely be lost as the $25 million University system budget reduction is allocated
across the state’s three main campuses. Continued instability in the State budget will likely create
greater uncertainty for the Anchorage population. Additionally, initiatives to resolve the State’s budget
deficit like broad-based taxes, increased oil taxes, or reductions in the PFD may impact Anchorage’s
economy and subsequently its population.

1

Working-age population is defined as the population age 16-64.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 2

 •

Relocation between the Mat-Su Valley and Anchorage (in both directions) accounts for roughly a third
of Alaska’s intrastate migration in any given year. Between 2015 and 2019, about 14,800 Anchorage
residents moved to the Mat-Su Valley while 9,100 Mat-Su Valley residents moved to Anchorage. This
movement continues a general trend of declining migration from Anchorage to the Mat-Su Valley and
increased migration from the Mat-Su Valley to Anchorage.

•

The military presence at Joint Base Elmendorf-Richardson (JBER) is a continued source of stability for
Anchorage’s economy and population. The population living in the JBER census area increased by more
than 1,600 between 2015 and 2019, a 15% rise.

•

While State budget-induced job losses in 2019 and 2020 were expected to result in further population
decline, the economic consequences of the pandemic may have a more immediate impact on the shortterm trajectory of Anchorage’s population.

Despite these trends, the pandemic has significantly increased uncertainty worldwide. The following
coronavirus-related factors may impact Anchorage’s population:
•

Alaska’s counter-cyclical pattern in relationship to the Lower 48 may or may not continue during the
current national situation as residents weigh health care, cost of living, and employment factors in their
decision to remain in Alaska or leave. Unemployment rates have climbed significantly throughout the
country along with increased uncertainty in the national economy and Anchorage residents will likely
not be enticed to leave by a strong labor market elsewhere.

•

Nationally, analysts have speculated about the pandemic’s impact on urban-to-rural migration. In a
widely cited survey, the Harris Poll found 38% of urbanites polled said they were somewhat likely or
very likely to move out of densely populated areas and toward rural areas once the pandemic ends. 2
While this sentiment may be short-lived and change as coronavirus cases spike across multiple states,
Anchorage has potential to capitalize on location-neutral workers’ interest in relocating.

•

Housing costs and availability have likely been key factors driving Anchorage’s population loss to the
Mat-Su. Regardless, the vast majority of Mat-Su residents not working in the borough are employed in
Anchorage. It remains to be seen if the coronavirus pandemic will spur a paradigm shift in employees
permanently working from home. If work from home is widely adopted, the economic distinction
between Anchorage and the Mat-Su will be further blurred as Anchorage employment data is credited
with jobs held by Mat-Su residents working from home. As some employers consider changes to remote
working policies, the Mat-Su Valley may see a resurgence in migration from Anchorage as commuting
times, a traditional barrier to living in the Mat-Su and working in Anchorage, are reexamined.

2

Based on Harris Poll COVID19 Tracker Wave 9 with results from the March 14, 2020 – April 27, 2020 survey period.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 3

 Anchorage Population, 2008-2023

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Alaska Department of Labor and Workforce Development (2007-2019); McDowell Group estimates (2020-2023).

Employment
For the 3-year forecast, AEDC’s analysis of employment typically entails a review of data released since the date
of the January jobs forecast, then making minor modifications (perhaps of a few hundred jobs) to bring the
forecast current. This year is different. The pandemic has fundamentally altered the employment landscape, and
most of what we saw coming in the January forecast is no longer relevant, at least in the near term. A complete
reset of the employment forecast is required.
This forecast briefly examines conditions in the industries that are the largest sources of employment in
Anchorage. For each sector, three key elements of employment are considered. One is the condition of each
key sector prior to the pandemic, whether trending up, down, or stable. The second element is the intensity of
damage done by the pandemic. Job loss has occurred across the economy, but some sectors have been hit
much harder than others. The third element, which is closely related to the first two, is how well each sector is
positioned to emerge from the deep pandemic-induced recession.

Industry by Industry Overview
Retail employment in Anchorage averaged 16,512 jobs in 2019, down 461 jobs (2.7%) from the 2018
average of 16,973. The sector shed jobs each year over the past four years, down nearly 1,600 jobs
(8.6%) since 2015. The decline is mainly related to down-sizing by national retailers and ever sharpening
competition from on-line retailers, amplified by recessionary conditions in Anchorage which began in
2015 and persisted through 2019.
The pandemic has had uneven impacts across the retail sector but overall the sector is suffering. The
latest employment estimates indicate the retail sector lost 1,600 jobs between February and April this
year, but regained 700 jobs in May and another 400 in June. June 2020 retail employment was 1,200
jobs below June 2019.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 4

 At one point earlier this year, consumer spending in Anchorage was down more than 40% relative to
January spending. While the latest data indicates spending is now down about 15% relative to January,
the actual loss compared to last year is far greater (though data is not yet available). 3 As the pandemic
has unfolded, online sales have hit record levels (Amazon’s first quarter 2020 sales revenue jumped
26%). As many as 25,000 retail stores nationally are expected to close permanently in 2020, due to
reduced consumer spending and as the shift to online shopping accelerates. 4
None of this points to robust recovery in the Anchorage retail sector. AEDC expects some improvement
in retail employment in the second half of 2020, but generally flat conditions through the 2021 to 2023
period. By 2023, retail employment will likely still be about 700 jobs below the 2019 count.

Retail employment outlook: 2019: 16,512, 2020: 15,500, 2021-23: 15,800
•

Professional and Business Services employment averaged 17,364 jobs in 2019, up from 17,241 in
2018. The slight increase in 2019 ended a 6-year stretch of consecutive annual losses. This sector, which
includes accountants, engineers, lawyers, and architects, among a wide range of other professional and
business services, had lost 3,000 jobs (15%) from the peak in 2013. While the uptick in 2019 is good
news, the sector was again showing weakness at year-end, with 370 fewer jobs in December compared
to December 2018.
Regarding COVID-19, between February and April of 2020, this sector lost 1,200 jobs, but added back
800 jobs in May and 400 more in June, according to preliminary DOLWD data. Still, June employment
was 1,100 jobs below the June 2019 level. Recovery in this sector will depend in part on state and federal
capital project budgets, and private sector investment as well, especially oil and gas industry spending.
In general, private sector spending is likely to remain constrained for several years, in parallel with weak
economic conditions overall.

Professional and business services employment outlook: 2019: 17,364, 2020: 16,600, 2021: 16,800,
2022: 17,000, 2023: 17,200
•

Health care employment in Anchorage averaged 20,893 jobs in 2019, down 50 from 2018. This sector
has generated sustained employment growth over the past 15 years, adding 4,600 jobs between 2010
and 2017. The decline in 2019 was the first annual loss in more than 15 years. While outpatient care and
hospital employment continued to grow through 2019, losses in nursing and residential care caused a
net decline in the health care sector overall.
The health care sector initially lost 1,500 jobs (between March and April) due to the pandemic but
regained about 500 jobs between April and June. Out-patient providers were hit hardest (especially
dentist’s offices). Employment recovery will depend on how quickly providers can return to normal
patient loads. AEDC expects health employment to recover and show some further growth over the
forecast period. How COVID-19 might reshape the health care landscape over the long-term is unclear.

3
4

https://tracktherecovery.org/
https://www.cnn.com/2020/06/27/business/stores-closing-coronavirus-june/index.html

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 5

 However, the pandemic has illustrated the need for more robust public health infrastructure. Meeting
that need could drive growth in health care sector employment. Other forces shaping health
employment over the next few years include population trends, State funding for Medicaid, IHS funding,
and a range of other factors.

Health care employment outlook: 2019: 20,893, 2020: 20,000, 2021: 20,500, 2022: 20,800, 2023: 21,000
•

Construction employment averaged 7,653 jobs in 2019 (peaking at just over 8,900 jobs in August), 192
jobs above the 2018 average and 488 jobs above 2017. Growth was slowing by the end of 2019, with
employment in December 200 jobs lower than December 2018. That decline may reflect a tapering of
repair-related construction activity connected with the November 2018 earthquake.
Preliminary data indicates the construction sector did not experience any initial decline in employment
because of the pandemic. In fact, construction employment added 1,400 jobs between March and May
2020. However, the sector has not seen its full seasonal surge in employment. The June estimate of
7,800 jobs is 900 jobs below June 2019.
The outlook for construction employment is uncertain. Federal funding for transportation infrastructure
will continue to support a foundation of construction activity. State capital project spending will remain
weak, and residential construction is likely to gradually slow in the absence of population growth.
Demand for new commercial space is likely to be substantially weakened by the pandemic. Demand for
brick and mortar retail space is not expected to grow, nor will demand for office space, as work-fromhome becomes an ingrained part of many firms’ business model. AEDC expects construction
employment to recover somewhat but remain slightly below 2019 levels through the forecast period.

Construction employment outlook: 2019: 7,653, 2020: 7,000, 2021: 7,300, 2022: 7,500, 2023: 7,500
•

Leisure and hospitality employment increased for the second consecutive year in 2019, averaging
17,661 jobs, up about 1.5% from the 2018 average of 17,394, and 2.3% from 17,261 jobs in 2017.
Employment in food services and drinking establishments accounts for two-thirds of the employment
in this sector (11,712 jobs in 2019). Hotels and other lodging places accounted for 3,546 jobs in 2019.
Fitness centers, theaters, and a variety of other entertainment and recreational sites account for the
remainder of employment in this sector.
COVID-19 related shut-down of the economy hit this sector hardest. Between March and April,
employment dropped by 7,300 jobs, a decline of more than 40%. The loss included 1,900 jobs in lodging
establishments and 4,100 jobs in eating and drinking establishments. Approximately 1,200 jobs were
added back in May, then another 1,400 jobs in June, however, employment that month was still 5,900
jobs below the June 2019 level.
Employment in bars and restaurants will recover gradually, to the extent COVID-19 concerns diminish,
but a full return to pre-pandemic employment levels is not anticipated within the forecast period. A
fully vaccinated population may be a requirement for restaurants to return to full seating capacity, and
patrons to return in pre-pandemic numbers. Meantime, many restaurants may not survive (several
national chains and local restaurants have already filed for bankruptcy protection).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 6

 Hotel employment will similarly be slow to fully recover, depending on how well the pandemic is
managed. The strength of the visitor industry is key, as is the convention/meeting market. It is unlikely
all of Anchorage’s lodging establishments will survive what is certain to be a prolonged period of
constrained travel and tourism.

Leisure and hospitality employment outlook: 2019: 17,661, 2020: 12,500, 2021: 13,000, 2022: 14,000,
2023: 15,000
•

Transportation -related employment averaged 10,496 jobs in 2019, down slightly from 2018’s average
of 10,531. The largest components of this diverse sector of the economy include air transportation
(3,293 jobs in 2019), truck transportation (1,331 jobs), and “couriers and messengers” (mainly including
UPS and FedEx) with 2,216 jobs. This sector has been a stable source of employment in recent years,
with modest growth through the recent recession.
This sector lost 600 jobs between March and April this year. Though specific data is not available, that
loss was likely mainly related to a sharp decline in air transportation as passenger traffic slowed to a
trickle. There was some recovery in June, when 400 jobs were added back, however the sector has not
seen the usual seasonal increase in employment. June 2020 employment was 1,400 jobs below the June
2019 level.
The outlook for this sector is closely tied to the pace at which air travel returns to normal and recovery
of the visitor industry. Globally, damage done to the airline industry by the pandemic is unprecedented.
Airlines are expected to collectively lose $80 billion in 2020, the result of a 50% decrease in revenues.
Revenues are forecast to rise next year, but the industry is expected to lose another $16 billion in 2021. 5
The well-being of Alaska Airlines is particularly important to the state’s economy. First quarter 2020
passenger revenue was down $235 million from the same period in 2019 with second quarter revenues
expected to be even lower. Alaska Air Group received $992 million in CARES Act funding in April.
AEDC expects the transportation sector to gradually recover and return to pre-pandemic levels of
employment by 2022.

Transportation employment outlook: 2019: 10,496, 2020: 10,000, 2021: 10,200, 2022: 10,500, 2023:
10,700
•

Government employment in Anchorage averaged 27,195 jobs in 2019, including 9,239 local
government jobs, 9,695 state government jobs, and 8,261 federal jobs. (not including active duty
military). Government employment was down a total of 275 jobs from 2018. The decline includes 143
state jobs, 123 local government jobs, and nine federal jobs. Anchorage has lost a total of 3,300
government jobs since 2010. These have been relatively high-wage, mainly year-round jobs.
Longer-term trends include the loss of about 1,500 federal jobs over the past decade (a 16% drop).
State government employment hit a high point in 2014 and has since declined by 1,200 jobs (down

5

International Air Transportation Association (IATA). https://www.iata.org/en/pressroom/pr/2020-06-09-01/

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 7

 11%). Local government (including the school district) is also down about 1,200 jobs (12%) from a 2014
high.
The military continues to have a stabilizing influence on the local economy, with more than 10,000
activity duty and 3,000 civilian personnel in Anchorage.
The government sector has recorded relatively few job losses related to the pandemic. Federal
employment has been essentially flat through the first six months of 2020. State government dropped
about 600 jobs between March and May, then added back 100 in June. The data suggests that most or
all that decline was at UAA. Local government employment started trending down in March, and
through May was down 700 jobs, with the school district accounting for much of those losses.
AEDC expects federal employment to hold steady through the forecast period. State government is
more difficult to predict, though on-going pressure to reduce state spending, built-in budget cuts at
UAA, plus pandemic-related changes in UAA enrollment and instructional delivery make employment
growth unlikely. The outlook for local government will be dependent on trends in school district funding
and staffing. Overall, government employment should recover somewhat in 2020, but then hold steady
after that.

Government employment outlook: 2019: 27,195, 2020: 26,000, 2021: 26,500, 2022: 26,500, 2023:
26,500
•

Oil and gas industry employment in Anchorage averaged 2,500 jobs in 2019, about equal to 2018.
While the number of workers directly employed by the oil and gas industry in Anchorage is lower than
many other sectors of the economy, its indirect impacts are substantial, particularly in professional and
business services, construction, transportation, and other sectors. Before stabilizing in 2019, oil and gas
industry employment had been trending down, losing 1,000 jobs since 2015. Further decline was
expected in 2020, mainly the result of BP’s departure from Alaska.
Preliminary 2020 data indicate oil and gas industry employment in Anchorage dropped by 500 jobs
from March to June. A combination of significantly reduced global demand for fuel and tensions
between Russia and Saudi Arabia pushed oil prices to historical lows in March. Though now back above
$40 per barrel, prices remain well below pre-pandemic forecasts.
Looking ahead, oil price trends will be a key factor in the employment outlook. The outcome of Ballot
Measure 1, the oil tax initiative, will also influence oil industry spending and employment in Alaska.
AEDC expects an uptick in oil industry employment in 2021, then a leveling after that, at about the 2019
level of 2,500 jobs.

Oil and gas industry employment outlook: 2019: 2,500, 2020: 2,200, 2021: 2,500, 2022: 2,500, 2023:
2,500
•

All Other sectors in the Anchorage economy together accounted for about 29,700 jobs in 2019. This
includes 7,675 jobs in financial activities, 4,880 jobs in wholesale trade, 3,184 jobs in information (mainly
telecommunications), 2,070 in manufacturing, and 5,438 jobs in other services. Among these sectors,

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 8

 manufacturing and wholesale trade have trended higher, adding 165 jobs since 2015, including 147
new jobs between 2018 and 2019. Financial activities, information, and other services have been
trending down, together losing 1,600 jobs since 2015, with year-over-year losses continuing into 2019.
Pandemic-related losses in these sectors in 2020 have been modest. Manufacturing employment
dipped by 300 jobs between March and April before recovering fully and adding 200 more. Employment
in the sector as of June was 300 jobs below the same time in 2019. Employment in the information
sector dipped by 400 jobs and remains about 400 jobs below 2019. Financial activity employment was
down 200 jobs in April, regained that in June, but is still 300 jobs below 2019. Wholesale trade lost 300
jobs this spring, added 200 back in June, and is currently about 200 jobs below 2019.
The pace and extent of recovery will vary from sector to sector, with some returning to growth trends
and others generally flat or resuming paths of gradual decline.

“Other sectors” employment outlook: 2019: 29,671, 2020: 29,000, 2021-2023: 29,500
Summary
Anchorage entered 2020 with an expectation that the economy might finally begin adding jobs, after four
consecutive years of decline. An average of 149,945 jobs were recorded in 2019, representing a net decline
from 2018 of only about 300 jobs (0.2%), the smallest annual decline since the recession began in 2015.
Statewide, employment trends turned positive in 2019 (showing an increase of 0.7%); hopes were high that
Anchorage would follow suit in 2020.
The first pandemic-related employment cuts in Anchorage were in March, but the real damage was in April,
when the local economy shed about 16,000 jobs, the largest monthly decline in Anchorage’s history. Based on
initial estimates from the Alaska Department of Labor, the economy started adding jobs in May (up 2,900 jobs
compared to the April job count) and again in June (4,800 more jobs). The most recent available estimates are
for June 2020, when (despite upticks in May and June) Anchorage employment remained 16,000 jobs below the
June 2019 level. Statewide, employment in June was down 37,700 jobs, compared to June 2019.
As detailed in the preceding sector-by-sector analysis, the pace and extent of recovery from the economic shock
of COVID-19 are uncertain. A range of public health, political, and economic factors will dictate how recovery
unfolds. The following table summarizes the sector level employment forecasts outlined above.
Anchorage Employment Forecast, 2019, 2020-2023
Sector

2019
Actual

2020 Estimate

2021 Forecast

2022 Forecast

2023 Forecast

Retail

16,512

15,500

15,800

15,800

15,800

Professional & Business Services

17,364

16,600

16,800

17,000

17,200

Health Care

20,893

20,000

20,500

20,800

21,000

Construction

7,653

7,000

7,300

7,500

7,500

Leisure & Hospitality

17,661

12,500

13,000

14,000

15,000

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 9

 Transportation

10,496

10,000

10,200

10,500

10,700

Oil and Gas

2,500

2,200

2,500

2,500

2,500

Government

27,195

26,000

26,500

26,500

26,500

Other

29,671

29,000

29,500

29,500

29,500

Total

149,945

138,800

142,100

144,100

145,700

-11,145

-7,845

-5,845

-4,245

Change from 2019

Source: ADOLWD (2019); McDowell Group estimates (2020-2023).

This analysis indicates Anchorage employment in 2020 will average about 11,000 jobs below the 2019 average.
In 2021, the economy will add 3,300 jobs, but remain about 7,800 jobs below pre-pandemic levels. Similarly, the
economy will add 2,000 jobs in 2022 and 1,600 jobs in 2023 but remain about 3% below the 2019 average of
about 150,000 jobs.
If 2020 does show an annual decline of 11,000 jobs, Anchorage will be 17,000 jobs below its peak employment
of 156,000 in 2015. Employment in Anchorage will have dropped back to its lowest point since 2001.
Among the many uncertain factors that might result in job growth in Anchorage above or below this forecast,
the following are key:
•

Effectiveness of efforts to control coronavirus infection rates in Anchorage (and avoid additional rounds
of business closures)

•

Timing and availability of coronavirus treatment and vaccine

•

The timeframe over which extended unemployment benefits continue to be paid

•

The timeframe over which moratoriums on evictions and foreclosures are maintained

•

Availability of additional federal funding to support businesses, non-profits, and communities

•

National and global economic conditions, especially the pace of recovery

•

Recovery of Alaska’s visitor industry, particularly the cruise industry

•

Oil prices, which will impact oil sector capital investment and tax revenue generated by the State of
Alaska

•

How the State of Alaska addresses its ongoing fiscal crisis

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 10

 Finally, the status of Anchorage’s labor force may influence employment trends. As noted elsewhere in this
forecast, the local labor force has been steadily shrinking (losing 12,000 workers between 2014 and 2019, an 8%
decline). Further, during the pandemic, many employees’ ability to continue working or increase working hours
will be directly related to K-12 school operations and child day care availability, which are critical to Anchorage’s
workforce. While the majority of Anchorage and Mat-Su licensed childcare facilities have reopened following
closures at the beginning of the pandemic, many facilities are operating at about half of normal capacity. A
sustained reduction in child day care availability could result in overall lower employment in Anchorage than
would otherwise be the case.

Anchorage Average Employment
2008-2023

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Alaska Department of Labor and Workforce Development (2008-2019); McDowell Group Estimates (2020-2023).

Acknowledgements
Employment data cited in this analysis are drawn from two data sets managed by the Alaska Department of
Labor and Workforce Development (DOLWD) Research and Analysis Section: the Quarterly Census of
Employment and Wages (QCEW) and the monthly Civilian Employment Statistics (CES). QCEW data is available
on a 6-month lag and is a complete count of employment and wages by detailed sector. CES data are estimates
available monthly for broad industry categories. CES data is subject to revision. Without the work of DOLWD
Research and Analysis Section staff, tracking employment conditions in Anchorage and elsewhere in Alaska
would not be possible.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 11

 Personal Income
Personal income describes the amount of money Anchorage residents receive, either from employment,
investments, business ownership, or government transfers like unemployment benefits. This metric is important
to monitor as it offers insight on how much money might be able to circulate in the local economy. It can be
viewed as an index of potential spending, with increases meaning more money available to be spent with local
businesses, generate taxes to support local government services, support the housing market, and in general
generate economic activity.
Personal income has three components: salaries, wages, and proprietors’ income; investment earnings; and
government transfers. The first component is the largest and includes the cost of employer-provided benefits.
The second category includes earnings from financial investments, dividends, and returns from real estate
ownership. The smallest of the three categories of personal income is government transfer payments which
include the Permanent Fund Dividend, unemployment benefits, and Social Security payments, among others.
Personal income in Anchorage has grown in most years. While part of this growth is due to inflation, its key
components have outpaced inflation. Investment earnings have grown the fastest over the past decade,
followed by government transfers, and wages and proprietors’ earnings.
The pandemic is impacting personal income in important ways. Unemployment, business closures, and slower
economic activity will push the salaries, wages, and proprietors’ income category lower. Some of this decline
will be offset through increased unemployment benefits, federal stimulus checks, and government assistance
to businesses.
The outlook for investment earnings is uncertain but leans negative due to deteriorating economic conditions.
The resiliency of the stock market and strength of local real estate will also shape this category, as well as ability
for entrepreneurs to adjust, realize opportunity, and grow business.
AEDC expects personal income to total about $19 billion in 2020, about 5% below 2019. The extent of federal
unemployment benefits will factor heavily in personal income over the reminder of 2020, along with other
federal grant and loan programs. In 2021, personal income should return to a slow growth trend (relative to
2020), continuing through 2023, largely matching the rate at which employment recovers in Anchorage.
•

In 2018 (the most recent data available), Anchorage residents had a total of $19.4 billion in personal
income, including
o
o

o

•

Salaries, wages, and proprietors’ income (including benefits): $12.6 billion
Investment income: $4.0 billion
Government transfer payments (including the PFD): $2.8 billion

In 2019, personal income for the entire state grew 3.8% compared to 2018. Government transfers led
the three categories with 5.8% growth. Salaries, wages, and proprietors’ income expanded 3.8%, and
investment income grew 2.1%.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 12

 •

The number of unemployed individuals in Anchorage rose from 6,800 to 20,000 between February and
March 2020. By April, about 19,500 individuals were receiving unemployment benefits which replaced
about 68% of earnings for recipients. The top three sectors individuals worked in prior to receiving
unemployment benefits were food service, trades, and health & social services.

•

About 900 Anchorage businesses received a portion of the $1.2 billion disbursed to Alaska businesses
as part of the federal Paycheck Protection Program in the second quarter of 2020. A variety of other
federal, state, and local programs have offered unprecedented support of Anchorage’s businesses and
nonprofits.

•

In April 2020, $126 million in state and federal unemployment benefits were paid to more than 48,200
Alaskans. This included 19,500 Anchorage residents who received $51.7 million in benefits. The federal
government’s temporary weekly benefit of $600 week was in addition to the average state payment of
$247 per week.

•

Anchorage residents received their 2020 PFD in July instead of the typical payment date of early
October. The payment was accelerated in response to pandemic-related economic disruption. The 2020
PFD was $800, totaling about $200 million to Anchorage residents.

Anchorarge Personal Income
($Billion), 2008-2023

$15.6 $15.4

$16.6

$19.4 $20.1 $19.0 $19.2 $19.4 $19.6
$18.4 $19.0 $18.5 $18.6
$17.5 $17.8 $17.5

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Bureau of Economic Analysis (2008-2019); McDowell Group estimates (2018-2022).

Anchorage International Airport
The Ted Stevens Anchorage International Airport (ANC) has recently seen passenger volume decline sharply
while cargo volume has increased. Located less than 10 hours by air from most of the industrialized world, ANC
has become the busiest airport on the globe on some days over the past few months. (In normal times ANC is
ranked 5th globally based on annual cargo volume.)

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 13

 The airport is a key asset to the Anchorage economy. According to research conducted in 2018, operations at
ANC support about 22,000 jobs, or about 1 in 10 jobs in the local economy.
AEDC is confident in the long-term success of the airport. ANC continues to attract private investment and
operates as Alaska’s primary aviation hub. A strategic global location and reliable operations will ensure that
Anchorage airport retains its important role in the US-Asia air cargo trade and a critical point of entry for Alaska’s
visitor industry.

Air Passengers
Prior to the COVID-19 pandemic, passenger volume in 2020 was expected to exceed records set in 2019. This
expectation changed quickly as travel restrictions mounted and it became clear the airport would not see the
usual seasonal increase in visitor travel.
Passenger volume has recovered slightly from lows observed in the spring of 2020. But a meaningful return to
pre-pandemic levels is not possible until travel restrictions are eased and the visitor industry regains its footing.
Longer-term, Alaskans may travel less for recreation and entertainment should the recession persist, and
business travel could remain lower as companies become increasingly comfortable in virtual meetings.
AEDC expects 2020 passenger volume to be well below 2019 levels, with some improvement in 2021. Through
2023, AEDC expects a rebound in traffic, though a return to pre-pandemic levels is unlikely within the forecast
period.
•

A record 5.76 million passengers used the airport in 2019, a 2.0% increase from 2018. About 2.87 million
people enplaned and nearly an equal amount deplaned.

•

Passenger volume at ANC is subject to significant seasonality. In 2019, the June-August period (a
quarter of the year) accounted for 38 percent of total volume. February is typically the slowest month
of the year, with volume about 60% lower than summer months.

•

Pandemic-related disruptions including travel restriction pushed total passenger volume down to
62,000 for May and April 2020, an 85% reduction from the same period in 2019.

•

Airlines have struggled with much lower passenger loads due to COVID-19. The average passenger
plane landing at ANC in May 2019 had 129 passengers aboard; in May 2020 the average was 35
passengers.

•

Passenger airplane landings are lower due to the pandemic. ANC received 1,272 passenger planes in
May of 2020, a 66% reduction from the same month in 2019.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 14

 ANC Air Passenger Volume (Million Passengers),
2008-2023

5.34
4.86

4.95

5.08

4.96

5.09

5.19

5.50

5.51

5.47

5.65

5.76
5.0
4.5
3.3
2.3

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: State of Alaska Department of Transportation & Public Facilities (2008-2019); McDowell Group estimates (2020-2023).

Air Cargo
Unlike passenger volume, the pandemic has boosted air cargo volume at the airport. Until March of this year,
air cargo was on a generally stable trajectory, with some expectation of slow growth in the near-term. These
expectations shifted quickly as cargo plane landings spiked, leading to a strong increase in cargo volume.
Roughly half of air cargo transported directly between the US and Asia (bypassing Anchorage) is in the belly of
passenger planes. As passenger planes were grounded due to the pandemic, this cargo shifted to dedicated air
cargo flights which are much more likely to refuel in Anchorage, driving Anchorage volumes higher. Urgent
movement of personal protective equipment also supported increased air cargo volume.
The increase in air cargo volume at the airport is not anticipated to be permanent. AEDC anticipates a return to
typical levels by the end of 2020 or early 2021, then generally matching global rates of economic growth through
2023.
•

Cargo volume totaled 3.0 million tons in 2019, a 2.5% decline from 2018. Volume transiting the airport
to other markets totaled 1.5 million tons while 0.7 million tons were enplaned, and an equal amount
deplaned.

•

Through the first half of 2020, cargo volume was up 7.4%, including a 14.5% increase in the second
quarter, compared to the same period in 2019.

•

Second quarter 2020 air freight totaled 900,000 tons, topping the previous high of 824,000 tons in the
fourth quarter of 2017. The spike occurred as freight typically carried in the belly of trans-Pacific
passenger jets was diverted to air freighters.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 15

 •

Trade disputes have the potential to impact air cargo at the airport. Approximately one in four cargo
planes that land at ANC originate in China, according to a 2019 estimate.

•

Bollore Logistics estimates year-over-year global air cargo capacity is about 30% lower in July of 2020,
due primarily to reduced passenger flights (which often carry freight in the aircraft belly).

•

The Asia to North America air corridor is the busiest on the globe with about four-in-five planes
traveling the corridor stopping at ANC.

•

The number of cargo planes landing in Anchorage increased 41% in May 2020 compared to May 2019,
nearly reaching 5,000 landings for the month. An average of six air cargo planes landed at ANC every
hour in May.

•

Cargo volumes at ANC fell sharply during the 2008/2009 recession and never recovered to prerecession levels. While that experience may not repeat itself, it does offer perspective on how ANC
might be affected by global recession.

ANC Air Cargo Volume
(Million Tons), 2008-2023
2.80

2.60

2.80

2.70

2.70

2.75

2.92

2.81

3.01

3.08

3.00

3.1
2.8

2.9

3.0

2.20

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: State of Alaska Department of Transportation & Public Facilities (2008-2019); McDowell Group estimates (2020-2023).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 16

 Port of Alaska
The Port of Alaska (POA) is Alaska’s most capable and important marine freight infrastructure asset. Refined
petroleum products, cement, consumer goods, construction materials and other supplies handled by the port
are distributed throughout the state.
The Port has proven resilient and reliable through the pandemic crisis. No sailings were canceled, and the flow
of goods was smoothly maintained.
Before the pandemic, AEDC had expected port volume to grow modestly in the coming years. The outlook now
is for lower total tonnages this year and next, then some growth in 2022 and 2023.
Two key factors are expected to drive port volume in the near-term: population trends and airport activity. The
population of Anchorage and the Railbelt requires a steady flow of consumer goods, construction supplies, and
durable goods such as appliances and ATVs. A growing population will support growth of volume at the port
while a shrinking population is likely to reduce volume.
POA handles around one half to two-thirds of all jet fuel used at the Ted Stevens Anchorage International
Airport (ANC). As airport activity rises or falls, the petroleum component of port tonnage is impacted. Evidence
of this relationship has been on display in 2020 as strong air cargo activity at the airport has pushed petroleum
volume at the port higher.
Other factors such as the severity of recession, competition with other Southcentral ports, and capital spending
by private enterprise and government will also impact port volumes.
•

POA volume in 2019 totaled 4.34 million tons, a 9.9% increase from 2018 and the highest volume since
2008. In 2019, 2.6 million tons of refined petroleum were handled by the POA, the largest category,
totaling 59% of all tonnage. Vans, flats, and containers contributed 1.7 million tons (38% of the total).
Other volume (mainly cement) accounted for the remaining three percent of volume.

•

Through the first half of 2020, volume at the port is slightly higher (1.4%) than the same period in 2019.
Airport-related petroleum activity increased the category by 5.7%, balancing a 4.2% decline in vans,
flats, and container volume.

•

Airplanes used 644 million gallons of jet fuel at ANC in 2019, with volume climbing in 2020. May 2020
fuel consumption totaled 73 million gallons, a 34% increase from the same month in 2019. The Port
also handles all jet fuel used by Joint Base Elmendorf-Richardson.

•

Modernization efforts at the Port continue with work focused on the new Petroleum and Cement
Terminal. Construction will continue into the fall and renew next spring, with the facility becoming
operational by late 2021.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 17

 Port of Alaska Volume (Million Tons), 2008-2023
4.37
3.80

3.96

4.34

4.14

3.95

3.78

3.75
3.41

3.46

3.50

4.30
4.00

4.10

4.20

3.50

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Municipality of Anchorage (2008-2019); McDowell Group estimates (2020-2023).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 18

 Building Permit Values
AEDC expects Anchorage building permit values will total about $425 million in 2020, a reduction of about $26
million from 2019. Continued uncertainty in state capital budgets and heightened instability related to the
coronavirus pandemic will likely reduce construction permitting activity through the latter half of 2020. However,
strong building permit values in the first half of the year will contribute to total permit values finishing the year
above non-earthquake-related 2019 permitting. AEDC expects further decline in permitting values in 2021 due
to low demand for new commercial (retail, office, hotel) space. Key drivers of construction spending over the
next several years will likely include municipal projects such as construction of Anchorage’s new solid waste
transfer stations and school repairs, and infrastructure improvements funded by the federal government,
including pandemic relief projects at Ted Stevens Anchorage International Airport and Merrill Field.
Prior to the ongoing coronavirus pandemic, the trajectory of building permit values in Anchorage was positive.
In 2019, building permit values totaled $451 million, a 17% increase from 2018. Despite this increase, permitting
levels have not rebounded to pre-recession highs of above $600 million in 2013 and 2014.
•

Nearly $30.0 million in building permits were related to earthquake repairs, almost half of the total
increase between 2018 and 2019.

•

Commercial projects typically account for the largest share of total permit value. In 2019, the category
accounted for $261 million or 58% of the total.

•

The following large projects were permitted in 2019:
o

Construction of the Maple Springs Senior Living facility valued at $20.3 million and the Medline

o

Repairs valued at nearly $15.0 million to the KeyBank building in downtown Anchorage due to

Warehouse valued at $19.4 million.
earthquake damage.

o
•

Ongoing construction of a new ambulatory surgery center valued at $9.4 million.

Residential construction permits contributed $147 million to the total value, the highest since the
statewide recession began but an amount far below the decade high of $194 million in 2014.

•

In 2019, the government category of building permit values increased slightly to $43 million, up from a
16-plus year low of $35 million in 2018. Early data for 2020 indicates values were trending upwards
from 2018 and 2019. Continued uncertainty in state capital budgets would likely have a negative impact
on construction in Anchorage. Improvements to area schools continue to be an important source of
Anchorage construction activity.

•

Through March of this year, total permit values were significantly higher compared to the same period
in 2019 ($98.0 million in 2020 compared to $67.4 million in 2019). Commercial permitting increased by
$20.5 million compared to the first quarter of 2019, a 66% increase in value. Government permitting
increased by 75% to $21.6 million and residential permitting was on par with activity in the same period
of 2019.

Despite significant uncertainty related to the coronavirus pandemic, Anchorage building permits have continued
about on par with 2019, with about $270.0 million in permitting through the week of July 17, a 2.6% increase
AEDC 3-YEAR OUTLOOK

McDowell Group  Page 19

 from the same period in 2019. 6 While not included in the permitting data, at least one major Anchorage
construction project, the $60 million redevelopment of the downtown bus depot into a mixed-use commercial
and residential center, has been slowed by complications due to the pandemic and other issues. While uncertain,
the pandemic is likely to constrain construction activity in the near term, and perhaps beyond that, depending
on the pace of economic recovery.

Anchorage Building Permit Values
($Million), 2008-2023
$631

$681
$549

$499
$432

$395

$467

$432 $448

$422

$451
$379

$425 $400 $400 $400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Municipality of Anchorage (2007-2019); McDowell Group estimates (2020-2023).

Anchorage Building Permit Values by Type, 2019
Commercial

Residential

Government

9%

33%
58%

Source: Municipality of Anchorage

Municipality of Anchorage weekly building permit summaries for 2020 included a December 2019 permit of $14.9 million related to the
KeyBank project which McDowell Group attributes to 2019 permitting activity. Figures from the report have been adjusted to reflect the
timing of this permit submission.

6

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 20

 Average Single-Family Home Sales
Despite slight sales volume decreases, average single-family home prices in Anchorage were largely unchanged
at about $375,000 in 2019 compared to 2018. While the 2020 housing market began the year stronger
compared to 2019, the number of sales has since decreased, likely due to significant household financial
uncertainty during (and after) the coronavirus pandemic. Due to changing demand by price range, average
prices of sold homes actually increased in the first months of the pandemic. While lower migration into and out
of Anchorage may slow housing sales activity, AEDC expects single-family home sales prices to remain resilient
through the last half of 2020, though total sales volume may be down.
•

In the first quarter of 2020, average home prices and loan origination activity had rebounded from
recession-period lows in 2019. However, sales volume decreased by about 10% in the second quarter
compared to the same period in 2019.

•

Foreclosures remained at low levels across the city in 2019, decreasing compared to the five-year
average. Foreclosures remained low in the first quarter of 2020. State and federal governments placed
a moratorium on property foreclosures during the coronavirus pandemic, with moratoriums lifted on
July 1 and July 25, respectively. Expanded unemployment benefits have likely helped newlyunemployed individuals make mortgage and rent payments. If federal unemployment benefits expire
and the moratorium on foreclosures is lifted, Anchorage can expect an increase in foreclosures, as
unemployment is expected to remain high as the pandemic continues.

•

Mortgage rates in Alaska declined to about 4.1% in 2019 after increases in 2018. Nationally, mortgage
rates have fallen to historic lows (below 3%) during the pandemic.

Anchorage Average Single-family Home Sales Price
($1,000), 2008-2020

$326

$321

$329

$322

2008

2009

2010

2011

$337

$347

2012

2013

$359

$367

$366

$365

$373

$375

$385

2014

2015

2016

2017

2018

2019

2020

This representation is based in whole or in part on data supplied by, and to the Subscribers of Alaska Multiple Listing Service, Inc.
(AK MLS). Information contained herein is deemed reliable but not guaranteed. Data maintained by AK MLS is for its own use and
may not reflect all real estate activity in the market.
Source: Alaska Multiple Listing Service, Inc. (2008-2018); McDowell Group estimate (2020).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 21

 New Housing Units
Based on data through the first three months of the year, AEDC anticipates Anchorage will add about 420
housing units in 2020. With about 117,000 housing units in Anchorage, the annual rate of housing construction
has hovered around 0.3% for the last several years and multi-family units have composed about half of all new
units. The level of construction activity will be impacted if planned multi-unit projects are shelved due to the
pandemic.
•

In 2019, Anchorage added 345 housing units, roughly 90 units fewer than were added in 2018. Multifamily projects accounted for 149 of these units while single-family homes contributed 185 units.16
mobile homes were added in 2019.

•

New construction in the Mat-Su Borough held reasonably steady in 2019 at 807 units but added nearly
double the housing units compared to Anchorage. A much higher share of new housing in the Mat-Su
are single-family residences (82%) compared to Anchorage (54%).

Anchorage New Housing
Units, 2009-2020
894

564

550

595

532

466

465

2009

850

2010

2011

436

423

2012

2013

2014

2015

2016

345

2017

2018

2019

420

2020

Source: Alaska Department of Labor and Workforce Development (2010-2018); McDowell Group estimate (2019).

Mat-Su Borough New Housing Units, 2010-2019
988
750

777

2010

2011

729

2012

906

929

1005

778

2013

2014

2015

2016

2017

813

807

2018

2019

Source: Alaska Department of Labor and Workforce Development (2010-2019).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 22

 Visitor Industry
Until the COVID-19 pandemic hit Alaska in March 2020, Anchorage’s visitor industry was on a long-term growth
trajectory. Cruise passengers, in particular, were visiting Anchorage in ever-increasing numbers, fueled by strong
growth in the cross-gulf market. Indicators such as air traffic and tax revenues consistently showed increases,
especially bed tax revenues, which reflected a jump in room rates in addition to more guests.
The pandemic stopped the industry in its tracks, with virtually all cruises cancelled, the highway borders with
Canada closed to all but essential travel, and tight restrictions for passengers arriving by air. While some
Anchorage businesses serving visitors were able to open on a limited capacity, such as hotels, bars, and
restaurants, many others ceased operations. Although the full impact was muted to a small degree by federal
relief efforts, the industry shed thousands of jobs and millions in wages in Anchorage in 2020.
The road to recovery is unclear. It depends on a variety of factors: the development of a vaccine and/or cure for
the virus, infection rates, nationwide and global economic conditions, and the confidence of the traveling public.
It will also be challenging for statewide and community destination marketing organizations to find the
resources to promote their destinations with reduced budgets. There is hope that Alaska’s vast spaces, outdoor
opportunities, and perceived safety will give the state an advantage over other destinations when people start
traveling again. However, the dependence of Anchorage (and the state) on the cruise sector is a challenge – of
all travel modes, the American public now considers taking a cruise as the riskiest of travel activities. 7
After several years of increasing revenue, AEDC expects a significant drop in bed and vehicle/RV tax revenue.
Both may drop around 40% compared to the prior year, with larger declines possible.
Following are selected indicators, both pre- and post-COVID, for Anchorage’s tourism sector.
•

Calendar year 2019 showed a 12.4% increase in bed tax revenue over 2018, growing from $27.8 million
in 2018 to $31.2 million in 2019. 8 This followed a 7.0% increase in 2018.
o

•

The first quarter of 2020, which started to be affected by the COVID-19 pandemic in March,
showed an 18.0% decrease from 2019.

Visit Anchorage reports that hotel occupancy was up by 4.3% between 2018 and 2019, while the average
daily hotel rate (ADR) was up by 7.5%, and RevPAR (revenue per available room) was up 12% over the
same period. 9
o

The most recent period measured by Visit Anchorage and STR shows that occupancy in late
June/early July 2020 was down 34% from 2019; ADR was down by 37%; and RevPAR was down
by 57%.

7
Coronavirus Travel Sentiment Index, Destination Analysts, week of June 22. Question: “At this moment, how safe would you feel doing
each type of activity?” 77% of those surveyed said traveling on a cruise line was very or somewhat unsafe, the highest rate among 22
common travel activities.
8 Municipality of Anchorage.
9
Visit Anchorage and STR.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 23

 •

Anchorage car rental and rental RV tax revenues increased by 3.2% in calendar year 2019, on the heels
of a 7.8% increase in 2018. 10
o

•

Car and RV rental tax revenues were down by 5.3% in the first quarter of 2020.

Passenger enplanements at Ted Stevens Anchorage International Airport were up by 2.2% in calendar
year 2019. 11
o

•

Enplanements were down by 44.5% in the January to May period of 2020.

Statewide cruise traffic was up by 13.9% in 2019 to more than 1.3 million passengers, following a
previous increase of 7.3% in 2018 (1.2 million passengers in 2018 compared to 1.1 million in 2017). 12
Cross-gulf traffic (passengers embarking or disembarking at Whittier or Seward) showed slightly less
growth than statewide traffic at 10.9%. (Virtually all cross-gulf passengers transit Anchorage either
before or after their cruise.)
o

The 2020 cruise season was essentially canceled by the COVID-19 pandemic, with only a few
small ships planning to sail in Southeast Alaska in August and September as of this report’s
publication.

•

Visit Anchorage reported a slight decline (2%) in convention attendance by out-of-town visitors in 2019,
although the number of conventions was similar (435 in 2018 and 434 in 2019).
o

Before the COVID-19 pandemic, the 2020 convention season was predicted to match the 2018

o

As of report publication, Visit Anchorage’s convention business was down 76% compared to

level. There were 114 conventions before mid-March, including 10,191 out-of-town attendees.

the same time last year. Many groups re-scheduled for 2021, but there is still uncertainty that
the market will return anytime soon; the nature of conventions gathering people in large groups
make them especially vulnerable to virus spread.

Anchorage Bed Tax and Car/RV Rental Tax
($Millions), 2015-2020
$26.1

$31.2

$27.8

$25.9

$25.0

$18
$5.8
2015

$6.2

$6.1
2016

$6.7

2017

2018

Bed Tax

Car & RV Tax

$7.0

2019

$4
2020

Municipality of Anchorage.
Alaska Department of Transportation and Public Facilities.
12
Cruise Line Agencies of Alaska and McDowell Group.
10
11

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 24

 Source: Municipality of Anchorage (2015-2019); McDowell Group estimates (2020).

Oil & Gas
Prices
As evidenced in 2020, crude oil price predictions are fraught with uncertainty and often inaccurate. Unexpected
global events can quickly and dramatically affect prices. With that caveat, Alaska North Slope (ANS) crude prices
are expected to continue to slowly recover from historic lows in April 2020, averaging $43 per barrel for the
remainder of 2020, bringing the average 2020 price to $42. Looking ahead, ANS crude is projected to sell for
$49, $53, $54 per barrel in 2021, 2022, and 2023, respectively.
•

In spring of 2020, global oil prices were crushed by increased production by Saudi Aribia and Russia,
coupled with COVID pandemic-driven decline in global demand. US oil consumption dropped by 37%
between early March and mid-April. As of mid-July, total US consumption has since recovered to about
85% of pre-pandemic levels.

•

Alaska North Slope crude oil briefly had a negative value (-$2.68) for the first time in April, the result of
supply and demand imbalances and the particularities of oil futures trading.

•

The forecasted annual average price for 2020 of $42 per barrel is lower than a recent previous low in
2016 of $43 and will be the lowest average annual price for ANS since 2004.

•

US rig counts dropped below 250 in July, a new record low since Baker Hughes began reporting rig
counts in 1948 and down from 2019’s high of over 1,000. This is expected to result in decreased future
US production and put upward pressure on prices.
Alaska North Slope Crude Oil (Average Price Per Barrel), 2008-2023

$109 $111 $108
$98

$98
$79
$71
$61

$65

$54

$52
$43

$42

$49

$53

$54

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Alaska Department of Revenue (2008-2020); Energy Information Administration, CME Group (2020-2022).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 25

 Production
Due to oil price driven production cuts in the spring of 2020, total 2020 ANS production is expected to average
474,000 barrels per day (bpd), down 3.2% from 2019. In 2021 oil production is expected to return to the 2019
average rate of 490,000 bpd and then decline to 475,000 bpd in 2022 and 468,000 bpd in 2023. These
projections assume there is no large COVID-19 outbreak on the North Slope which could force companies to
reduce staffing and negatively impact production rates. This projection also assumes that the ballot initiative to
increase oil taxes fails. If it were to pass, we would expect lower oil production in future years.
•

Oil production has been declining in recent years with annual decreases of 3.4% and 3.7% in 2018 and
2019, respectively. Future production rates are more uncertain than ever due to a shortened 2020
drilling season, persistently low oil prices, and a new operator of Prudhoe Bay.

•

During the first three and a half months of 2020, ANS production averaged about 507,000 bpd, about
2% less than the same period in 2019. Over the following two and a half months, average production
dropped to about 415,000 bpd. Production has since recovered to about 500,000 bpd. Most of the
production cuts came from ConocoPhillips’ Kuparuk and Alpine fields.

•

Hilcorp closed on BP Alaska’s upstream assets at the beginning of July and took over as operator of
Prudhoe Bay. Hilcorp has a track record of increasing production from legacy fields and may increase
or slow the decline of Prudhoe Bay production.

•

Prior to the COVID pandemic and corresponding oil price crash, there were 10-12 drill rigs operating in
Alaska. Since mid-April only three rigs have been operating in Alaska. Only eight times in the last 20
years has the weekly number of drill rigs been as low as three and never for more than one week at a
time. This historically long period of low active drill rig counts may be reflected in oil production in the
coming years.
Alaska North Slope Crude Oil Production (Thousands of Barrels per Day), 2008-2023

704

671
619

583

550

534

513

508

519

527

509

490

474

490

475

468

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Alaska Department of Revenue (2008-2023).

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 26

 Gross Value
The gross value of North Slope oil production is calculated as the annual oil production times the average price.
This gross revenue flows to State and local taxes, salaries of oil employees, support service companies, North
Slope investment, and oil company profits. The projected gross value of North Slope oil production for 20202022 is expected to be 11% lower than the gross value from 2015-2017.
Alaska North Slope Crude Oil Gross Value ($billions), 2008-2023

25.2
23.3

22.2

17.8

21.0
18.3

14.9

13.3
9.7

10.4

11.7

8.2

7.2

8.7

9.1

9.2

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Alaska Department of Revenue (2008-2020), McDowell Group calculations (2020-2023).

Hilcorp Acquisition of BP Alaska Assets
With the acquisition of BP’s Alaska assets, Hilcorp now operates Prudhoe Bay, the largest Alaska oil field as well
as most of the Cook Inlet gas production, which heats and electrifies Anchorage. The overall economic impact
in Alaska of this transition is unknown. In general, successful closing of the transaction (currently only the
upstream assets) is viewed as good economic news for several reasons.
•

Had the BP/Hilcorp deal fallen apart amid the COVID pandemic and record low oil prices it is uncertain
whether BP would have been able to quickly ramp back up North Slope operations or quickly find
another buyer.

•

The original deal appears to have been reworked in Hilcorp’s favor, leaving them in a potentially
stronger financial position. Having the operator of Prudhoe Bay and supplier of Anchorage’s heat and
electricity in a stronger financial position is positive for the long-term economic health of Anchorage
and Alaska overall.

•

Hilcorp’s leaner approach to operations may extend Prudhoe Bay’s operating life and prolong the
positive economic impacts of the industry in Alaska.

Oil and Gas Support Sector
The oil and gas support sector started 2020 in its strongest position since before 2015. However, the
combination of the COVD pandemic and the associated low oil prices brought North Slope activity to a halt in
AEDC 3-YEAR OUTLOOK

McDowell Group  Page 27

 the spring of 2020. Absent some unexpected resurgence in oil prices, the support sector is expected to remain
relatively weak through 2023. It is likely that not all businesses in the oil and gas support sector will survive the
prolonged downturn in activity, especially in the absence of extended federal benefits. The result is expected to
be increased consolidation of companies and reduction in overall labor force. Statewide, employment in the
support sector has dropped by 1,600 so far in 2020, compared to 5,000-6,000 employment decline during the
2015 downturn.

Oil and Gas Development
•

HEX LLC purchased the Kitchen Lights unit and associated infrastructure with AIDEA financing and plans
to increase production.

•

Hilcorp is developing multiple Cook Inlet fields and is supplying most of the local natural gas under
long term contracts.

•

AGDC, in partnership with BP and ExxonMobil, has reduced the capital cost estimate for the Alaska LNG
project by 12% to $38.7 billion. Alaska LNG received its FERC record of decision and AGDC is soliciting
strategic partners to take over the project.

•

Oil Search has slowed work on Pikka, reducing its 2020 capital spend from $230 million to $160 million.
The FID for Pikka has moved from 2020 to 2021 but the company reports still being on track for first oil
in 2025. Pikka is expected to produce 135,000 bpd at its peak.

•

ConocoPhillips has reduced its 2020 capital spending in Alaska by $200 million, primarily through not
drilling previously planned wells at Alpine and Kuparuk. ConocoPhillips has not announced any plans
to slow down its Willow development.

Looking Ahead
Uncertainty is inherent in economic forecasting, but recent events illustrate how quickly things can change.
Today it’s difficult to predict with any degree of confidence what the next six months might hold, let alone two
or three years from now. Lapses in COVID-19 containment in Alaska and elsewhere in the U.S., the timing of
vaccine development and distribution, the outcome of November elections, international tensions, and other
forces are sure to affect economic activity and investor confidence.
AEDC remains focused on mitigating and repairing the immediate economic damage cause by COVID-19,
assisting in any way we can the businesses and residents at greatest risk. It is difficult to know where we will
land after the inevitable decline in federal funding that has been crucial to keeping many businesses and
households afloat. We must be prepared for more difficulty ahead as the breadth and depth of the pandemicinduced recession becomes clearer.
Charting a course ahead for the Anchorage economy requires an understanding of the forces driving long-term
population decline and a shrinking labor force. Population is down 10,000 since 2013, including the loss of 2,600
residents in 2019. The Anchorage labor force has been declining steadily, down 12,000 workers since 2014. If
our employment estimate for 2020 holds true (down 11,000 jobs from 2019), Anchorage employment will have
declined by 18,000 jobs from its peak in 2015 and dropped back to its lowest level in 20 years.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 28

 In last year’s 3-year forecast we noted that Anchorage’s economy had strength in its diversity, with important
contributions from the military, transportation, health care, tourism, education, professional services, oil and
gas, and other sectors. In early 2020, our concern was mainly about the prospect of state fiscal policies pushing
us deeper into recession. While state fiscal policy remains a significant unresolved issue, AEDC’s current concerns
are much broader as the still-unfolding negative impacts of COVID-19 grip the Anchorage economy. But the
message still holds true — our economic diversity gives us confidence in the future.
The path toward economic recovery will be difficult. The hard work that lies ahead is daunting. We can start by
recognizing that the days of easy state (oil) money are behind us. We can re-learn the importance of shopping
locally and supporting local businesses. We can avoid the self-inflicted wounds that result from the threat of
ever-changing tax rates on the oil industry. We can finally establish a stable state fiscal plan, one that gives
confidence to investors and all Alaskans who rely on the essential public services government provides. Finally,
though perhaps difficult to see today, we must view this as an opportunity to rebuild a more resilient economy,
to reskill for a 21st century workforce, and better leverage our natural advantages in the global marketplace.

AEDC 3-YEAR OUTLOOK

McDowell Group  Page 29