The Cordova Times chatted with Nolan Klouda, executive director of the Center for Economic Development, Business Enterprise Institute about his perspective on the state of economic affairs here in Alaska and nationally, and what to look for in 2023.
“There is a lot of uncertainty and anxiety over things like inflation and if we are going to enter into a recession, given the aftershocks of COVID-19 and all these supply chain types of issues. I think there is a feeling of uncertainty about things, but at the same time a lot of the measures of how the economy is doing are pretty positive, at least as far as things like the job market goes. If you are a job seeker, this has been a really good economy statewide in most communities in the state and nationally,” said Klouda.
Other factors that could affect the economy, such as pandemic recovery compared to the rest of the nation, are not so positive, shared Klouda.
Alaska’s economy is doing poorly compared to the rest of the country and recovery from the COVID-19 pandemic has been a bit slower, according to Klouda. Even though Alaska’s unemployment rate is low, sitting under 5%, it is one of the highest unemployment rates in the country right now because unemployment is low everywhere, he added. He predicts that there will be some job growth in the coming year, but that it will probably be slow moving, similar to the forecast made by the Department of Labor and Workforce Development.
Alaska is forecasted to add 5,300 jobs this year, according to an article by Karinne Wiebold in the January 2023 issue of Alaska Economic Trends magazine.
The federal infrastructure bill is slated to send billions of dollars to the state of Alaska over the next several years, Wiebold wrote. The funding will repair infrastructure including roads and bridges and create jobs in the process.
“The projects will create jobs, and the improvements will lay the foundation for further economic growth. Port improvements in Anchorage and the development of a far north deep-water facility in Nome will increase the state’s ability to move goods, possibly on a global scale,” read an excerpt from Wiebold’s article.
Klouda believes the infrastructure bill will have a big impact on the state’s job market.
“That money will be used on roads and bridges and ports, and is very likely to create jobs when it starts to hit in a big way … And in some ways, it’s going to squeeze our labor market even more. There is going to be a lot of hiring going on, it’s going to be hard to find people to fill those kinds of jobs. I think that’s probably the biggest thing federally going on, as far as what affects the economy overall,” said Klouda.
Klouda brought up an interesting point: finding people with the skill sets to fill jobs in the labor industry.
“That is a big thing a lot of policy folks are worried about right now. Everywhere you go, it’s hard to find workers right now. We have been in this very labor scarce kind of environment, and that’s driven by a bunch of complicated causes. It’s been a tough thing for all of us to get our heads around,” said Klouda. “I think it’s already hard to find workers, then you’re talking about several thousand jobs created. Alaska doesn’t always have a lot of spare capacity … It will be interesting to see how it plays out. That same thing is happening nationally.”
On the entrepreneur business side of things, there’s been an influx over the last few years in people starting their own businesses, even amidst the pandemic. Factors that may have affected the rise in self-employed individuals include more disposable income, thanks to the federal stimulus checks and unemployment benefits, according to Klouda.
“There was this incredible surge in people starting businesses, being self-employed and becoming entrepreneurs. It is something we are trying to unpack and understand what would be the cause. There were a lot of people who started businesses in 2020 and 2021, and that shows up in the data nationally,” said Klouda.
Klouda shared that three major industries in the state — seafood, tourism and oil— could be impacted by a potential recession, which would impact the state’s economy.
“In Alaska, what kind of drives us still is the price of oil. That determines a lot of state revenues, that determines a lot of oil money that finds its way circulating into the economy through paychecks, business spending and contractual spending,” said Klouda. “If a recession causes oil prices to come down, then that could have a negative effect in Alaska. If we have high oil prices while there is a recession nationally, then Alaska could be the safe harbor in the storm. On the big picture level that’s what it could look like.”
“One industry that is really sensitive to a national recession is tourism … you see the numbers dip a little bit when the national economy is weak,” he added. “And then there are things like seafood. Seafood prices can come down, especially when there is a global recession. Global economic factors could affect the health of the seafood industry. It’s kind of a mix of things, you don’t really quite know how a recession will play out.”
Klouda said it’s hard to predict if a recession is going to happen, and predictions for the future vary.
“I never stake any position on whether we are going to have a recession in the future, it’s always hard to forecast these things … if you’re always predicting a recession, eventually you are going to be right because there will eventually be one,” Klouda said. “It’s certainly not a given that we are going to have a recession in 2023. There is a fair probability, maybe it’s a 40, 50 or 60 percent chance of a recession, but certainly not something that’s guaranteed.”
Klouda shared a positive thing to look forward to heading into 2023 on the economy front, as it appears prices due to inflation are coming down.
“Looking at the year ahead, inflation has been a big source of anxiety for people nationally and here in the state. We always get it a little bit worse because prices are a little bit higher here. But a lot of indicators on inflation seem like they are actually easing up. That is one optimistic thing about 2023 is that we will probably see inflation subside,” said Klouda.
The Center for Economic Development has been around for roughly three decades. Klouda shared their focus is multi-faceted: research on the economy overall, economic development planning and promoting and training entrepreneurs. Klouda has been involved with the center since 2010, and also supports different programs within the University of Alaska Anchorage Business Enterprise Institute.
