Aug 4, 2023
The 2023 AEDC Three-Year Outlook Luncheon highlighted several key points about Anchorage's economic prospects. Anchorage prides itself on its unique qualities, such as its natural beauty and economic significance within Alaska. However, global macroeconomic forces, including high inflation, the Federal Reserve's interest rate increases, geopolitical tensions, foreign manufacturing, and investment capital availability, impact Anchorage's economic outlook.
Anchorage-specific factors were also addressed, notably the challenge of retaining the working-age population. The forecast indicated that although the city's total population is expected to increase in 2023 after a six-year decline, the working-age population may continue to shrink. This was attributed to demographic realities, including the aging of "Baby Boomers" and insufficient younger population influx.
On a positive note, after experiencing significant disruptions, Anchorage's economy is moving towards modest growth over the next three years. Job growth has been steady, and economic indicators suggest a demand for workers, even as unemployment levels decrease. However, the declining working-age population might constrain job growth.
The presentation emphasized the importance of population growth and working-age population retention for sustained economic growth. Attracting new residents to Anchorage remains a challenge, but investments in housing, public safety, and community redevelopment were identified as potential solutions.
In terms of specific sectors, the outlook highlighted trends in various areas:
Air Cargo: Anchorage's air cargo volume experienced significant fluctuations, with a peak in 2021 followed by a slight decline in 2022. Stabilization with modest growth is expected as supply chain disruptions ease, but inflationary impacts on consumer demand persist.
Port of Alaska: The Port of Alaska remains crucial for transportation and infrastructure development across the state. Factors like construction activity, new Federal infrastructure funding, and North Slope oil development are expected to drive higher freight demand.
Building Permit Activity: Building permit values have not fully recovered to pre-2014 levels, with interest rate increases and inflationary pressures impacting residential construction and remodeling activity.
Visitor Industry: While the visitor industry faced challenges due to the COVID-19 pandemic, there are positive indicators. Air passenger volumes have not fully rebounded, but the Southcentral cruise industry is growing, influencing air travel. Room taxes and rental vehicle taxes have shown fluctuations, driven by factors like average daily rates and platform compliance.
Oil Industry: Global oil pricing and geopolitical factors continue to influence the Alaska North Slope (ANS) crude oil industry. The price of ANS crude oil is expected to decline steadily through 2026 due to various global factors.
In summary, the 2023 AEDC Three-Year Outlook Luncheon highlighted a mixed economic landscape for Anchorage. While facing challenges such as demographic shifts and global economic forces, there are opportunities for growth in sectors like construction, tourism, and infrastructure development. The city's unique attributes, combined with strategic investments, could play a crucial role in shaping its economic trajectory in the years ahead. To read the full report, visit AEDC's Research & Reports page: https://aedcweb.com/report/2023-3-year-outlook-report/.