Economist Neil Fried of the Alaska Department of Labor and Workforce Development, Research Section, explains data trends on a slide.
By Marc Donadieu
Glacier City Gazette
With the price of oil plunging and the state of Alaska dependent on oil revenue, residents are rightly concerned about the effects a weak economy will have on state and local governments. People want to know how bad Alaska’s economic situation is expected to get and how they might be affected. How are such forecasts created and are they reliable?
The topics of economic predictions and accuracy are where Economist Neil Fried comes into play. He works for the Alaska Department of Labor and Workforce Development, Research Section, and he visited the Girdwood Community Center on Feb. 3 to speak about Alaska’s economy and answer questions. Glacier City Realty sponsored Fried’s presentation, as it has for the past few years. The hour-long talk drew about 50 people, and it began with baked goods people brought and coffee and tea provided by The Grind.
Fried began his presentation by saying he would be happy to answer questions about Alaska’s economy and economic forecasting. However, he emphasized would not answer questions about economic policy such as would a sales tax or income tax be better for the economy.
He stressed that there is a lot of information we just don’t know yet and that nobody can predict what the state legislature will do to address the economy. Despite the generally so-so information he provided, he did so in a clear, upbeat manner, which included donning a Bart Simpson bowtie.
Then he identified two key areas of uncertainty in Anchorage’s economy, which is tied to oil prices.
“One big uncertainty is how is the industry going to react to these lower prices. We know they’re going to cut their workforce. They’ve already begun doing that. How much are they going to cut their work force? I don’t know the answer to that question. The other one is the whole fiscal story. What is going to happen there? I can’t answer that one either. I can guess.”
Fried was forthright about the unpredictable nature of economic forecasting that tries to divine the future by examining a wide swath of past and present economic data and trends to make an accurate prediction. Sometimes he nails it and other times he fails, but he keeps a sense of humor about the many variables of economic forecasting that are far beyond anyone’s control.
Fried’s forecast for Anchorage in 2016 is a slight loss of jobs, less than 1 percent, but that some sectors like tourism could have modest growth. He says 2017 is when the municipality should be very concerned because nobody, economists included, really knows what will happen. There are too many unknowns and variables, but they don’t look promising.
“I’m just worried about the more cumulative effects of what is already beginning but could manifest themselves even more as the year goes on with the new budget cycle, the price of oil unless it changes dramatically. That’s what I’m worried about. Things can change very rapidly.”
If you wish to understand Alaska’s fiscal crisis in more detail, Diane Kaplan, President and CEO of the Rasmusen Foundation, will be presenting at the Girdwood Community Center from 7-9 p.m. on Feb. 22. She will speak about Alaska’s financial situation and lead a discussion about choices for getting through it. The presentation is being sponsored by Girdwood 2020; Girdwood, Inc.; the Girdwood Chamber of Commerce; and The Rasmuson Foundation.