Tight labor market pushes Alaska unemployment to a record low

Alaska’s unemployment rate has reached its lowest level ever, two years after it hit a record high during the early days of the COVID-19 pandemic.

The state’s seasonally adjusted unemployment rate dipped to 4.9% in April — the latest data available from the Alaska Department of Labor and Workforce Development.

In April 2020, the unemployment rate shot to an unprecedented 11.9% a month after the pandemic was declared, levels that exceeded even the mid-1980s downturn in the state, according to labor department data dating back to 1976.

Today’s low unemployment highlights an extremely tight labor market, creating headaches for Alaska employers who need workers as summer and a promising tourism season get underway, but also advantages for potential workers who can shop for the highest wages, state economists say.

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The numbers are also another sign that the economy has bounced back to its pre-pandemic footing, said Lennon Weller, an economist with the Alaska Department of Labor and Workforce Development.

Before the pandemic, the state was just recovering from a long recession.

“The majority of data we look at would indicate we are essentially as healthy if not healthier than we were pre-pandemic,” Weller said Tuesday.

The trends seen in Alaska echo a nationwide recovery from massive job losses during the pandemic. In April, Alaska was one of 17 states recording their lowest unemployment ever.

Persistent inflation has become a problem, particularly for many people with long commutes or who already faced high prices at stores, such as in rural Alaska, Weller said.

Demand at Alaska food pantries has spiked in recent months.

On the other hand, Weller said there are several bright spots in the economy:

• Preliminary data for wage growth in 2021, the most recent available, is fairly strong.

• Economic output is at its strongest since at least the start of the pandemic, as spending and tourism return to pre-COVID levels. Soaring oil prices in recent months are boosting the state’s gross domestic product, he said.

• Unemployment claims are at record low rates, with continued claims dropping to about 4,400 recently, from more than 50,000 during the pandemic.

“We’re close to a baseline level where as many people that want a job, have one,” Weller said.

The number of unemployed people was just under 18,000 in March and April, low levels not seen for more than three decades, state data shows.

Helping create the tight job market is a relatively small labor pool in Alaska. The total number of employed and unemployed people in Alaska reached nearly 362,000 in April, higher than in recent years, but less than in 2016.

The state’s population peaked at just under 743,000 people in 2016, before trending downward thanks in part to outmigration associated with a strong Lower 48 economy. That shrinking population has contributed to a shrinking labor pool.

On top of that demographic shift, the pandemic created new circumstances that have prevented some people from returning to work.

More than 40,000 Alaskans were unemployed in the early days of the pandemic. But many haven’t returned to their former jobs for various reasons, economists said. Some took early retirement, some remain concerned about exposure to COVID-19, and some continue to face challenges finding child care, among other reasons, Weller said.

[Caught in the middle: Alaska needs more child care to aid economic recovery, but facilities are pinched]

“A number of people have chosen to remain on the sidelines for whatever reason,” said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development.

The current conditions have created an “incredible” demand for job seekers, who are in relatively short supply, he said. That’s an unusual outcome for a recovery, which is typically an employer’s market rather than a job seeker’s, Fried said.

The tight labor market is also a factor in the Lower 48, so there’s been less incentive for workers to head to Alaska for job opportunities, Fried said.

“The fact the job market is so tight all over the country means fewer people are coming to Alaska, which makes the job market in Alaska get even tighter because we typically get a chunk of the labor pool from somewhere else in the country,” Fried said.

Paula Bradison, CEO of PeopleAK, formerly Alaska Executive Search, said employers are offering large signing bonuses at a pace she’s never seen before. People looking for jobs are also in the driver’s seat like never before, she said.

For employers, however, “the pandemic amplified the problems we were going to experience no matter what,” she said.

That includes an insufficient amount of workers even before the pandemic, illustrated in part by the number of J-1 Summer Work Travel workers many hospitality and leisure companies leaned heavily on each summer to work in the tourism industry, she said.

Alaska’s workforce had long been undergoing attrition and aging, too. More workers were increasingly close to retirement as the pandemic arrived, and they had increased incentive to opt out of the workforce because COVID-19 put older populations at high risk, she said.

The tight labor market could continue, she said. Giant sums of federal infrastructure money expected to pour into Alaska will create new demand for workers, she said.

Weller, the economist, said there’s one piece of broad economic data that has not returned to pre-pandemic levels, but it’s moving closer.

In April, wage and salary jobs, which don’t include self-employed Alaskans, continued to grow to 310,600 jobs. But they remained 11,800 below their numbers during the same month in 2019.

However, overall employment is higher when the self-employed are counted, a category of work that appears to have grown in Alaska during the pandemic, Weller said. The state’s seasonally adjusted numbers peg the combined employment number in Alaska at just over 344,000.