Economic data from 2020 for Sitka are in, and the numbers show a community hit hard by job losses and revenue declines, especially in tourism and seafood.

However, federal relief looks like it may have offset the worst of the damage. Economist Jim Calvin, with McKinley Research, presented his analysis of Sitka’s economy last week (4-22-21).

See the entire McKinley Research Group presentation on Sitka.

The analysis from McKinley Research may not have been quite what the audience expected. Jim Calvin has studied Sitka’s economy for years, in the organization’s previous incarnation as the McDowell Group.

At its worst in May of 2020, Sitka’s employment was down by about 25-percent.

“Sitka was hit harder than most of the rest of the state,” said Calvin. “Down 676 jobs (25-percent). In the meantime the statewide decline was about nine percent, and Juneau was down 13-percent.”

Virtually all seasonal tourism jobs vanished, along with most visitors — and not just cruise passengers. In April of 2019 somewhere around 5,000 people arrived at Sitka’s airport; that same month a year later saw only 300 “enplanements.”

Every other sector of Sitka’s economy also took hits: hotels, restaurants, construction, retail, seafood, and government all were down.

And Calvin found an economic indicator in the fishing industry that someone less familiar with the region might overlook.

“The number of crew licenses sold in 2020 was 31-percent lower than in 2019,” Calvin said. “That’s the lowest number of crew licenses sold since 2009.”

Lockdowns across the country effectively closed the white-tablecloth market for Alaska’s premium harvests of salmon, halibut, and black cod. That, plus the challenges of safely taking on crew during the pandemic meant that many boats were going with fewer crew, or in some cases, going it alone.

Gross business sales in Sitka were down in 2020 — but by a total of only around $15 million. From $497 million in 2019, to $392 million in 2020. Calvin said it’s important to turn that number around.

“We care about business sales because it’s business sales that generate wages,” he said. “And it’s business sales that generate tax revenues to support city services. So, the moral of the story: Big whack in business sales in the community as a result of the pandemic.” 

A big whack, but not devastation. Sitka does not look or feel depressed. The reason, according to the data, appears to be the three major federal relief packages so far. In Alaska — incredibly — personal income went up in 2020, by $1.4 billion, a little over three percent. In Alaska, as in Sitka, there was an overall drop in workplace earnings that was more than offset by so-called “transfer payments” — or direct payments from government. Sitka didn’t benefit to quite that degree, but it’s something: Add up the supplemental unemployment insurance, the Paycheck Protection Program, and the Economic Impact payments and Sitka’s net personal income loss is only $20 million — out of the $632-million in personal income in 2019.

The problem, says Calvin, is the uneven distribution of the pain.

“The impacts have not been uniform,” he said. “Certainly businesses in scenic and sightseeing, and other transportation, accommodations, food service businesses, drinking places — those businesses have been hardest hit. And lower wage earners have been hit by a substantial margin.”

Calvin says that three-quarters of Sitka residents collecting unemployment insurance had earnings of less than $40,000 annually prior to the pandemic.

In a typical year, in a typical economic presentation, Calvin would devote more attention to broader economic trends — like Sitka’s demographics. He did mention that the community’s slow population slide continues, and that Sitka could be down around 8,100 people by 2030. But this time he concluded with the big question of the pandemic: What are the long-term economic impacts of COVID? Will the positive vaccination trend end the pandemic, and stimulate a spending boom? Or will the trillions in debt incurred by the country trigger a round of inflation? Calvin deferred the answer to Yogi Berra, who said “It’s dangerous to make forecasts, especially about the future.”

Alaska’s largest barge operator is raising prices at the end of January. Economists say it could lead to higher prices for groceries and other local consumer goods next year.

Alaska Marine Lines, a subsidiary of global shipping giant Lynden, posted a notice to customers Tuesday saying prices would rise 5% on all its routes including Southeast Alaska, the Aleutian Islands and Prince William Sound. 

“This increase will become effective on January 31, 2021,” wrote AML’s Director of Pricing Margretta Grace in a notice to customers.

The McDowell Group studied the economic impact of freight costs to Juneau in 2017. A portion of increased shipping costs is absorbed by wholesalers, but they often translate into higher retail prices especially in coastal communities.

“More than 95% of all the freight that moves into Southeast Alaska communities is on a barge,” said Jim Calvin, senior vice president of McKinley Research Group, the McDowell Group’s successor. “So the cost of moving that material is certainly important to the prices that businesses pay and ultimately the prices that consumers pay for the products that they purchase.”

Samson Tug & Barge in Sitka also serves Southeast Alaska, and its published rates expire in late January, too.

Vice President Cory Baggen says Samson is in the process of reviewing its general rates.

“We should be making an announcement soon,” she wrote in an email.

In Alaska, freight prices are overseen by the federal Surface Transportation Board. But the board doesn’t directly regulate how much shippers charge: It only reviews the reasonableness of rates if a consumer files a formal complaint.

Representatives from AML’s parent company Lynden in Seattle didn’t return calls or messages.

Sitka’s economy isn’t exactly booming, but it’s not doing too badly, either. While much of the rest of the state has been in a recession over the last five years, Sitka has experienced modest growth in many areas of the economy, with the notable exception of population — which has remained stable for 25 years.

Jim Calvin, an economist with the McDowell Group in Juneau, delivered the news to a full house at Harrigan Centennial Hall last week (4-24-19).

The most glaring omission in the numbers was data from the 2018 fishing season. Power trolling for salmon remains Sitka’s top fishery, and a poor season in that sector, combined with a record-low pink salmon harvest, would have taken some of the shine off of what was otherwise an unexpectedly bright report.

Economics — like climate — is the study of long-term trends, and not short-term highs and lows.

On a bar graph and pie chart, Jim Calvin says Sitka is doing pretty well.

Sitka’s exhibited a remarkable degree of stability and resiliency over the last 25 years as it’s gone through various ups and downs. But pretty stable, pretty diversified economy. Some year-to-year noise in unemployment, but all-in-all pretty stable. Income has been trending in the right direction. Per capita total personal income for residents has been trending in the right direction. The latest data we have is 2017, but the last four or five years it’s all pointed in the right direction.

There are some interesting contrasts in the numbers: At 4-percent, Sitka has the lowest unemployment rate in the state, but 60-percent of the community’s workforce is non-resident. School enrollment is down sharply, but not the overall population. By 2030, almost a quarter of the population could be hitting retirement age.

Any one of these statistics don’t necessarily represent a threat to Sitka. Calvin says the darkest clouds are coming from Juneau.

Sitka has a remarkably diversified economy and has ridden out Alaska’s recession largely unscathed. It’s been tough sledding in Anchorage for example, and oil industry employment across the state is down by a third. And those are all high wage jobs. So Anchorage has taken a hit for sure. The state, since the recession has started, has lost somewhere in the neighborhood of 12,000 jobs. In the meantime, Sitka has been steady-as-she goes. Clearly, there are challenges each year depending on the strength of the fish run, or the number of visitors that are coming into the community. But you have a nicely diversified economy from which to look to the future. There are some challenging things in front of the community: The state budget is one of those key challenges. A lot of that is beyond your control. Frankly the legislature and the governor have it within their power to push the state back into recession, or to at least hold the gains that we’ve made as we’ve been trying to come out of recession, depending on how we address our budget situation. In the meantime, Sitka has kind of been an observer in that and suffered the kind of economic pain that other communities which are much more dependent on the oil industry, and the professional business services that feed the oil industry. So you’re in a good place in that regard. But still as Alaskans we’re all in this together, and if we can’t figure out a way to provide necessary state services and balance our budget, we risk shooting ourselves in the foot. That’s what we’re most concerned about — it doesn’t have to be a bloodbath for us to get our financial house in order. But we risk that.

Sitka businesses shared insights into the economy that weren’t necessarily fleshed out in the data. 109 local businesses responded to McDowell’s survey, compared to the 200 which responded in Juneau — an economy roughly four times as large.

In short, Sitka businesses are concerned about upward trends in the economy that aren’t so desirable, like the cost of living, and the unavailability of housing.

This is what the business community expects from the local economy over the next five years. This surprised us a little bit. More than half — 57-percent of the respondents — expect the economy to decline over the next five years. And that compares to 14 percent who expect it to improve. You know a lot is going on here: I think the state’s budget challenge is a big part of that. Sitka is particularly exposed with the high school, the university, the Pioneers Home — all are part of that state budgeting picture. In addition to DOT, and Fish & Game, and other sources of state employment. State government’s an important part of the picture. You add into that Medicaid payments that flow into the economy, capital project money that flows into the economy — state money that flows to and through Sitka is an important part of the economic picture. So I think we’re seeing concern about that here. Probably also some concern about the hospital/SEARHC issue, what that might mean in terms of the housing market and employment picture going forward. So that’s kind of a downer on what the business community is seeing about the economy going forward, and that’s not a good thing, because these are the people who invest in the community, and you would like your potential investors to be more optimistic about what’s coming.

Calvin took questions on the contrast between Sitka’s generally positive economic data and the negative business confidence. He said “Part of the challenge we have as researchers is that all of the data makes us look backwards, we can’t look forward. But we do know that people are very concerned about the state budget situation, and for good reason.”

Sitka’s economy isn’t looking all that great right now — but this isn’t the first time the community’s suffered a dip.

The Sitka Economic Development Association will paint a broad picture of the community’s economy Wednesday afternoon, April 24, at 3 p.m. in Harrigan Centennial Hall. The public is encouraged to attend.

SEDA is bringing over analyst Jim Calvin, with the Juneau-based research firm the McDowell Group, to present on the State of Sitka’s Economy.

SEDA has given the presentation every year since 1998 — but this is the first time in six years that it’s brought in a professional economist to run the numbers, plus review the results of last month’s business survey, which had over 100 responses.

SEDA executive director Garry White spoke with KCAW’s Robert Woolsey about what attendees can expect to hear Wednesday afternoon.

White – There’s a lot of not-stellar news out there right now. And so we thought that bringing somebody over who does this for a living and taking a look at it was warranted this year. Frankly, last year I had people say “Garry, you’re giving us negative information.” And my response was, “I’m pulling data, and the data doesn’t look good.” We’re seeing cuts in federal and state employment. And if you look at is as dollars flowing into the community, that’s payroll —  our Forest Service workers, Coast Guard, folks who work at the state — that’s a paycheck that comes into our community and gets spent at the grocery stores and retail shops. That’s a positive thing for us. Something else that we’ve been noticing as well is that over time, the revenue that comes into town — you know, back in the eighties a lot of that was from earned revenue, paychecks, 1099s and W2s. That percentage has dropped off quite a bit, and we’re seeing more money come in through retirement accounts and investments. So what we’re seeing is that there are not as many wage earners as there used to be.

KCAW – And that’s confirmed by things that we’re hearing in other venues: The Sitka School District is down 50 students. That means families.

White – Right.

KCAW – And families are generally in that wage-earner category.

White – We saw a big drop in population obviously when the mill shut down, then we bounced back up. We saw a drop-off in 2007 when Sheldon Jackson closed. And then we built back up. And in 2013 we got above the population when the mill was operating. And now we’ve basically fallen off a cliff since 2014. You can see that in the population trends and in school district enrollment. And what also is happening: We’re getting older. We’re losing our workforce-age folks and we’re becoming a more mature community.

White says that the news at Wednesday afternoon’s presentation will have some positive content. Sitka’s cruise ship tourism is climbing back to pre-recession levels, and fishing — despite challenges in the Pacific Salmon Treaty and herring fishery — remains a bright spot in the economy.

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