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Is trouble on the horizon for Alaska's economy?Alaska's economy has largely withstood the effects of the global economic downturn without depression-like unemployment that has plagued the Lower 48. But is the ride about to end? A report by economists for Wells Fargo released this week finds that Alaska is among 13 states that "likely fell into recessionary territory in July," even though the country's economic outlook as a whole "remains in positive territory." The report draws from data compiled by The Federal Reserve Bank of Philadelphia that attempts to estimate the current health of the economy. Alaska's "economy is very cyclical and fluctuates quite a bit," Michael A. Brown, one of the economists who authored the report, said Thursday. "Obviously, a lot of that's tied to oil and energy, but growth has decelerated in other areas as well." There are two economic forces at work against Alaska, according to Brown and his Wells Fargo colleagues: First, the state's heavy reliance on federal funding is troubling at a time that austerity and deficit-crunching is the political norm. Second, Japan -- Alaska's leading foreign trade partner -- is still recovering from earthquakes and subsequent nuclear disaster earlier this year. But Neal Fried, a state labor economist, said he's wary of economic indexes that rely heavily on national averages or data tied to manufacturing, which Alaska doesn't have a lot of. He also said the jury's out on the economic impact of the Japanese disaster on Alaska. "Our economy is structured so different than the national average," Fried said Thursday. "That's what so many of those indexes are designed to capture. But we're an outlier, and we have problems of our own." Among those problems is that Alaska depends on oil taxes, fees and royalties to fund nearly 90 percent of state government, as well as stimulating other parts of the economy. With oil fields in decline and fluctuating crude prices, the state faces the ongoing challenge of diversifying its economy. Another economic uncertainty facing Alaska is a potential decline in federal spending. Fried said federal spending in recent years has remained steady thanks to government stimulus programs. But anecdotal evidence and the impending shift toward federal austerity suggest the state could see a decrease in funds flowing to Alaska from the Beltway in the next year or so. From the closure of post offices to impending cutbacks in military spending, Fried said Alaskans should expect more of the same from Washington in the near future. "This is just the beginning. About a third of our economy is tied to federal spending," Fried said. "When will the cuts start? That's the question. My guess is probably about a year from now the effects will really be felt." The possibility of higher unemployment that a decrease in federal spending could bring to Alaska comes at an especially inopportune time. Cost of living in Alaska isn't getting any cheaper, and a report released last week shows steady inflation continued the first half of this year. The biannual Consumer Price Index -- a measure of the change in cost of goods and services people buy for day-to-day living -- shows the cost of living in Anchorage rose by 2.8 percent. Everything from rental agreements to labor contracts to child support payments are affected by the CPI. While some inflation is to be expected, Fried says, anything above 1.5 percent is reason for concern. If Alaska's economic future is positive, Fried said it will come from the unforeseen. "What you can't predict -- like growth in another sector or something we can't even imagine -- that's what we have to hope is on the horizon somewhere," Fried said. The unseen could be rare earth elements, which are in abundance in Alaska and of use for electric car batteries and smart phones; or maybe the elusive natural gas pipeline will finally materialize; or maybe something more elaborate, like the Bering Sea Tunnel from the dreams of Tsar Nicholas II and Wally Hickel. Contact Austin Baird at austin(at)alaskadispatch.com What a curious article. Banking on the unforeseen is a crock. For many years I have held respect for Fried. But thru the last four (4) years he seems to just be spouting the particular party line. Perhaps he just wants to get out of his lucrative position enjoy his even more lucrative retirement from the State of Alaska. Alaska surely does have some of the most beneficent perks for old timers. Not true for later day employees of the State. Some who work extraordinarily difficult jobs for the State, really are not paid very well, unless they have been in those jobs for 20+ years. Ultimately that State government workers are paid the least of a quasi competitive market. All of that is to say that Alaska State spokespeople are misrepresenting the actual state of the State economy. We have the service industry and the oil field support. We have health care industry. Some of those may grow. But there is no diversity here. SOA (State of Alaska) spends money teaching mostly unemployable people theoreticallys how to present themselves to employers, knowing full well no employment is really available for them. These services are paid for not by SOA, but thru Federal programs. It is my belief that the unemployment rates in Alaska are significantly higher than reported publically. It might be one of the good things about which the SOA Senate is reviewing/investigating. Great Article!! Keep the questions coming. Thanx, nem Hello? Our economy has been FLAT for YEARS and now it is picking up some of the downward pull of the bad federal economics. No surprises here. If Parnell had the guts and sense of a turkey, he'd have pulled the oil company tails a long time ago and gotten us a REAL gas pipeline, with REAL contracts to produce LNG or GTL.....instead, we've got NO FUTURE. That's what happens when the oil companies have invested their money in LNG elsewhere on the Pacific Rim (Canada, Australia) and don't want us entering the market because it would lower prices overall. That's what you get when you elect a former oil company PR expert as Governor. Alaska are so incredibly stupid, they probably deserve what they've got. That's no excuse for the men who are doing this, but it is a hard fact that until Alaskans wake up, they won't see better days. Economy: We have $$$BILLIONS$$$ in the State Treasury that is doing NOTHING, but depreciating in value. We chase after the whims of stock market and hope to turn a profit, with our little pot of gold. While banks are going bankrupt and corporations fold. Instead we should be using that money to put people to work and help build up our infrastructure, for the future of our children and their welfare. We should be building a gas pipeline from the North Slope to the interior, to convert all homes and businesses over to LNG, at a low price of under a dollar. Instead of a PFD check, we should give our citizens a choice of investing in State businesses and give them share, that will increase in value, to leave to their grand kids. We should put down railroad tracks to Prudhoe, to carry LNG to market and tourist to the North Slope. We should build a ski resort on top of Chandelar shelf, south of Atigun Pass, for skiers and Japanese tourist to watch the Northern Lights. We should be investing in ourselves, not supporting crumbling institutions, who can't manage their own money. The money we have in the State treasury belongs to the people of the State, not to the Government, not to greedy Wall street and not to a defunct Government, who spends more than it takes in. It belongs to the embellishment of Alaskans and their descendants. Put Alaskans to work, not the rest of the world. We need to invest in Alaska. The value of our little pot of gold, is depreciating faster that our investments. We have to invest in material goods, stock piles of raw materials that will be need to keep Alaska going, to create jobs and put people to work. We can't afford to play the shell game with Alaska's money, for a questionable return. The rule of thumb should be, if it doesn't benefit Alaska, we want nothing to do with it! Our citizens money, that the State is safeguarding, has to benefit Alaskans. Not other States. Not the Federal Government, but the State's people, Alaskans. erased Remember, there are important entrepreneurial opportunities waiting to be developed in Alaska. We need to work toward diversifying the economy. http://www.aksourcelink.com/aksl-blog/aksl-blog/2011/07/31/where-are-the-business-opportunities-in-alaska- |
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