Alaskanomics

Trends Provides New Way to Monitor Alaska's Economy

Alaska’s Department of Labor and Workforce Development has developed a new feature in their monthly Trends magazine. Each issue will contain an expanded set of economic measures that will offer insight into the health of the state’s economy. The economic measures will show how current data compares to the 10-year average. The article will also provide historical context and look at comparisons in the US economy.

The August issue of Trends looks at job growth, the unemployment rate, and gross domestic product growth. The graphics below provide a visualization of the economic measures outlined in this month’s Trends.

The top half of the gauges represent relative economic strength and the bottom represents weakness. Please visit the Department of Labor for the full report on this month’s economic measures.

July Unemployment at 7.0 Percent

The seasonally adjusted unemployment rate for July increased two-tenths of a percent to reach 7.0 percent. This is much higher than the national average, which was 4.3 percent last month.

Again, the story for employment in Alaska is job loss. An estimated 7,500 jobs were lost from July 2016 to July 2017. The industries with the largest losses were oil and gas, construction, professional and business services and state government. Each had over 1,000 jobs lost in comparison to July 2016. Local and federal government and healthcare did see gains over last year’s employment in July.

Not-seasonally adjusted unemployment was 6.6 percent in July. It was a down four-tenths of a percent from June, which is a slightly smaller than usual decrease. July and August are the height of seasonal employment in seafood processing, construction, and leisure and hospitality.

The boroughs with the lowest unemployment continue to be areas with a lot of fishing and tourism. Kusilvak Census Area continues to have the highest unemployment in the state at 24.5 percent.

Detailed employment numbers can be found at the State of Alaska's website.

Commonwealth North updates report with recommendations on the State’s Operating Budget

Commonwealth North (CWN) has a long standing commitment to a sound state fiscal policy and working to close the large gap between revenue and spending in the state’s budget. With this in mind, CWN has created a Fiscal Policy Study Group, which became the Fiscal Action Coalition. CWN’s Board of Directors and the Fiscal Policy Study Group published a report in June 2015 that outlined recommendations on how to address the fiscal gap in the state’s operating budget. The report was updated in January 2017. The State's Operating Budget: Critical Crossroads, Choices and Opportunities can be found at CWN’s website, or in the ‘Resources’ section of Alaskanomics.

The report is a great answer to the question of what we should do about the fiscal gap in the operating budget. It outlines strategies for reducing the gap, raising new revenues, and creating efficiencies in the budget process.  The updated report highlights what changed between the 2015 and 2017 report. The revenue decline has continued and savings is still being used to fill the fiscal gap.

The report not only takes a look at the past budgets, but also gives examples of ways to strategically reduce spending while still providing essential government services. Each recommendation is thoroughly researched and gives concrete examples of how the legislature can move forward with the recommendations.

Many in Alaska know that there needs to be a solution to the fiscal gap in the state budget. The work of groups, such as Commonwealth North, shows that there are individuals ready and willing to help educate Alaskans on the issues and work towards compromise and a solution. Please visit the ‘Resources’ section of Alaskanomics for information on more groups working to close the fiscal gap.

Cost of Living in Alaska

Alaska’s Department of Labor & Workforce Development’s July issue of Trends discussed the Cost of Living in Alaska. The article is an annual favorite for Trends readers and shows how the cost of living varies throughout Alaska and compares to the rest of the nation. The news for 2016 was not terrible, in fact, it was the second year in a row that the increase in the cost of living in Alaska was under 1 percent.

Anchorage is the only community where inflation is measured. Components that play into the inflation calculation include energy, food and beverages, transportation, recreation, clothing, housing and medical. The first four in the list decreased in 2016, while the final three increased. In 2016, energy prices dropped by 5.8 percent, this decline has helped hold inflation low, especially in regards to categories that depend on fuel, particularly transportation and housing. Energy prices do play a role in the housing prices, it is more likely that the recession in Alaska is the reason that housing prices didn’t increase much in 2016. Housing prices did increase in 2016, but only by 0.9 percent. This is the smallest increase since 1988 when prices fell by 2.2 percent. Medical costs rose 4.5 percent, but are a small portion of the inflation calculation. Medical costs have increased an average of 4.1 percent a year over the past decade, with the largest increase in 2010 with a 5.7 percent increase.

Below is the average breakdown of an Anchorage citizen's household budget. Healthcare costs are very high in Alaska. The average monthly premium purchased on the individual market is $300 higher than the next highest state, West Virginia. It is over double the national average.

Alaska cities have high costs of living, but there are others that are higher. Anchorage, Juneau, Fairbanks, and Kodiak all rank on the Council for Community and Economic Research’s survey of more than 250 US cities. The survey publishes the difference in cost of common items between the cities in the survey. Items that are higher than the national average in the 4 Alaska cities include a can of peaches, iceberg lettuce, 2-liter bottle of Coca-Cola, whole wheat bread, a dozen eggs and a bottle of white wine. The items that on average are cheaper in Alaska are potato chips and rib-eye steak. Not surprisingly, but doctor and optometrist visits in Alaska are well above the national average. Going to an optometrist in Alaska will cost you double from the national average. A medical doctor visit is much higher as well, but not quite double the rate. Alaska is the 3^rd most expensive state, behind only Hawaii and California.

The July Trends edition has a lot of great comparisons of cost of living, broken down in various categories. Housing prices, rent and house affordability are some of the categories highlighted in the report. You can find the rest of the article at the Department of Labor’s website.

June Unemployment at 6.8 Percent

Alaska’s seasonally adjusted unemployment rate for June rose one-tenth of a percent and sits at 6.8 percent, well above the national average, which is 4.4 percent. While there was an increase in unemployment, perhaps the more telling number is that June employment was down by 5,500 jobs, or 1.6 percent. This is compared to June last year. This number seems high, but in comparison to June 2016, it suggested tapering of job losses. During the fall of 2016, job losses were as high as 9,000 compared to the same month in the prior year. This equals about 2.5 percent. The industries with the largest losses were state government, construction, and oil and gas at -1,500, -1,400 and -1,300 respectively. These three industries account for 70 percent of the jobs lost across the state.

The boroughs and census areas with large fishing were the lowest, Aleutians East and Aleutians West with 2.7 percent and 3.8 percent respectively. Tourism areas also had low rates with Skagway and Denali Borough at 3.5 percent and 4.1 percent. The highest rate was 23.7 percent in the Kusilvak Census Area. The census area is on the Bering Sea Coast, north of Bethel, and often has the highest unemployment in Alaska.

For full employment information, visit the Alaska Department of Labor and Workforce Development.

A Comprehensive Economic Development Strategy for Alaska 2017-2022: Draft Report

Alaska’s Department of Commerce, Community and Economic Development has been working on an economic strategy and the first draft was recently published. This document is a collaboration of people from across many sectors and areas of the state. It outlines the economic plan for Alaska in the next five years. The document is a great tutorial for the best way for Alaska to move forward, out of economically difficult times.

The drafting of the strategy was an exercise in compromise as it included representatives from all sectors, urban and rural, private and public sector. It will be a great resource for Alaska as we move forward and can be used as a common base for communities across the state. Northrim Bank was proud to be part of this project and support the use of the final report.

The report was jointly funded by the State of Alaska and the Federal Economic Development Administration. It will be the groundwork for economic plans throughout Alaska. The project summary is listed below and the final report can be found at https://northernopportunity.com/final-draft/ when it is completed.

Project Summary

Northern Opportunity: Alaska’s Economic Strategy is a five-year (2017-2022) economic development plan for Alaska. Driven by the need to improve the resiliency of the state’s economy and intentionally lay a foundation for future growth, this plan follows the U.S. Economic Development Administration’s Comprehensive Economic Development Strategy (CEDS) framework. This is the first statewide CEDS developed for Alaska.

The decline in global oil prices in 2014-2015 made clear the need for a coordinated statewide economic development strategy, as Alaska’s economy has seen significant contraction. Employment in oil and gas extraction, construction, business services, state government, and others have seen sharp declines. At the same time, a thriving entrepreneurship scene as well as healthy seafood, visitor, mining, and health care sectors provide a basis for optimism. The state’s abundant natural resources and recent oil discoveries also point to opportunities for growth. As such, this plan comes together in the spirit of optimism, to capitalize on strengths, as well as to mitigate challenges to economic resilience.

Northern Opportunity: Alaska’s Economic Strategy is the result of eight months of extensive outreach and reflects the input of communities, businesses, public entities, non-profits, Tribal organizations, and individual Alaskans. Information for this project was gathered through research, regional CEDS documents, a series of community forums in every region of the state, business forums, and two online surveys: one directed to individual Alaskans and the other toward business leaders.

VISION: Northern Opportunity: Alaska’s Economic Strategy’s vision is that Alaska will have a stable and sustainable economy that generates quality jobs, capital investment, and new revenue to benefit the people and businesses of Alaska.

MISSION: Northern Opportunity: Alaska’s Economic Strategy’s mission is to arrive at a consensus among Alaskans regarding our economic future, which will result in the articulation of priorities and goals for the state economy. These efforts will promote new investment and economic opportunity for the benefit of all Alaskans.

Most regions throughout the state of Alaska have a CEDS or some version of a regional economic development strategy. Northern Opportunity: Alaska’s Economic Strategy utilized the most recent regional economic planning documents from around the state to inform all aspects of this strategy. The statewide strategy is not meant to replace any regional strategies, rather highlight areas of focus that have commonality from region to region, and provide a coordinated, high-level economic strategy for the entire state.

This five-year strategy is meant to be a roadmap for economic development in Alaska and will span 2017 through 2022 with yearly updates. Research and community feedback allow for a clear understanding of Alaska’s current economic position and underlying trends affecting recent economic performance, while highlighting areas in need of greater resilience. Conversations with community and business leaders throughout the state, investigation of economic development best practices, and additional research were used to identify the most strategic directions forward for the state. Actions were identified that can be taken by public and private sector partners to maximize economic opportunity and collectively mitigate the challenges faced by Alaska businesses and residents. This CEDS also identifies a wide range of stakeholders and strategic partners from government, regional economic development organizations, industry associations, and private businesses.

The CEDS development process began in September 2016 and ran through April 2017. During that time, project staff worked with over thirteen communities, gathered input from all major industry sectors in Alaska, and analyzed data from more than 700 individual and business survey respondents. This CEDS was facilitated and compiled by the State of Alaska’s Department of Commerce, Community, and Economic Development (DCCED), with the core project team from the DCCED Division of Economic Development (DED), and contracted assistance from the University of Alaska Center for Economic Development (UACED). The project was jointly funded by the Federal Economic Development Administration (EDA), and the State of Alaska.

The State of Alaska’s DED supports the growth and diversification of Alaska’s economy through business assistance, financing, promotion, and public policy. The division works closely with industry leaders, allied agencies, and economic development organizations across the state, including the ten state-designated Alaska Regional Development Organizations (ARDORs).

Key Goal Areas

The CEDS process identified six key goal areas of focus. These goals were developed by distilling the input the project team received from individual and business surveys, community and industry meetings, and Strategy Committee engagement.

Business Development: Cultivate a resilient business climate that supports growth and expansion of existing and emerging industries.

Finance and Investment: Maximize the productive use of capital for Alaska business expansion.

Enterprise Infrastructure: Build the transportation and technological foundations for economic growth.

Entrepreneurship and Innovation: Position Alaska to thrive in a technologically advanced global economy.

Economic Development Capacity Building: Strengthen the ability of Alaska organizations to execute economic development initiatives that create jobs and investment.

Quality of Life: Improve the attractiveness and livability of Alaska communities to attract and retain a quality workforce and set the foundations for economic well-being.