In 2017, job losses in Alaska's ongoing recession spread from the sectors first affected—primarily oil and gas and state government—to the sectors that depend on household spending, including retail trade, accommodation and food services, and leisure and hospitality. Alaska will continue losing jobs in 2018, but at a slower pace— likely in the range of 0.7%. That slower pace isn't a sign of recovery, but rather an indication that the initial shock of low oil prices has made its way through the economy.
These are among the findings of a new overview of Alaska's economic and fiscal conditions, by Mouhcine Guettabi, assistant professor of economics at ISER. He also finds that the effects of the recession varied considerably around Alaska in 2016 and 2017, with areas that depend less on oil and gas and state government faring better. But many parts of rural Alaska depend heavily on local government jobs, which held steady through 2017—but face uncertainty going forward, if the state continues to cut aid to local governments.
The state government has yet to enact a plan for dealing with the huge budget deficit caused by low oil prices, and the author also includes a rough estimate of how much this fiscal uncertainty reduces private capital investment in Alaska: somewhere on the order of $200 million to $600 million a year. The overview also considers the effects of different rates of withdrawal from the Permanent Fund earnings reserve, should the legislature decide to use some of those earnings to pay for government operations.
What Do We Know to Date about the Alaska Recession and the Fiscal Crunch? By Mouhcine Guettabi, with support from Northrim Bank.
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