Alaskanomics

Alaska is the Most Productive State in 2010

Alaska led the nation in 2010 with the highest per capita real gross domestic product (GDP).  At $63,424 per person in value added economic output Alaska was 49% above the national average.  Mississippi rated the lowest at $29,345 or 31% below the national average.

Though Alaska’s output was impressive on a per capita basis, the size of our total GDP was $49 billion, which accounted for only 0.3% of the entire $14.6 trillion U.S. economy.

The Federal Bureau of Economic Analysis considers this report the most comprehensive measure of U.S. economic activity.  It calculates the total of what consumers, businesses and the government spends on final goods and services, plus investment and net foreign trade.  For example, it counts the wages earned by workers, the income generated by businesses and the sales, property and excise taxes paid.

Alaska’s real GDP grew by 1.9% in 2010 following and impressive 8.9% gain in 2009 in the midst of a national recession.  By comparision, the U.S. GDP increased 2.6% in 2010 after declining 2.5% in 2009.  In 2009 Alaska was the third fastest growing state economically and one of only 10 to increase. 

In 2010 the recovery was widespread, with 48 out of the 50 states showing improvement.  North Dakota was the fastest growing with a 7.1% gain due to a very active energy sector.  Second was New York, improving 5.1% mainly from a rebound in finance and insurance, which also helped Connecticut.  Nationally, durable goods manufacturing was the source of the largest overall improvements for the U.S. economy.  Retail trade also was a positve driver in 2010.  However, construction activity declined for the sixth straight year and affected Nevada the most.

In Alaska, the 1.9% growth in GDP was led by government spending, followed closely in improtance by mining (which includes oil & gas).  The third largest positive driver was health care, follwed by real estate.  Unlike the rest of the nation, construction activity was positive in Alaska.  The only significant decline in Alaska was the transportation and warehousing sector.

It is important to note that these national figures do include government spending.  Federal deficit spending has been over a $1 trillion dollars a year, meaning much of this “stimulus” spending is not sustainable over the long run and will need to decrease in future years.  Private sector economic growth will have to make up for this short-term government excess spending if GDP figures are going to continue to rise in the future.

The complete report can be read at: http://www.bea.gov/newsreleases/regional/gdp_state/2011/pdf/gsp0611.pdf

Video Clip: Alaska Highway Funding and State Transportation Bill

Associated General Contractors’ John MacKinnon discusses the future of federal highway funding in Alaska as well as the benefits of a state transportation bill during a presentation at the AGC 2011 Alaska Construction Spending Forecast.

 

Anchorage Building Permits Continue to Decline in 2010; New Projects Slated for 2011

In a presentation to the Anchorage Building Owners and Managers Association (BOMA) on January 7, 2011, Brian Meissner of ECI/Hyer reviewed construction results for 2010. Total building permit values in Anchorage continued to decline from a peak of $800 million in 2006 to $386 million in 2010. Residential permit values grew 8% from 2009 to 2010, while commercial permit values were down 22%. Meissner identified a number of high-dollar private and public projects planned for 2011 and beyond, however, including more than $600 million in military projects and other health care, university, library and school projects throughout Alaska. Click here for Brian's presentation.

Alaska's Unemployment Insurance Fund one of few solvent

Alaska’s Unemployment Insurance Trust Fund is one of just a few state unemployment insurance funds that are solvent, with a balance of $257 million. As of November 2, 31 states have borrowed nearly $41 billion from the federal government to fund their unemployment insurance programs. Alaska is one of three states where employees help fund the trust, with employers paying 73% of benefit costs and workers the other 27%. The other two states with employee contributions, New Jersey and Pennsylvania, have borrowed $1.7 billion and $3 billion from the trust fund, respectively. Alaska's fund is the source of 26 regular weeks of unemployment benefits; the Federal government pays for extended benefits beyond 26 weeks. For more information about Alaska's Unemployment Insurance Trust Fund, see the November issue of Alaska Economic Trends, the Alaska Department of Labor's monthly publication.

The 1/3 Rule or What Drives the Alaska Economy?

by Scott Goldsmith, Institute of Social and Economic Research

The Alaska economy depends on 14 sectors or drivers that bring new money into the state and account for all the jobs and income of Alaska households and businesses.  These 14 sectors can be aggregated into 3 groups, each of which accounts for about 1/3 of the total.

The first group—Petroleum—includes all activities related to production, the revenues collected by state and local governments, and the Permanent Fund.

The second group—Federal Spending—includes the dollars that flow into Alaska from both military and civilian government activities.

The final group includes all Other Drivers, both the natural resource sectors of fishing, timber, mining, and agriculture, as well as tourism, air cargo, miscellaneous manufacturing and services, retiree spending, non-earned income.

The other economic sectors, like construction, finance, health care and state government, are important for the health of the economy, but they recycle the money that the drivers bring in.  Without the drivers there would be no money to recycle and no role for these other sectors to play.

A new study by ISER (Institute of Social and Economic Research) of the University of Alaska Anchorage, funded through a gift from Northrim Bank, quantifies for the first time, the contribution of each of the drivers of the Alaska economy.  The knowledge that comes from understanding what the drivers are, their relative importance, and their future prospects, is critical for planning for Alaska’s economic future.

This table summarizes the share of economic activity attributable to each driver.  All the jobs and income are accounted for in this table.  So, for example, some finance jobs are attributed to petroleum, some to federal government, and some to the other drivers.