Alaska

Alaska’s overall economic performance among the worst in US for several years, research finds

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Alaska’s economy has performed “at or near bottom” on four key indicators of economic health nationwide over the past seven years, according to a report released Thursday by the University of Alaska Center for Economic Development.

Taken together, the state’s poor performance between 2015 and 2021 — in terms of job growth, unemployment, net migration and gross domestic product — puts Alaska’s economic health on the lower edge all 50 states and the District of Columbia, said Nolan Klouda, executive director of the center and lead author of the 10-page report.

“One could argue that Alaska has been the underperforming state since 2015,” Klouda said in an interview on Thursday. “I think it is.”

The report concludes, “By any measure presented here … Alaska’s economy appears to be at an impasse relative to the rest of the United States.”

“This underperformance places Alaska at or near the bottom of all states and DC for the 2015-2021 period and the pandemic-affected 2020-present period,” it said. “This marks seven years of weak or negative growth in terms of (gross domestic product, the total value of all goods and services produced) and employment, and the highest rate of net emigration of any state or DC.”

The report is a brief but troubling look at these Alaskan and national economic indicators. It does not examine political solutions. Low oil prices for years are cited as the main cause, although these prices have improved in recent months. Oil prices are key to the state of Alaska’s revenue, and higher prices encourage funding for valuable oil projects.

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In the interview, Klouda provided some ideas for reversing the situation, including further diversifying the state’s economy and reallocating revenue to areas that may attract people to Alaska, such as: B. Investments to improve the education system.

He also noted that the report’s “strong” picture of the state’s economy was based on the performance of the rest of the US during a period of relatively strong national economic health.

Bill Popp, head of Anchorage Economic Development Corp., said the report paints a clear and accurate picture of the state and Anchorage’s economic challenges. Net emigration — more people are leaving Alaska than coming in — is a particularly troublesome issue, hampering economic recovery through a shortage of available labor, he said.

Some bright spots, Popp said, include improvements in employment in recent months, including in the oil industry, with major oil projects on the horizon expected to create thousands of jobs, and the increasing emphasis on the industry, the state’s characteristics to potential workers to market could move here, for example in tourism and in the medical sector.

“I think it’s a call to action for the community that we can no longer say this is a cycle and the economy will get better next year,” Popp said. “We have a lot of reason to be optimistic, but we don’t have the manpower to take advantage of the opportunities we need.”

gross domestic product

According to the report, gross domestic product is the most important measure of economic health.

“From 2015 to 2021, state GDP shrank 7.1%, the second-largest contraction of any 50 states plus the District of Columbia,” the report said.

During the same period, US GDP grew by 12.8%.

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Alaska’s gross domestic product has shrunk during the pandemic. A recent three-month measurement of Alaska’s real gross domestic product was 7.7% below pre-pandemic levels, the lowest of all 50 states and the District of Columbia, the report said. Nationwide, the gross domestic product rose by 4.8% in the same period.

Last year, Alaska’s GDP was $57.3 billion, the smallest of any state except Wyoming and Vermont, the states with smaller populations than Alaska.

employment growth

Alaska ranks second to last for job growth, just ahead of North Dakota, the report said.

“While the rest of the country saw job growth, Alaskan jobs fell 8% from 2015 to 2021,” the report said.

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In August, Alaskan employment was 3.9% below pre-pandemic levels, compared with a 0.2% growth nationwide. Only Vermont, the District of Columbia and Hawaii ranked lower, the report said.

unemployment

Alaska had the highest unemployment rate of any state from 2017-19 and remained above the national average during the pandemic.

“Over the period from 2015 to 2021, Alaska had the second-highest average unemployment rate at 6.5%, versus 5.1% for the US as a whole,” the report said. “Only Nevada did worse 7.2%.”

“A surprising aspect of the recovery from the pandemic has been low unemployment rates across the US,” it said. “As of September 2022, Alaska’s unemployment rate was just 4.4% — a very low rate by historical standards, but still the fourth highest of any state and DC.”

net migration

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From 2012 to 2021, more people left Alaska than moved here each year, another sign of a shrinking economy.

“Alaska’s average annual net migration rate between 2015 and 2021 is the lowest of any state,” the report said.

During that time, Alaska lost about nine people per 1,000 people, while the US gained about 2.2 people per 1,000 people.

effect of oil

In the interview, Klouda addressed the far-reaching effects of oil prices on the economy. He said prices coupled with low oil production compared to previous decades are hurting government revenues and the state’s gross domestic product. Sharp job losses at oil and gas companies have also recovered only slightly, wiping out many high-paying jobs that support other aspects of the economy.

“The relative weakness in oil prices is probably the biggest factor in all of these[indicators],” he said.

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An unprecedented time

Klouda and Popp said the state’s economic performance is unprecedented, at least in Alaska’s recent history.

Popp said the net emigration of Alaskans has continued for unusually long years. The key factor has been the lack of people moving to Alaska, a situation that can be addressed with proper investment to improve Anchorage and state services, he said.

“One problem is that our wages aren’t what they used to be,” he said. “And many cities and states have invested in themselves, creating great schools, vibrant downtown and community environments, and walkable neighborhoods, things that younger generations are looking for. There is strong competition for labor at the national level and it comes full circle that we have not invested in ourselves.”

Klouda said Alaska’s economy collapsed dramatically in the 1980s, but that downturn was marked by a “slow, unnerving wear and tear” of job problems, people leaving the state and a declining gross domestic product.

[‘Slow strangulation’: Alaska school districts face fiscal cliff with high inflation and flat funding]

The slow cooking means many Alaskans are still doing fine, he said.

But the fallout adds up, hurting public investment in things like education, which can improve quality of life and help keep people in Alaska, he said.

One result of the state’s struggling economy is the Anchorage School District’s proposal to close schools, a result of fewer students, a net churn and multi-year lump-sum state funding of public education, the result of limited state revenues, Klouda said.

“These data were known, but we saw value in putting them all together,” he said of the report. “Rather than providing scattered facts, we wanted to put this information together to paint a really clear picture of how our economy is doing.”

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