Source: Alaska Department of Labor
So far, Alaska has gotten off relatively lightly. Good times or bad, Alaska's unemployment rate is normally higher than the national rate. But not this recession. Eleven possible reasons:
- Federal employment and expenditures are important in Alaska, accounting, directly and indirectly, for about 35% of jobs. Per capita Federal expenditures are significantly larger in Alaska than elsewhere in the U.S. (about 70% higher in 2008). This undoubtedly provides an element of stability, detaching the Alaska economy somewhat from private sector fluctuations.
- The price of oil rose to high levels in the first half of 2008. A third of the jobs in Alaska are directly or indirectly dependent on oil; oil taxes and royalties account for a large proportion of state government revenues. Resource development projects have long lead times. Investments made now will only pay off years from now. While commodity prices were high in 2008 and are lower now, its likely they'll rise again when the world economy begins to improve. Economic activity in this sector should be relatively unresponsive to short run price movements. In fact, employment in the natural resource production sector grew from April 2008 to April 2009.
- The high oil prices didn't just give a boost to the Alaska economy, they probably helped increase the national unemployment rates against which I'm comparing the Alaska rates.
- There was a large disbursement from the Alaska Permanent Fund in the Fall 2008. For years Alaska has been putting oil revenue into an investment fund. Each year the fund disburses some of its income to Alaska residents. These disbursements can be thousands of dollars, depending on the success of the Fund's investments. Disbursements in the Fall of 2008 were relatively large: each resident of Alaska, each man, woman, and child, received $2,069.
- But wait, there's more... in addition to the normal Permanent Fund disbursement, the state authorized a one-time $1,200 Alaska Resource Rebate, to offset the impact of higher fuel costs. Again, this was paid to every resident of Alaska. Between the normal disbursement and the rebate, a family of four would have received a gross payment of $13,076. Alaska's economy is relatively thin, so much of this money was probably spent out of state; the marginal propensity to spend out of a one-time windfall may be relatively low. Nevertheless - as Julia O'Malley reported: "There was nary a parking spot at the Dimond Center mall, where sports fans were wheeling big-screen TVs out of Best Buy. In line at Fred Meyer, there were wads of cash. From banks to the iPhone line at the AT&T store, people were queued up, waiting to spend the biggest payout in the history of the state."
- Overall employment has held up relatively well. The number of jobs grew over the same month in the previous year through April, but fell in May and June (Available jobs in Alaska decline from a year ago). Rising unemployment rates may be due in part to a tendency for net migration to the state to increase when unemployment is relatively high in the lower-48. Net migration to Alaska tends to rise when unemployment rises in the Lower-48.
- Alaska's housing market held up pretty well. As Caroline Schultz compared the Alaska market to the national market in the March issue of the Alaska Department of Labor's magazine. In the fall of 2008 Alaska subprime delinquency rates were much lower than national rates.
- The crash came in September, after we had the summer tourist season under our belt.
- Alaska's fisheries are a large part of its economy, and export markets are important, but a large part of the fisheries harvest would have been taken before the world economy seized up in the fall. The problems with export financing in the fall would have had a relatively small impact on fish markets.
- Alaska's state government has accessible savings accounts which can be used to smooth out revenue fluctuations. Dan Robinson of the State's Department of Labor notes, "As reserves go, Alaska is in a league of its own as a result of its mineral wealth. Recent high oil prices have allowed the state to replenish key savings accounts, most notably the Constitutional
Budget Reserve, which had a balance of $6.2 billion in December 2008. That amount,
plus about $1 billion in another savings account called the Statutory Budget Reserve, gives Alaska significantly more flexibility than other states have when faced with budget deficits."
- And... a lot of reporters from outside were here from August to November, spending money, and covering Governor Palin.
We are taking our hits. As noted under #6, jobs have fallen over the same month the previous year in May and June. Jim Carlton points to a decline in air cargo through Anchorage's Stevens Airport, declining tourism, and the low oil prices of recent months: Chill of Downturn Spreads North to Alaska.
Update, July 17: The Alaska Department of Labor released its unemployment estimates for June today (Unemployment rate at 8.4 percent in June). The rate was almost unchanged from May, and remains well below the national rate. The number of jobs did decrease year-to-year from June 2008.
Edits: July 17: ADOL June update; clarified reference to per capita Federal expenditures in point 1. Changed May 2009 jobs from preliminary to revised. Note that this is non-farm payroll employment, and excludes the self-employed, fishermen and other agricultural workers, and private household workers. July 19: an earlier version of this post noted that job numbers grew from 323,800 jobs in May 2008 (revised) to 326,400 in May 2009 (revised). The 2008 estimate came from the June ADOL Trends magazine, the 2009 estimate from a July 2009 press release. However, news reports indicate that the year-over-year number dropped in May and in June. A check against an updated ADOL spreadsheet confirms that. I either picked the wrong May 2008 estimate to compare to the 2009 number, or missed revisions that occured to the May '08 number after the Trends was published. Item #6 and the final paragraph have been changed to reflect this. I apologize for the error.