alaska's economy: then and now · oil begins flowing through the pipeline alaska recession...

General OverviewA little bit of context: a historical perspective

What can we say about the near future?

Alaska’s Economy: Then and Now

Mouhcine Guettabi, PhD

Institute of Social and Economic ResearchUniversity of Alaska Anchorage

10/11/2017

Mouhcine Guettabi Basics



Outline

1 General OverviewAlaska’s Economy and Demographics:Then and Now

2 A little bit of context: a historical perspectiveConsiderable change in a few decadesHistorical employmentPrivate sector decline: Wave 1GovernmentPrivate sector: Wave 2

3 What can we say about the near future?Where do we go from here?



What can we say about the near future?Alaska’s Economy and Demographics:Then and Now

Outline







Alaska as a state used to be known for rising employmentand population, characterized by periods of boom andbust such as the construction of the trans-Alaska oilpipeline in the mid-1970s, the recession followingcompletion of the pipeline in the late 1970s, thegovernment spending and construction driven boom of theearly 1980s, and the oil price crash driven deeprecession of the late 1980s. While true once, that pictureis no longer true.




Big Savings account

Alaska has built a very big savings account. In 1976,Alaskans voted to put part of the state’s oil revenues into aspecial account the legislature couldn’t spend. With thatdecision, Alaskans used temporary oil revenues to create apermanent asset. As of October 5th, 2017 the PermanentFund had a balance of close to 62 billions.




Snapshot of how much Alaska has changed

1970 2016/2017

Wage employment 130,000 361,183Savings account 0 $62 billion

Population 304,000 737,000




Slow and steady

For the past quarter-century, Alaska’s economy has beencharacterized by relatively slow and steady growth inpopulation and employment driven by growth across manysectors such as the federal government, mining, tourism,air cargo, healthcare, and retail trade, and with significantregional variation.




What about now? Alaska’s situation in numbers

Alaska’s Fiscal and Economic Situtation by the numbersBudget and economy

2013 2014 2015 2016 2017

Unrestricted GF revenues 6.9 5.39 2.25 1.53 1.64

Wage and Salary Employment 335,366 336,640 338,262 332,138 324,498




Dimensions of change

Alaska has considerably changed along almost alldimensions.Quality of life has improved significantly.Alaskans are richer, more likely to own a home, and lesslikely to be male than 50 years ago.




Considerable change in a few decadesHistorical employmentPrivate sector decline: Wave 1GovernmentPrivate sector: Wave 2

Outline








Does Alaska still have considerably more men?

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2011 2012 2013 2014 2015 2016

Alaska population by gender: 1900-2016

Female

Male

The share of the male population decreased from 0.72 in 1900 to 0.51 in 2016. In fact, the male to female ratio has been less than 1.2 since 1970 and is currently at 1.06.





What about the age distribution?

24.58%22.54% 24.28%

20.26%

2.55% 3.62% 5.23% 7.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

1980 1990 2000 2010

Age distrbitution by decade1980-2010

Less than 5

5 to 18

19 to 65

Over 65





Alaska evolution: homeownership

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

1950 1960 1970 1980 1990 2000 2010 2011 2012 2013 2014 2015 2016

Homeownership rates for Alaska and the United States1950-2016

AK

US

Homeownership rates increased from 50 to 58% between 1970 and 1980 census. Another significant jump occurred between 1990 and 2000





Alaska evolution: crowding

30.50%

19.40% 19.60%

10.10%8.60% 8.60%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1940 1950 1960 1970 1980 1990 2000

Slighly different measures of economic stabilityCrowding: 1940-2000

US

Alaska





Alaska evolution: neighborhood stability

25.80%23.30%

21.50%

13.20%11.90%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

1960 1970 1980 1990 2000

Turnover and neigborhood stability1960-2000

AK

US





Nonperforming loans: Now and Then

17.29%

4.77%

1.09%

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Percent of nonperforming loans ( past due 90+ days) relative to total loans

Periods of loan distress: -During the 1980's recession, the percent of nonperforming loans peaked at 17.29%. - During the great recession, they peaked at 4.77%. - So far in this current recession, the percent of nonperforming loans has peaked at 1.09% in 2017.





Outline








Major events

Pipeline construction begins

First PFD distributed

Oil begins flowing through the pipeline

Alaska recession begins, following crash in oil prices

Continuous period of employment growth from 1989 to 2008averaging 1.8% per year

First year of negative growth in two decades

Period of very slow growthbefore recession

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Wage and Salary Employment in AlaskaSignificant Economic Events Between 1959 and 2015





What about wages?

57,979

74,700

The average wage growthbetween 2000 and 2015 was 0.73%

0 20,000 40,000 60,000 80,000Average wages and salaries

20152014201320122011201020092008200720062005200420032002200120001999199819971996199519941993199219911990198919881987198619851984198319821981198019791978197719761975197419731972197119701969

1969 to 2015

Real average wage and salaries





What do we know about the current economicsituation?

We are in the middle of the second year of the recession.The contraction has spread from Oil and Gas,Construction, and Government to the rest of the economyin this last year.Most boroughs and census areas are feeling the squeeze.





Basic picture: Economic contraction

-1.8%

-2%

-1%

0%

1%

2%

Yearly

em

plo

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wth

rate

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Employment growth rate using QCEW

at the state level2002-2016 -1.81%

5%-5% 20%10%0%-10%Growth rate

Yukon

Yakutat

Wrangel

Valdez

Southeast Fairbanks

Skagway

Sitka

POW

Petersburg

Northwest Arctic

North Slope

Nome

Matsu

Lake and Pen

Kusilvak

Kodiak

Ketchikan

Kenai

Juneau

Hoonah-Angoon

Haines

Fairbanks

Dillingham

Denali

Bristol Bay

Bethel

Anchorage

Aleutians West

Aleutians East

Alaska

2015-2016

Employment growth rate at the borough level

We lost 6,221 jobs between 2015 and 2016





Inside the numbers





Outline








How are the hardest hit sectors doing relative to 2014?





Outline








How is Government doing relative to 2014?





Outline








How are spending dependent sectors doing relative to2014?



What can we say about the near future?Where do we go from here?

Outline







Preliminary projections

-1.81%

-2.3%

-0.7%

These projections do not includemajor cuts or added taxes

-2%

-1%

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rate

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Actual Growth Rate Forecast

Wage and Salary employment growth projections




Major decisions ahead

Alaska is slowly becoming a state dependent on a financialasset.Need for new revenues is inevitable.While the economy has weakened, the fundamentals arestill sound.Delaying a decision means more uncertainty.The good news is that the state has options that aresustainable.




Thank you

Thank You

Mouhcine Guettabi

Phone Number :907-786-5496email : [email protected]


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