economy

ISER's Mouhcine Guettabi  told attendees at  the Alaska State Chamber of Commerce's Fall Forum in Fairbanks, "The future of Alaska economic development will rest on the success of the traditional basic sectors and the pursuit of new opportunities.

A new paper by ISER researchers Mouhcine Guettabi, Trang Tran, and Linda Leask aims to give some context to to the ongoing debate about how much Alaska's state government should be spending, as it faces big budget deficits. The paper look at state spending in several ways.

As of 2015 (the most recent year for which cross-state data are available), per-person spending by Alaska's state and local governments was twice the national average. But much of that gap is due to Alaska's unique spending programs (PFDs being the largest but not the only one), higher living costs, and federal grants that are twice the U.S. average per person.

Adjusting for Alaska's unique spending and higher living costs, spending per person in Wyoming (another oil-producing state with a small population) was higher than Alaska's in 2015. Spending in North Dakota (another oil-producer with a small population) was within 15% of Alaska's.

Over the 20-year period from 1992 to 2015, real (adjusted for inflation) spending per person in Alaska grew much slower than the national rate—50% compared with 73%. Alaska's spending did grow faster than the national rate in the last years of that period, when oil prices were high.

Download the paper, How Does Spending in Alaska Compare? A grant from Northrim Bank helped fund this research. If you have questions, get in touch with Mouhcine Guettabi, assistant professor of economics at ISER, at mguettabi@alaska.edu or 907-786-5496.

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 estimates that the the fiscal uncertainty caused by the state's current lack of a plan for dealing with its huge budget deficit may be reducing capital investment in Alaska by something 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.

Download the report, What Do We Know to Date about the Alaska Recession and the Fiscal Crunch? By Mouhcine Guettabi, with support from Northrim Bank. If you have questions, get in touch with the author at mguettabi@alaska.edu or 907-786-5496.

Construction spending in Alaska this year will be around $6.6 billion, up 4% from last year. But that overall increase is due just to a recovery in spending by the petroleum industry, which is expected to be up about 15%, to nearly $2.6 billion. Without petroleum, overall construction spending in 2018 is likely to be down about 2%, to $4.1 billion.

These estimates are from the newly released 2018 construction forecast, prepared by Scott Goldsmith, professor emeritus of economics at ISER, for the Associated General Contractors of Alaska and the Construction Industry Progress Fund. He has made these forecasts of construction spending every year since 2004.

Download Alaska's 2018 Construction Spending Forecast.

Mouhcine Guettabi and Andrew Bibler, both assistant professors of economics at ISER, recently compared the paychecks of people in private and public sector jobs in Alaska. Using Alaska Department of Labor data from 2001 through 2016, they found:

• Average earnings are higher in the private than the public sector. That's because men earn more than women, and men make up a bigger share of private workers—55%, compared with 43% in the public sector.

• Men who work for state and local governments earn on average about $2,000 less per quarter than men working for private businesses. The reason why is that overall, men who take public-sector jobs start out at considerably lower wages—and their wages don't catch up over time, even though they increase somewhat faster than private wages.

• Women working for state and local governments earn on average about $500 more per quarter than women in private-industry jobs. That's because overall, the starting salaries for women in public and private jobs are similar, and salaries for women in public-sector jobs grow faster as they spend time in their jobs.

Download Public and Private Sector Earnings in Alaska, prepared for the Alaska Department of Administration, by Mouhcine Guettabi and Andrew Bibler. If you have questions, get in touch with Mouhcine Guettabi at mguettabi@alaska.edu or 907-786-5496 or Andrew Bibler at ajbibler@alaska.edu or 907-786-5452.

How might steps Alaska's state government takes to balance its budget affect Alaska families? Different ways of closing the state's $3 billion budget gap—the result of lower oil prices and dwindling oil revenues—will have different effects on households with and without children, according to a new report by Matthew Berman and Random Reamey of ISER. They looked specifically at how state income, sales, or property taxes and a cut in Permanent Fund dividends would affect incomes of households with and without children. 

Alaska lost nearly 2,300 jobs—about 1% of all wages and salary jobs— from March 2014 through March 2016. But not all areas of the state and sectors of the economy lost jobs. In a new paper, Mouhcine Guettabi, assistant professor of economics at ISER, examines jobs losses statewide and by area and economic sector. This is the first in a series of short papers that will examine various economic and fiscal issues important to Alaska.

Download the paper (PDF, 752KB). If you have questions, call the author at 907-786-5496 or email him at mguettabi@alaska.edu.