Famous as the state of economic boom and bust, Alaska appears to have reached something of a new, no-growth stability as its population ages in place, and its economy begins to diversify ever so slightly.
Now deep into the state’s longest running recession, the pain of the economic valley is nowhere near as obvious as the bust that rocked the north in the mid- to late-1980s. Though the 2018 economy has shrunk back to the size of that of 2011, according to the Alaska Department of Labor, Anchorage still looks outwardly vibrant and the bedroom communities of the Matanuska-Susitna Valley to the north are continuing to grow ever so slightly.
The state is now last in the nation in new job creation and first in the nation in unemployment. But nowhere are to be found the boarded-up mini-malls of the 1980s or the abandoned condominium complexes once obvious in the Anchorage Metropolitan Area, a huge swatch of the state’s Cook Inlet region that includes the Mat-Su and is home to about 60 percent of the state’s tiny population of less than 750,000 people.
Asked to explain why “The Great Alaska Recession’‘ that began in 2014 doesn’t echo with the ominous tones of the Crash of ’88, Labor Department economist Neal Fried Wednesday answered with the opinion that “there are a million reasons.”
“You’re still here; I’m still here,” the 1978 graduate of the University of Alaska Fairbanks, then joked.
Fried puts age high on the list of changes since the 1980s. What was once a state full of mobile, young people is increasingly a state of rooted, old people.
“Our demographics have changed a lot,” Fried said. Alaska historically skewed young, but not so much anymore.
The median age is now almost 35 and weighting older. More than one in 10 Alaskans are today over age 65, according to the state. At statehood in 1960, the median was 23, and it had increased only slightly to 27.5 by 1984 when the recession of the ’80s started.
Given retirement incomes and a booming stock market that boosts the portfolios of the better-off retirees, Fried noted, any number of the 65-and-over group can afford to stay in Alaska – if they want – pretty much no matter what happens to the economy.
Little boom = little bust
Retirees serve as a buffer on the current recession, but Fried noted that the biggest difference between now and then might be something simpler:
Alaska’s new-millennium economic cycle is but a shadow of the state’s historic boom and bust. Consider this the mini-boom and mini-bust. Alaska grew slowly from the mid-2000s through 2013 before beginning to shrink slowly back.
The build-up to this recession wasn’t at all like the bad-old days.
“We got so far ahead of ourselves in the 1980s,” Fried said.
Back then, houses were going up in Anchorage as if the city were planning to welcome a mass exodus from Los Angeles. When that failed to materialize, everything came tumbling down.
That just hasn’t happened this time. The economic build up was smaller and slower, and so, too, the decline.
“This recession is longer than the 80s already,” Fried said, “but it’s not as deep.”
And with oil prices now creeping upward and an ” oil renaissance” on the North Slope expected to end the steady decline in state oil production and add new oil to the Trans Alaska Pipeline System, Fried and some other economists are expecting the state could pull out of the recession sometime in 2019.
Whether Alaska can move beyond oil as an economic mainstay remains, however, a big question.
As a state, Alaska is a middle-size American city (the Dayton, Ohio, metropolitan area, ranked 75th in the country, is larger), and has long-struggled with the image of a place where people go to adventure – or get rich and get out – not settle.
The Navajo and Apache Indians of the American Southwest abandoned Alaska for more hospitable climes only about 500 years ago, according to geneticists and linguists. Many of those who followed those early Athabascans into the country – the Russian fur traders, the American gold miners, the Texas and Louisiana oilfield developers – stuck to a similar script.
The territory’s population fell almost 15 percent after the gold rushes of the late 1800s and early 1900s ended, and for the next 30 years the population remained generally stagnant as the number of people coming north was near the number fleeing south.
Alaska was home to fewer than 250,000 people at Statehood in 1960, and it didn’t really begin to grow until after oil started flowing through TAPs in 1975. The state population didn’t hit 500,000 until 1984.
Oil revenue fundamentally changed everything. Oil money fueled the growth of state government and helped encourage repairs to a battered highway system, which in turn helped propel tourism.
“Our economy is now much more diverse than it was in the ’80s,” Fried said, citing the big changes in the so-called “visitor industry.”
When the Alaska Visitors Statistic Programs first started tracking tourism in 1985, the state attracted fewer than 675,000 tourists a year. The number didn’t reach 1 million for almost a decade.
Although a threefold increase since 1985 might seem huge, Alaska remains a bit player in national tourism markets. Oregon, a state that sells outdoor adventure and scenery similar to that of Alaska, last year attracted almost 29 million visitors, who left behind about $12 billion.
Oregon has invested heavily in development of its state parks and trail systems. Alaska has invested little in visitor services. Instead it has subsidized commercial fishing and banked on oil. The latter is proving a better bet than the former.
Fishing jobs were capped by the state’s limited entry law in the 1970s, and processing jobs have been slipping away to China or other Asian countries because of the costs and the difficulties of finding labor willing to work in Alaska fish processing plants.
“I don’t know where you find people,” Brian Gannon, a job recruiter told Sarah Gibson at New Food Economy. “I’ve recruited in Guam, Samoa, the Virgin Islands, and 40 states in the lower 48, [but] soon it’s going to be just us recruiters in a room talking to no one about how great work in Alaska is.”
“‘Great’ is subjective when it comes to a salmon processor gig,” Gibson added. “Room and board cost just $10 a day, but the pay is low: $10 an hour, $15 for overtime. Many say that the fishery’s slim profit margins won’t allow for a wage increase.”
The latter claim appears to have some validity. Alaska salmon processors are up against stiff competition from market-dominant, farmed salmon raised on automated farms and run through automated processing plants.
Where the jobs of tomorrow will develop in Alaska is an unknown. Gov. Bill Walker is banking on development of a gasline from the North Slope to Cook Inlet, though the $45 billion cost is staggering and financing has yet to be arranged.
The odds of success do not look great.
“A staggering 15 proposed projects are awaiting FERC (Federal Energy Regulatory Commission) approval, with most in pre-application phase and a couple in pre-filing stage,” market analyst Gaurav Sharma reported at Forbes this week, and those are only the U.S. projects.
With Australia, Qatar and Russia – already major natural gas and liquified natural gas (LNG) exporters – in the mix, he projected “it’s highly likely many” of the U.S. projects are doomed.
But Fried said there is potential for job growth in other industries Alaska.
Along with the visitor sector, he said, the air cargo sector is growing and could grow more. Cargo Facts last year ranked Ted Stevens International Airport fifth in the world for air cargo just behind Inchon, Korea and just ahead of Dubai in terms of volumes handled.
The airport is a major refueling stop for jets carrying air cargo bound from Asia to the Lower 48.
There is also potential for more mineral development, though many in the state seem opposed to mining. And there is always the possibility for the unexpected.
After the Prinz Brau Alaska brewery – a subsidiary of Germany’s largest brewer, Radeburger Group – failed in Anchorage in the late 1970s, nobody gave the production of Alaska beer much chance of success.
Seven years later, Alaskan Brewing shipped its first 253 cases of Chinook Alaskan Amber. Almost no one was banking on that business’s success. “Commercial banks turned them down for financing (as did relatives),” Tom Acitelli wrote at All About Beer Magazine.
But founders Geoff and Marcy Larson scraped together $310,000 in start-up capital with the help of 88 investors and subsequently built an Alaska institution that would become a model for others.
Alaska is now home to about three dozen breweries and brewpubs.
“The number of Alaska breweries and brewpubs mushroomed by over 150 percent from 2007 to 2017, and there’s no sign the state recession has hit Alaska’s brewers,” Fried wrote in November. “New establishments continued to open and employment increased even as the overall eating and drinking industry began to lose jobs.
“Brewery employment grew from 121 jobs in 2007 to 340 in 2017. Brewpubs have also grown considerably over the last decade, reaching total employment of 921 in 2017.”
The craft brewers have slowly but steadily taken over market share from the major beer producers. They now control about 30 percent of the business, and Fried expects their share will only continue to grow.
Beer is now an established Alaska industry. Hopefully there will someday be others.