Fueled mainly by increased federal spending, growth in service industries like health care and an expected recovery in summer tourism, Alaska's economy will continue on the path of steady growth it has enjoyed in recent years.
Pat Burden, president of Northern Economics Inc., an Anchorage-based consulting firm, presented an upbeat picture of the state in a presentation at the World Trade Center, Alaska's first statewide economic overview luncheon, held Jan. 27 in Anchorage.
Burden noted some concerns, however. Alaska received some $7.6 billion in federal funds during 2003, he said, but about $3 billion of this was in grants. These may or may not be sustained in the future, he said.
Burden expects a modest 1.7 percent growth in statewide employment, or 6,000 jobs, in 2004, but the Gross State Product, a measure of the size of the state's economy, is expected to grow $1.5 billion and is expected to reach a total of $33 billion in 2004, he told the World Trade luncheon.
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Gross State Product is a measure of the value of total sales of services and commodities in the state. It will grow faster than employment because some of the growth will be in high-value commodities like oil and gas, and minerals, where employment gains will be modest, Burden said.
Increases in federal spending will be the biggest factor behind the employment increases, and will create 2,800 of the 6,000 new jobs. Many of these will be military, and will be part of the deployment of the new Stryker brigade at Fort Wainwright, Burden said.
The hospitality sector, a broad category that includes hotels, restaurants and drinking establishments and generally reflects the contribution of the visitor industry, is expected to grow about 4 percent in overall value and will add 1,400 jobs statewide, Burden said. The economic effect will be modest because many jobs related to the visitor industry are seasonal and modest in pay, he said.
Tourism is expected to be up because a weaker U.S. dollar is making overseas trips more expensive, which makes Alaska more attractive as a vacation destination, he said. About 50,000 additional cruise tourists are expected in 2004. However, with gasoline prices high, independent travelers along the Alaska Highway are expected to decline, Burden said.
The construction and manufacturing category, of which 86 percent of the value is construction, is expected to show very modest growth in 2004 with a net addition of 200 jobs.
That's partly because several major projects are being completed this year, such as missile defense facilities at Fort Greely and the Anchorage airport expansion. Interest rates are expected to nudge up later this year, which may cool the vigorous residential homebuilding boom around the state, he said.
Modest growth is also expected in the transportation and utility sector, Burden said.
The big trade sector will grow 3.5 per cent in value, or from about $3 billion in 2003 to $3.1 billion in 2004, but employment will increase only about 1 percent, or about 400 jobs, Burden said.
Continued entry of national retail chains into Alaska explains why the value of the trade sector is growing faster than employment, he said. The national chains are highly automated and efficient and tend to employ fewer people per sales dollar.
Burden used a different method in making his forecast than has been used by other Alaska economists. Other forecasts rely on statewide employment growth as measured by wage and salary employment as an economic indicator.
This is reliable, and timely, because employers are required to make monthly reports on the number of paid employees to the state Department of Labor, which makes the aggregate data public.
But because self-employed people and uniformed military are not included in the numbers, wage and salary data doesn't show the whole picture of what is happening in the economy, Burden explained. Independent commercial fishermen or sole proprieters, for example, do not show up in wage and salary totals.
Burden developed a different approach using employment data from the U.S. Bureau of Census which estimate the self-employed. His firm developed a model to estimate employment changes based on changes in the Gross State Product.
The latest federal data on Gross State Product, however, is for 2001. Burden's firm used the model to derive projections of Gross State Product and total employment for 2002 and 2003, and tested the model against other, more current information for those years from the state of Alaska and other sources, which the federal government also uses in developing its figures.
The model was also used to predict growth of the state's economy for 2004, Burden said.
