Alaska Economic Trends February 2016: Is Alaska in a Recession? - P.O.W. Report

Saturday, February 13, 2016

Alaska Economic Trends February 2016: Is Alaska in a Recession?

The full February 2016 Journal can be found [here].

While the National Bureau of Economic Research has National standards for what constitutes a "Recession" Alaska State wide does not.
For the U.S. economy, one of the clearest signals of a recession is a high unemployment rate, and low rates typically mean the national economy is strong. That’s not always the case for Alaska, where the migration of job seekers to and from the state complicates matters. Alaska unemployment rates were relatively high even during the boom years of pipeline construction — in the 8 percent range — primarily because the promise of high-paying jobs lured a signifi cant number of people who didn’t yet have a job. For a short period, at least, many would have been counted as unemployed.

"Alaska has a combination of highly seasonal industries and industries with more stable year-round job counts. To avoid labeling a bad fishing year or a weak construction year a recession, the recession definition we propose is at least three consecutive quarters of over-the-year job losses. That means losses would have to include either the fourth or first quarter, when the state’s large seasonal industries are at their low points."

By this proposed definition, Alaska has had three recessions since 1970 — half as many as the U.S. economy (see Exhibit 2):
• Third quarter 1976 to second quarter 1978 (eight quarters)
• First quarter 1986 to first quarter 1988 (nine quarters)
• Second quarter 2009 to fourth quarter 2009 (three quarters)

Is Alaska Currently in a Recession?

Coming full circle, the answer to whether Alaska is in a recession now is that it’s still too early to tell, given data limitations and the proposed definition of three consecutive quarters of job losses. Reliable job numbers are available through the third quarter of 2015, and they show the state was still adding jobs at a very modest rate, at least up to that point.

The soonest a recession could have begun would be the fourth quarter of 2015. Preliminary job numbers suggest growth nearly dried up in the fourth quarter. Oil jobs began falling after holding steady longer than elsewhere in the country, and state government job counts were already down by more than 1,000 and expected to fall further. 
Whether the expected recession is eventually determined to have begun in the fourth quarter of 2015 or the first quarter of 2016, the writing is on the wall in the form of low oil prices, declining oil production, and a large state government budget gap.

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