Article

September 2022

Oil, budgets, migration, and retirees: Alaska’s 2015–18 recession

Alaska experienced a local recession from March 2015 to April 2018. Falling oil prices combined with the state government’s dependence on oil revenue contributed to job losses throughout the economy. Unemployment did not increase mainly because Alaska’s population is aging rapidly and leaving the labor force through retirement.

The national economic expansion from 2009 to 2020 was the longest recorded in the history of the United States. The unemployment rate fell dramatically, and real gross domestic product (GDP) steadily increased. However, many petroleum-producing states experienced local recessions during this period because of declining oil prices. One of these states was Alaska, which was in a recession from March 2015 to April 2018. This article explores the dynamics, causes, and results of this recession.

The first section of this article explores the trends of employment and GDP in Alaska during the recession. Employment dropped 4 percent overall and 30 percent in mining and logging, which is mainly oil and gas. Real GDP fell 4 percent, and real mining GDP fell 17 percent.

The second section of this article looks at falling oil prices and other factors connected to oil that contributed to the 2015–18 Alaskan recession. The mining, quarrying, and oil and gas extraction sector was 22 to 40 percent of Alaska’s economic output every quarter from 2005 through 2014. By comparison, this sector was 2 to 3 percent of total U.S. output during this period.¹ When Alaska’s oil price fell 81 percent from April 2011 to February 2016, the mining and logging sector was hit first. Falling oil prices also hurt the state government, which relied on petroleum (oil and gas) for 92 percent of its total revenue in 2011. Ultimately, most industries lost jobs. Declining federal spending in Alaska, spending which is particularly important to the state’s economy, also contributed to the recession. In 2014, the year before the recession, Alaska had the fourth-highest proportion of federal jobs to total nonfarm jobs among U.S. states.

The final section describes the effects of the recession. The unemployment rate did not increase greatly, which was largely a result of a declining labor force participation rate. This decline in turn was a result of a high retirement rate caused by Alaska’s aging population. A large wave of young people migrated to Alaska in the 1970s and ’80s to work on pipeline projects, and those who stayed are now reaching retirement age.

Defining the timeframe of the recession

I needed to decide on a timeframe for the recession before I could analyze it. The National Bureau of Economic Research (NBER) sets official start and end dates for U.S. recessions, but there are no official dates for state-level recessions. State-level recessions usually coincide with national ones but in states like Alaska they often do not. For example, Alaska actually gained jobs during every U.S. recession between 1960 and 2019. It also experienced major job losses in 1977 and 1986 to 1987, both of which occurred during U.S. economic expansions.² This article uses a time series of employment data from the Current Employment Statistics (CES) program to determine the start and end dates for Alaska’s recession. Employment alone is not generally used for recession dating, but it was ultimately the best option in this case. Using real GDP yielded recession dating that was out of line with other economic indicators, such as employment, personal income, and unemployment.

The Bry-Bochan method of finding peaks and troughs (local highs and lows) in a time series was run on smoothed seasonally adjusted total nonfarm employment data. A peak is the start of a recession, and a trough is the start of an expansion. A peak or trough is only identified if there are at least 15 months between any two peaks and between any two troughs, and at least 6 months between each peak and trough. See the appendix for more information on the recession dating methodology used in this article.

Industry employment

Employment data used to calculate dates for the recession, as well as examine its dynamics, are from the CES program, which measures people on establishment payrolls.³ U.S. total nonfarm employment fell 5 percent between December 2007 and June 2009, the period of the Great Recession. As shown in chart 1, although Alaskan employment did experience a decline between December 2008 and June 2009, it grew by 1,000 jobs (less than 1 percent) over the entire recessionary period. The state’s subsequent economic expansion saw employment growing by 20,700 jobs (6 percent) from June 2009 to March 2015. During Alaska’s following recession, lasting from March 2015 to April 2018, employment fell by 13,700 jobs (4 percent). Alaska lost jobs in every quarter from the second quarter of 2015 through the fourth quarter of 2017.⁴ After the Alaskan recession, employment started growing again and was up 4,700 jobs (1 percent) by September 2019.

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Chart 2 shows the number of jobs gained or lost by industry during both the expansion (June 2009 to March 2015) and the local recession (March 2015 to April 2018).⁵ All industries with job losses in the local recession lost more than they gained during the prior expansion, except for trade, transportation, and utilities.

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The industries with the most job losses during the recession are closely tied with petroleum (oil and gas). These industries were hit hardest by declining oil prices. Mining and logging–which in Alaska is mostly made up of oil and gas drilling, extraction, and support activities–recorded the largest number of jobs lost and the largest percentage of jobs lost (30 percent). Construction had the second most job losses by percentage (16 percent) as well as the third largest number of jobs lost. This makes sense because among oil-producing states like Alaska, construction employment tends to be very sensitive to oil prices.⁶ The construction sector builds well foundations, sets up oil rigs, builds and maintains pipelines, and builds well equipment.

The Alaskan state government is also highly dependent on oil revenue, so when oil prices fell the state’s budget shrank substantially. Ten percent of state government workers were therefore laid off. Seasonally adjusted data are not available for the components of state government, but one alternative is to use annual averages. Of 2,200 state government jobs lost between 2015 and 2018, 900 were in education.

In contrast to other industries in Alaska, federal government employment in the state dropped by 15 percent during the Alaskan expansion and rose by 2 percent during the Alaskan recession. Declining federal spending in Alaska has been cited as a secondary cause of the recession.⁷

Total nonfarm employment can be divided into three categories: goods-producing industries, private service-providing industries, and government employment.⁸ As shown in chart 3, the goods-producing industry (which includes oil and gas extraction) closely follows Alaska’s business cycle, growing by 6,000 jobs during the expansion and losing 10,000 during the recession. The private service-providing industry is more stable, growing during the expansion and falling slightly during the recession. Finally, Alaska’s combined federal, state, and local government employment has been declining since the early 2010s.

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State gross domestic product

Alaska’s gross domestic product does not track the state’s business cycle as closely as employment does, but it did fall leading up to and during the recession. Gross domestic product is the total market value of finished goods and services produced by a national or a local economy within its borders over a specific period. Alaskan GDP is dominated by revenue from natural resources, particularly oil and gas. In the decade leading up to the recession (2005 through 2014), the mining sector (mainly oil and gas extraction) made up 30 percent of total Alaskan GDP.⁹ Chart 4 shows that the trend of nonmining GDP reflects little of the fluctuations of total GDP, meaning that the mining sector drives the volatility of the state’s GDP. Employment in mining is only about 3 to 5 percent of total nonfarm employment. However, oil revenue spills over into the rest of the economy and makes up most of the state government budget too.

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Real and nominal GDP trends differ in Alaska largely because oil prices have a major role in the price deflator used to convert nominal to real. Mining GDP causes almost all the fluctuation in both real and nominal GDP in Alaska, so oil prices greatly affect the trend of real GDP.

Given that the difference between nominal and real GDP in Alaska is largely driven by oil prices, both real and nominal GDP tell part of the story. When real GDP remains steady but nominal GDP increases because of increased oil prices, the dollar value of the oil revenue and taxes collected is higher without an increase in the price for the basket of goods and services that the state government, oil companies, oil company employees, and oil company shareholders usually purchase. Real GDP, on the other hand, is better at showing quantity and quality of goods and services produced. Real GDP for mining tracks oil production quantity more closely than it tracks oil revenue.

Alaskan GDP fell substantially leading up to and during the recession. As shown in chart 4, real total Alaskan GDP fell 11 percent between its peak in the second quarter of 2012 and subsequent trough in the first quarter of 2019.¹⁰ Nominal total GDP fell 15 percent between its peak in the fourth quarter of 2011 and subsequent trough in the first quarter of 2016.

Chart 4 shows that nominal nonmining GDP (total GDP minus mining GDP) is very stable compared with total GDP. Nonmining GDP grows steadily prior to 2015 then flattens out during the recession before increasing again in 2017. On average, nonmining GDP grew about 4 percent per year during the expansion and only 2 percent during the recession.¹¹

What caused the recession?

While economists have identified several potential causes of the 2015–18 recession in Alaska, including the strengthening of the dollar and declining government spending, the drop in oil prices is consistently identified as the main cause.¹² Alaska’s oil price fell 81 percent from April 2011 to February 2016. This shock reverberated throughout the economy, affecting private industry and government.

Alaska’s reliance on government

The Alaskan economy is reliant on government spending, much of which depends on the oil sector. All levels of government make up a combined 18 percent of GDP in Alaska, compared with 13 percent for the United States. Federal civilian spending and military spending make up 7 percent of Alaska’s GDP compared with 3 percent for the United States. State and local government spending make up 11 percent of Alaska’s GDP compared with 9 percent for the United States.¹³

In 2014, the year before the recession, Alaska had the highest proportion of government jobs to total nonfarm jobs (24 percent) of any state.¹⁴ In comparison, government jobs for the United States as a whole make up only 16 percent of employment. In fact, Alaska has a higher percentage of government employees than the United States at every level of government (federal, state, and local).¹⁵

Almost all land in Alaska is owned by either the federal government (61 percent), the state government (27 percent), or Alaska Native groups (12 percent).¹⁶ Less than 1 percent is in private non-native hands.¹⁷ The state of Alaska is the second-largest landowner in the United States, after the federal government.¹⁸ All this public land requires government workers and contractors to manage, in addition to the costs of supplies and infrastructure.

Economist Scott Goldsmith estimated that in 2006 about one-third of Alaskan jobs depended either directly or indirectly on federal spending.¹⁹ There are four major reasons for this. First, a lot of military spending goes to the five major military bases in Alaska and the service members stationed there. Second, the federal government owns 61 percent of the land in Alaska, the fourth highest percentage of any state in the country and the largest by total area. Alaska contains 86 percent of U.S. land administered by the Fish and Wildlife Service and 66 percent of U.S. land administered by the National Parks Service.²⁰ The federal government spends money on federal positions, contractors, and supplies required to manage these lands. Third, a lot of federal dollars go to health and other programs for Alaska Natives, who are 28 percent of the population–higher than the proportion of American Indians in any other state.²¹ Finally, Alaska is the least densely populated state with some of the harshest terrain, so building basic infrastructure for all residents is expensive. The federal government helps pay for this construction.²²

In 2014, the year before the recession, per capita state government spending was the highest in the country at $15,463 per resident, compared to $5,339 nationally.²³ It was the highest in both education and corrections, and the second highest in both public assistance and transportation.²⁴ This is partially explained by the fact that state spending includes funds from the federal government, and the Alaskan state government gets more than twice the national average in federal grants per resident.²⁵ Also, Alaska’s small population is spread across the largest state meaning that getting services to residents costs more in transportation costs, personnel, and infrastructure.

One example of this is healthcare. In 2015, the first year of the recession, Alaska had the highest per capita healthcare spending of any state (including both public and private spending). This was 37 percent higher than the national average.²⁶ Among other factors, getting patients to a hospital from a remote area frequently requires an expensive air ambulance.

Alaska’s reliance on petroleum

Alaska’s reliance on the state government means revenue to fund it is very important. Most of this revenue comes from petroleum, which is a major driver of the economy. Mining, quarrying, and oil and gas extraction was 32 percent of Alaskan GDP in 2011, compared to 2 percent nationally.²⁷ Alaska has consistently been one of the top two U.S. states by this measure.²⁸

Alaska relies on petroleum income to fund its state government. It is the only state without a personal income tax or a state sales tax.²⁹ Most of the Alaskan state government’s petroleum-related tax revenues come from severance taxes (taxes on the extraction of natural resources). Alaska led the nation in severance tax revenue as a percentage of total state tax revenues from 1980 through 2014, with the percentage maxing out at 82 percent in 2012. It has remained one of the top two states by this measure since then.³⁰

As shown in chart 5, inflation-adjusted state tax collections grew by $4.0 billion (656 percent) between 1999 and 2008. Tax revenues then fell by $4.2 billion (91 percent) from 2008 to 2016, ending up at the lowest level since at least 1990.³¹ This dramatic decline in tax revenue was partly offset by dipping into reserve funds, but it ultimately contributed to a decline in the state government’s ability to fund government services.³²

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In addition to severance taxes, state government revenue from petroleum also includes rent paid by oil companies drilling on state-owned land as well as royalties on the sale of oil and gas extracted from this land.³³ In the decade leading up to the recession (2005 through 2014), petroleum revenue made up 91 percent of the government’s general fund—money it uses for most of its expenses.³⁴

Petroleum revenue is also important for the Alaska Permanent Fund (APF), a trust fund in which a portion of state government revenues from oil are invested for the future. With assets valued at $81.9 billion at the end of fiscal year 2021, it is one of the largest sovereign wealth funds in the world.³⁵ Alaska’s constitution requires that at least 25 percent of all oil and gas royalty revenues be put into the APF. The principal of the fund is prohibited from being spent, but the earnings can be spent by the state government. A companion fund called the Constitutional Budget Reserve Fund is also available to the legislature for appropriation.

Each resident gets a yearly Permanent Fund Dividend (PFD) check. The total value of the checks is usually half the earnings of the APF averaged over the past 5 years. These checks ranged from $878 to $2,072 in the 2010s.³⁶ From 2016 through 2018, the government reduced the amounts of the PFD and used the savings to fund government operations.³⁷

Economist Scott Goldsmith estimated that about half of all jobs in Alaska were directly or indirectly dependent on the petroleum industry in 2007.³⁸ Oil revenue accounted for 31 percent of state spending, spinoff jobs from oil wealth accounted for 16 percent, and oil industry jobs were 3 percent.³⁹ Spinoff jobs from oil wealth include those produced by increased demand resulting from people spending their PFD checks. These percentages were quite stable from year to year as of 2012. More recent numbers are not available, but these percentages likely dropped substantially as oil revenues fell after 2014. Mining, quarrying, and oil and gas extraction fell as a percentage of nominal GDP from 32 percent in 2012 to 13 percent in 2016.

Oil price drop led to the recession

After rising from $33 per barrel in January 2009 to $111 in April 2011, the Alaska North Slope (ANS) first purchase oil price fell to $21 in February 2016, a drop of 81 percent.⁴⁰ The ANS oil price reflects what oil from the state’s North Slope region (where most of the oil and gas in the state is extracted) is selling for in the oil market. The ANS area includes the Prudhoe Bay Oil Field, one of the largest oil fields in the world, as well as the National Petroleum Reserve. The Prudhoe Bay Oil Field is on land owned by the state government and leased by private companies. In addition to rent, the state gets royalties on the sale of petroleum produced there.

Previous research supports the claim that falling oil prices were the primary cause of Alaska’s 2015–18 recession. First, the oil price drop has been linked to job losses on a national level. The price drop beginning in November 2014 is estimated to have caused a loss of 259,000 jobs nationally through October 2016.⁴¹ Second, these oil price drops have been linked to local recessions in other oil-producing states. The Federal Reserve Bank of Kansas City found that the decline in oil prices starting in 2014 led to recessions in oil-producing states within its district. Both Oklahoma and Wyoming entered recessions in 2015, and Kansas and New Mexico did likewise in 2016.⁴²

Finally, research shows that falling oil prices specifically caused Alaska’s recession. Economists Gregg Erickson and Milt Barker argue that most state-level recessions in the United States are caused by a large decline in the price of the state’s main export, which in Alaska’s case is petroleum.⁴³ Moreover, Alaska is more dependent on its main export than most states are. In most cases, other export industries can take advantage of lower costs for labor, buildings, and real estate caused by the recession, hastening a recovery. However, Alaska’s other export sectors, like seafood and mineral mining, were too weak to step in as major industries.⁴⁴ Industries besides petroleum have had difficulty developing because of Alaska’s low population density, harsh climate, and distance from import and export partners.⁴⁵ Other industries also had to compete with the petroleum industry for labor, infrastructure, and materials, making the costs of starting a business more expensive, especially during the oil boom.⁴⁶

University of Alaska economist Mouhcine Guettabi argued that Alaska’s employment levels have been strongly affected by oil price levels for a while, and that the 2015–18 downturn was driven by declining oil prices. Guettabi’s econometric analysis of monthly employment and oil price data from 1991 to 2018 in oil-dependent states found that, on average, a 10.0-percent change in oil prices results in a 1.7-percent change in employment in the long run. He also found that the higher a state’s dependency on petroleum, the slower it is to recover from job loss.⁴⁷

Declining federal government spending contributed to the recession

Although falling oil prices were the main cause of the recession, declining federal spending in Alaska has been cited as an independent, secondary reason for the recession. Alaska lost 15 percent of its federal government jobs during the national economic expansion between 2009 and 2015. Alaska’s federal civilian plus military GDP (real) fell by 8 percent during the same period. Federal government contributions to state government revenue increased by about $300 million, 25 percent, from 2006 to 2010 because of the Great Recession stimulus package, but the amount then decreased by about $300 million between 2010 and 2015 after those programs expired. This decline in federal government contributions contributed to Alaska’s job loss.⁴⁸

Why did job losses not increase the unemployment rate?

Less money coming to the state from oil exports and the federal government led to drops in both GDP and employment. Despite the jobs that were lost during the recession, however, Alaska’s unemployment rate remained relatively constant. This consistency is largely because Alaska has a large cohort of baby boomers who are now retiring and dropping out of the labor force. This group is largely composed of people who moved to the state to work on petroleum-related projects after oil was discovered on Alaska’s North Slope in 1968.

Unemployment

Alaska’s loss of jobs during its recession did not lead to a large increase in unemployment. The unemployment rate represents the number of people who are jobless, looking for a job, and available for work as a percentage of the labor force (all people who are employed or unemployed). Alaska’s unemployment rate was higher than the U.S. rate every year from 1977 through 2008. Then the Great Recession hit, and the U.S. rate increased from 4.6 percent in 2007 to 9.6 percent in 2010, overtaking the Alaskan rate, which only increased from 6.3 percent to 8.2 percent during that period. (See chart 6.)⁴⁹

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During the recovery from the Great Recession, the U.S. rate declined dramatically by 2015 (to 5.3 percent), but Alaska’s was little changed at 6.3 percent, exceeding the U.S. rate again. Then Alaska’s recession hit, and the U.S. rate continued to decline while Alaska’s rate stayed constant. As a result, Alaska had the highest unemployment rate of any state in the nation from 2017 through 2019.⁵⁰ Why didn’t Alaska’s rate increase even though Alaska was rapidly losing jobs?

Labor force participation rate

Part of the reason the unemployment rate in Alaska has not seen a large increase in response to major job losses is the large decline in the proportion of people who are working or looking for jobs, as measured by the labor force participation rate.⁵¹ Instead of being counted as unemployed, many people just left the labor force. As shown in chart 7, Alaska’s labor force participation rate has historically been much higher than that of the United States. Both the U.S. and Alaskan rates have been declining since around the year 2000, but Alaska’s rate declined faster. It fell from 73 percent in 2000 to 65 percent in 2019, a decline of 8 percentage points. The U.S. rate only declined by 4 percentage points (from 67 percent to 63 percent).⁵²

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Employment-population ratio

Another measure that helps explain why Alaska’s unemployment rate remained stable in the face of rapid job loss is the employment-population ratio, which is the number of people working divided by the civilian noninstitutional population. Alaska’s ratio has traditionally been higher than that of the United States, but they both have been declining for a while. However, starting in 2012 the U.S. ratio began to increase while Alaska’s continued to fall. Between 2012 and 2018, Alaska’s ratio fell 2 percentage points, and the United States’ rose by 2 percentage points.⁵³ In other words, in contrast to the United States as a whole, a shrinking proportion of Alaskans were working.

Age and participation rates

Why was Alaska’s employment-population ratio historically higher than that of the United States, and why has it been declining more quickly?

One reason that the employment-population ratios of the United States and Alaska are moving in different directions is the difference in the age distribution between the country and the state. As of 2020, people 65 and older were 13 percent of the total population of Alaska, a lower percentage than that of any state besides Utah. By comparison, the national rate is 17 percent. However, both Alaska and the United States are experiencing rapid increases in the percentage of the population that is 65 and older. (See chart 8.) The difference is that, although Alaska’s percentage is currently lower than the United States’, it is increasing much more quickly. In fact, Alaska has the fastest growing 65 and older population in the country. The number of people 65 and older in Alaska grew from about 55 thousand to about 92 thousand, a 67 percent increase, between April 2010 and July 2019.⁵⁴ In comparison, this population only grew by 34 percent nationally.⁵⁵

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As shown in table 1, the labor force participation rate is much lower for people 65 and older compared with the population as a whole.⁵⁶ This low level is largely because of retirement (for reference, the Social Security Administration defines normal retirement age as 66 to 67 years old).⁵⁷ A low proportion of the population being 65 and older is indicative of a high labor force participation rate, and a growing 65 and older population pushes the labor force participation rate down. The difference in level and trend of the labor force participation rate between Alaska and the United States, therefore, is partially driven by the difference in level and trend of the proportion of the population that is 65 and older.⁵⁸

Table 1: Labor force participation rate by age group, Alaska and United States, 2019
Age group	Alaska	United States
Total, above 16	63.1	63.1
16 to 19 years	37.5	35.1
20 to 24 years	76.0	72.2
25 to 34 years	79.2	82.9
35 to 44 years	78.3	83.1
45 to 54 years	81.3	81.4
55 to 64 years	60.2	65.4
65 years and over	22.3	20.2
Source: U.S. Bureau of Labor Statistics.

Migration

Why is Alaska’s population rapidly aging? This ageing mostly comes down to Alaska’s history of migration. Young people tend to come to Alaska for jobs on military bases or in the fishing or mining industries.⁵⁹ The largest example of this migration occurred in the 1970s and 1980s, when tens of thousands of people moved to the state to build the Trans-Alaska oil pipeline and work in the oil fields. Many of these workers, mostly members of the baby-boom generation, stayed in Alaska.⁶⁰ This cohort is now at or nearing retirement age.

Chart 9 shows net migration (in-migration minus out-migration) for Alaska from 1960 to 2019.⁶¹ Most of this migration was to or from other U.S. states. The waves of migration in the 1970s and 1980s show up as distinct spikes. After that, although some people left Alaska when the pipeline projects ended, many stayed. This cohort of migrants are now reaching retirement age, a major factor in the state’s aging population and the decline in the labor force participation rate. The declining participation rate, in turn, helps to explain why employment has fallen so much without causing the unemployment rate to increase substantially.

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In 2017, the Alaska Department of Labor and Workforce Development (DOLWD) listed reasons that might explain why unemployment had not increased substantially in the face of job losses. In addition to a declining participation rate caused by retirement, people leaving Alaska outnumbered those coming to the state. As shown in chart 9, Alaska’s net migration has been negative every year since 2013. Both in-migration and out-migration have declined since then, but in-migration has declined more (not shown in chart). Since the national economy expanded during Alaska’s local recession (see chart 6), many workers who left the state may have found jobs elsewhere.⁶² Perhaps more importantly, fewer people were moving to the state because of its relatively weak job market. Any workers or job seekers who left the state would have left the Alaskan labor force, decreasing employment without increasing unemployment in the state.

Conclusion

Alaska’s recession, which lasted from March 2015 to April 2018, was caused primarily by declining oil prices and secondarily by declining federal government spending in the state. Total nonfarm employment fell greatly, especially in mining and logging, professional and business services, manufacturing, and state government. The job loss spread beyond the oil sector partly because the state government is so dependent on oil revenues. This dependency meant that the government had to substantially reduce spending when oil revenues fell. The job losses during the recession did not lead to a statistically significant increase in the annual unemployment rate. This lack of change is mainly because Alaska’s population is aging rapidly and so many people are leaving the labor force by retiring.

Appendix: Dating the recession in Alaska

Ultimately, I decided to set the start and end dates of the 2010s Alaskan recession by using the Bry-Boshchan method of finding peaks and troughs with smoothed seasonally adjusted total nonfarm employment. Before settling on this method, however, I considered a few other ways. Since the NBER determines U.S. recession dates, I considered looking for an Alaskan source. In 2016, an economist with the Alaska DOLWD announced the state was in a recession, and that it “likely began at the end of 2015.”⁶³Eventually the DOLWD confirmed that the recession ran from 2015 to 2018.⁶⁴However, they did not give specific months, so I explored other approaches.

I also considered using the Bry-Boshchan method with Alaska’s GDP data. However, an attempt to use this method did not yield reasonable results. Furthermore, the Alaska DOLWD uses employment rather than GDP for determining the dates of Alaskan recessions because, “[Alaskan GDP] tends to rise and fall with oil prices, and short-term declines in oil prices don’t necessarily cause a ‘significant decline in economic activity that spreads across the economy.’ Many oil companies operating in Alaska are international and publicly traded, and when oil prices rise or fall, much of the initial benefit or loss goes to company operations and shareholders outside the state.”⁶⁵

A third approach I considered was from a paper published by the Kansas City Federal Reserve.⁶⁶ It involved running the Bry-Boshchan method on state-by-state coincident indexes of economic activity developed by the Philadelphia Federal Reserve. The components of these indexes are GDP, nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index.⁶⁷ The paper only looks at states in the Kansas City region of the federal reserve, but it was possible to replicate the method for Alaska. The results suggested that the recession lasted from September 2015 to September 2016.

Unfortunately, those dates do not make sense for several reasons. First, the Alaska DOLWD, other Alaskan economists, and the Alaskan media all agreed as late as 2018 that the state was still in a recession. Second, none of the five components of the coincident index can really explain why it shows a trough in September 2016. Employment (chart 1) and personal income (not shown) continued to decline far past 2016, and the unemployment rate (chart 6) continued to climb slightly.⁶⁸ Real GDP (chart 4) did reach a local minimum in late 2016, but there are many deeper troughs in real GDP history when Alaska clearly was not in a recession. Plus, as explained above, using GDP data is not a good method of finding recession dates for Alaska.

In the end, the recession dates were chosen using the Bry-Boshchan method with total nonfarm employment. The NBER does not use employment alone to determine the dates of a national recession, especially the end date, but employment peaks and troughs tend to be close to recession starting and ending dates. The Great Recession lasted 19 months, but U.S. total nonfarm employment continued to decline another 8 months after the end of the recession. This period of postrecession job loss is less than half of the length of the recession. Using September 2015 to September 2016 for the Alaska recession would mean that the recession lasted 13 months and employment continued to decline for 19 more months, longer than the recession itself. It seems that employment, although not a perfect indicator of the recessionary period, is better than the alternatives. Finally, using the March 2015 to April 2018 period is consistent with the Alaska DOLWD.

Suggested citation:

Brent Buxton, "Oil, budgets, migration, and retirees: Alaska’s 2015–18 recession," Monthly Labor Review, U.S. Bureau of Labor Statistics, September 2022, https://doi.org/10.21916/mlr.2022.25

Notes

¹ Nominal gross domestic product (GDP). See “GDP by state” (U.S. Bureau of Economic Analysis), https://www.bea.gov/data/gdp/gdp-state. For national numbers, see “Gross domestic product” (U.S. Bureau of Economic Analysis), https://www.bea.gov/data/gdp/gross-domestic-product.

² See “U.S. business cycle expansions and contractions” (National Bureau of Economic Research, last updated July 19, 2021), https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions.

³ The most recent data are estimates based on a monthly survey of a sample of employers. The sample includes about 145,000 U.S. businesses and government agencies, which cover approximately 697,000 individual worksites. Historical data are based on data from the Quarterly Census of Employment and Wages (QCEW) program, which is an administrative data source that covers 97 percent of all employment within the scope of the Current Employment Statistics (CES) program. For more information on the program’s concepts and methodology, see “Technical notes for the Current Employment Statistics survey” (U.S. Bureau of Labor Statistics), https://www.bls.gov/web/empsit/cestn.htm. For Alaska’s employment data, see “State and metro area employment, hours, and earnings” (U.S. Bureau of Labor Statistics), https://www.bls.gov/sae/. All data are seasonally adjusted unless otherwise stated.

⁴ This job-loss timeframe is based on quarterly averages of seasonally adjusted CES total nonfarm employment.

⁵ Industries (such as information, financial activities, other services, and local government) that moved by less than 1,000 jobs in both periods are not displayed.

⁶ Mouhcine Guettabi, “How do oil prices influence Alaska and other energy-dependent states,” Research Matters (University of Alaska Anchorage Institute of Social and Economic Research), no. 116, September 2018, https://iseralaska.org/2018/10/research-matters-no-116-how-do-oil-prices-influence-alaska-and-other-energy-dependent-states/.

⁷ Gregg Erickson and Milt Barker, The Great Alaska Recession (Erickson and Associates, April 2015), https://www.alaskapublic.org/wp-content/uploads/2015/06/Erickson150412-The-Great-Alaska-Recession.pdf.

⁸ Government employment is the sum of employment in federal, state, and local government. Goods-producing industries employment is the sum of employment in mining and logging, construction, and manufacturing. Private service-providing industries employment is the sum of employment in trade, transportation, and utilities; information; financial activities; professional and business services; education and health services; leisure and hospitality; and other services.

⁹ GDP is summed across quarters and then total GDP is divided by mining GDP.

¹⁰ Real quarterly gross domestic product for Alaska is available starting in 2005. See “GDP by state” (U.S. Bureau of Economic Analysis).

¹¹ Real nonmining GDP cannot be calculated because the values from industries composing real GDP do not necessarily add to total real GDP.

¹² See Guettabi, “How do oil prices influence Alaska?”; Erickson and Barker, The Great Alaska Recession; and Dan Robinson, “When recessions linger: what we can learn from other states’ downturns and recoveries,” Alaska Economic Trends 37, no. 4, April 2017, pp. 4–9, https://laborstats.alaska.gov/trends/apr17art1.pdf.

¹³ Using 2014 nominal GDP. See “GDP by state” (U.S. Bureau of Economic Analysis).

¹⁴ Though the proportion of government jobs to total nonfarm jobs in the District of Columbia is higher than Alaska’s proportion.

¹⁵ “CES data overview page” (U.S. Bureau of Labor Statistics), https://www.bls.gov/ces/data-overview.htm.

¹⁶ The federal land number comes from “Federal land ownership: overview and data,” Congressional Research Service, R42346, February 21, 2020, https://fas.org/sgp/crs/misc/R42346.pdf; and state and tribal numbers come from “Alaska land transfer program,” (U.S. Bureau of Land Management), https://www.blm.gov/programs/lands-and-realty/regional-information/alaska/land-transfer.

¹⁷ Less than 1 percent of Alaskan land is in private non-native possession, however, private non-native land per capita is higher in Alaska than nationally. Alaska has about 5 million acres of private non-native land divided by about 737 thousand people, or about 7 acres per capita. The United States has about 1.3 billion privately owned acres divided by about 330 million people, or about 4 acres per capita. See Dick Mylius, “Alaska’s state, federal and [Alaska Native Claims Settlement Act] lands—who owns what and why?,” May 16, 2021, in AUUF Podcasts, podcast, MP3 audio and accompanying PDF, http://auuf-podcasts.org/AUUF_Podcasts/podcastgen/?name=2021-05-17_20210516_0900.mp3.

¹⁸ See Mylius “Who owns what and why.”

¹⁹ Scott Goldsmith, “What drives the Alaska economy?,” UA Research Summary, no. 13 (University of Alaska Anchorage Institute of Social and Economic Research, December 2008), https://iseralaska.org/static/legacy_publication_links/researchsumm/UA_RS_13.pdf.

²⁰ “Federal land ownership: overview and data,” Congressional Research Service.

²¹ “Indian Country demographics” (National Congress of American Indians, last updated June 1, 2020), https://www.ncai.org/about-tribes/demographics. Values correspond with the “American Indian and Alaska Native” category from the U.S. Census.

²² Goldsmith “What drives the Alaska economy?”

²³ See “Total state government expenditures,” Balllotpedia, September 2018, https://ballotpedia.org/Total_state_government_expenditures.

²⁴ Andrew Kitchenman, “Alaska has the highest level of state spending, but that’s not the whole story,” KTOO, July 25, 2016, https://www.ktoo.org/2016/07/25/alaska-has-the-highest-level-of-state-spending-but-thats-not-the-whole-story/.

²⁵ Mouhcine Guettabi, Trang Tran, and Linda Leask, “How does Alaska’s spending compare?,” UA Research Summary, no. 85 (University of Alaska Anchorage Institute of Social and Economic Research, February 2018), http://www.akleg.gov/basis/get_documents.asp?session=30&docid=40633.

²⁶ Rankings are from “Health expenditures per capita by state of residence” (Kaiser Family Foundation, last updated August 12, 2022), https://www.kff.org/other/state-indicator/health-spending-per-capita/. The underlying data source is “Health expenditures by state of residence, 1991–2020” (National Health Expenditure Data, Centers for Medicare and Medicaid Services, last updated August 12, 2022), https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsStateHealthAccountsResidence.

²⁷ See “GDP by state” (U.S. Bureau of Economic Analysis); and “Gross domestic product” (U.S. Bureau of Economic Analysis).

²⁸ Guettabi “How do oil prices influence Alaska?” Data from 2010 to 2017.

²⁹ John Waggoner, “9 states that don’t have an income tax,” AARP, last updated March 9, 2022, https://www.aarp.org/money/taxes/info-2020/states-without-an-income-tax.html.

³⁰ See “Annual survey of state government tax collections” (U.S. Census Bureau), https://www.census.gov/programs-surveys/stc.html.

³¹ “Annual survey of state government tax collections” (U.S. Census Bureau).

³² Mouhcine Guettabi, “What do we know to date about the Alaska recession and the fiscal crunch?” (University of Alaska Anchorage Institute of Social and Economic Research, January 2018), https://iseralaska.org/static/legacy_publication_links/2018_01-AKRecessionFiscalCrunch.pdf.

³³ Revenue Sources Book (Alaska Department of Revenue, fall 2018), https://www.revenue.state.ak.us/docs/default-source/press-releases/2018_12_14-department-of-revenue-releases-fall-2018-revenue-sources-book.pdf?sfvrsn=ddfa3f5d_3.

³⁴ Petroleum revenues and the general fund value are summed across years rather than averaged.

³⁵ “$81.9 B final FY21 end of year Permanent Fund value” (Alaska Permanent Fund Corporation), https://apfc.org/fund-news/81-9-b-final-fy21-end-of-year-permanent-fund-value/.

³⁶ “Summary of dividend applications and payments” (State of Alaska Department of Revenue, Permanent Fund Dividend Division), https://pfd.alaska.gov/Division-Info/summary-of-dividend-applications-payments.

³⁷ Nathaniel Herz, “Gov. Walker's veto cuts Alaska Permanent Fund dividends to $1,022,” Anchorage Daily News, last updated October 19, 2016, https://www.adn.com/politics/2016/09/23/gov-walkers-veto-shaves-alaska-permanent-fund-dividends-to-1022/.

³⁸ See Scott Goldsmith, “The Alaska economy: how does it work?” (Institute of Social and Economic Research, University of Alaska Anchorage, February 1, 2012), https://pubs.iseralaska.org/media/291933ed-a19a-4775-ad85-904e98a555c6/2012_02-AkEconomyHowDoesItWork.pdf. See especially slide 32 “Petroleum has transformed the Alaskan economy.” Also see Scott Goldsmith, Structural analysis of the Alaska economy: what are the drivers? (Institute of Social and Economic Research, University of Alaska Anchorage, March 2010), https://scholarworks.alaska.edu/bitstream/handle/11122/4287/REVISEDstructure_ak_economy_v2.pdf?sequence=1&isAllowed=y. For an alternative estimate, see American Petroleum Institute, “Economic impacts of the oil and natural gas industry on the U.S. economy in 2011,” July 2013, https://www.api.org/~/media/Files/Policy/Jobs/Economic_Impacts_ONG_2011.pdf. The American Petroleum Institute (API) estimates that in 2011, 6 percent of U.S. jobs were directly or indirectly attributable to oil and natural gas, compared to 12 percent for Alaska. However, that national number includes the impact of capital investment while the state level number does not, so they are not directly comparable. Also, the API does not include government jobs funded by oil revenue, of which Alaska has a much higher percentage relative to total employment than the United States does.

³⁹ Erickson and Barker, The Great Alaska Recession.

⁴⁰ Data available at “Alaska North Slope First Purchase Price” (U.S. Energy Information Administration), https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=F005071__3&f=M. The U.S. Energy Information Administration defines first purchase as “[a]n equity (not custody) transaction involving an arms-length transfer of ownership of crude oil associated with the physical removal of the crude oil from a property (lease) for the first time. A first purchase normally occurs at the time and place of ownership transfer where the crude oil volume sold is measured and recorded on a run ticket or other similar physical evidence of purchase. The reported cost is the actual amount paid by the purchaser, allowing for any adjustments (deductions or premiums) passed on to the producer or royalty owner.” For this and other definitions, see “Petroleum and other liquids: definitions, sources and explanatory notes” (U.S. Energy Information Administration), https://www.eia.gov/dnav/pet/TblDefs/pet_pri_dfp1_tbldef2.asp.

⁴¹ Wander Cedeño, "How did employment fare a decade after its 2008 peak?," Monthly Labor Review, October 2018, https://doi.org/10.21916/mlr.2018.25.

⁴² Jason P. Brown, “Identifying state-level recessions,” Economic Review (Federal Reserve Bank of Kansas City,

February 2017), https://www.kansascityfed.org/research/economic-review/1quarter 17-brown-identifying-state-level-recessions/.

⁴³ Erickson and Barker, The Great Alaska Recession.

⁴⁴ Erickson and Barker, The Great Alaska Recession; and Goldsmith, “What drives the Alaska economy?”

⁴⁵ Goldsmith, “What drives the Alaska economy?”

⁴⁶ Emilene Ostlind, “Living in a Natural Resource Economy,” Western Confluence, May 2022, https://westernconfluence.org/living-in-a-natural-resource-economy/. The natural resource curse hypothesis states that having abundant natural resources (such as petroleum) can make an economy poorer. In Alaska, other industries likely had more trouble developing because the petroleum industry drove up the cost of labor, capital goods, and real estate. The resource curse can also be a result of people dropping out of school to work in oil fields, resulting in lower educational attainment. Finally, natural resource wealth can have a negative effect on the political system, which can result in lower economic growth. See Alexander James, “The long-run vanity of Prudhoe Bay,” Resources Policy 50, December 2016, https://www.sciencedirect.com/science/article/abs/pii/S0301420716302057.

⁴⁷ Guettabi, “How do oil prices influence Alaska?”

⁴⁸ See “Annual Survey of State Government Finances” (U.S. Census Bureau), https://www.census.gov/programs-surveys/state/data/tables.html. Intergovernmental revenue represents funds given to the state government by the federal government. For analysis, see Erickson and Barker, The Great Alaska Recession.

⁴⁹ For Alaska unemployment, labor force participation rate, and employment-population ratio, see “Local Area Unemployment Statistics” (U.S. Bureau of Labor Statistics), https://www.bls.gov/lau/data.htm. For U.S. data, see “Labor force statistics from the Current Population Survey” (U.S. Bureau of Labor Statistics), https://www.bls.gov/cps/data.htm.

⁵⁰ The small increase in Alaska’s unemployment rate during this period was not statistically significant at the 90-percent confidence level. Alaska’s unemployment rate has a wide confidence interval because it has a relatively small population compared to most states. For error measures, see “Information on model-based error measures for regions, divisions, and states” (Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, last modified March 14, 2022), https://www.bls.gov/lau/lastderr.htm.

⁵¹ The labor force participation rate is the total number of unemployed persons plus the number of employed persons, all divided by the civilian non-institutional population (the population age 16 or older neither in the care of a specialized institution nor active-duty military).

⁵² Confidence intervals are not available for changes in the U.S. labor force participation rate over nonconsecutive years. Confidence intervals are not available for state-level annual averages of labor force participation rates nor changes between years.

⁵³ See “Region, division, and state employment-population ratios with confidence intervals, their relationships to the U.S. ratio, and over-the-year ratio changes with significance indicators, 2021 annual averages” (Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, March 2, 2022) https://www.bls.gov/lau/laaaepderr.xlsx. Confidence intervals are not available for comparing nonconsecutive years of state-level annual averages of employment-population ratios.

⁵⁴ For data by state, see “State population by characteristics: 2010-2019” (U.S. Census Bureau, June 2020), https://www.census.gov/data/datasets/time-series/demo/popest/2010s-state-detail.html; use tables under the heading “Annual estimates of the resident population for selected age groups by sex: April 1, 2010 to July 1, 2019.” For the 2020 ranking, see Lillian Kilduff, “Which U.S. states have the oldest populations?” (U.S. Population Reference Bureau, December 2021), https://www.prb.org/resources/which-us-states-are-the-oldest/.

⁵⁵ “National population by characteristics: 2010-2019” (U.S. Census Bureau, October 2021), https://www.census.gov/data/tables/time-series/demo/popest/2010s-national-detail.html; use table: “Annual estimates of the resident population for selected age groups by sex: April 1, 2010 to July 1, 2019.”

⁵⁶ See “Expanded state employment status demographic data,” Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, July 5, 2021, https://www.bls.gov/lau/ex14tables.htm; particularly see “2018 annual averages: employment status of the civilian noninstitutional population in states by sex, race, Hispanic or Latino ethnicity, marital status, and detailed age.” The difference between the United States as a whole and 65 and older age groups is statistically significant at the 90-percent confidence level.

⁵⁷ See “Starting your retirement benefits early,” (U.S. Social Security Administration), https://www.ssa.gov/benefits/retirement/planner/agereduction.html.

⁵⁸ One possible reason that Alaska’s participation rate has been relatively high historically, in addition to its young population, is the state’s high male-to-female ratio. Alaska has the highest male-to-female ratio in the country with 52.0 percent of the Alaskan population being male compared with 49.2 percent for the United States in 2019. See “2019: ACS 1-year estimates subject tables,” American Community Survey, U.S. Census Bureau, 2020, https://data.census.gov/cedsci/table?q=Age%20and%20Sex&g=0100000US,%2404000%24001_0400000US02&tid=ACSST1Y2019.S0101. In both Alaska and the United States, male labor force participation rates are higher than female labor force participation rates, although these two rates are closer together in Alaska than in the United States. In 2019, male participation rates were 66.7 percent for Alaska and 69.2 percent for the United States and female rates were 59.5 percent for Alaska and 57.4 percent for the United States. For U.S. data, see "Labor force statistics from the Current Population Survey" (U.S. Bureau of Labor Statistics). For state-level data, see "Expanded state employment status demographic data" (U.S. Bureau of Labor Statistics).

⁵⁹See Dan Robinson, David Howell, Eric Sandberg, and Liz Brooks, Alaska population overview, 2019 estimates (Alaska Department of Labor and Workforce Development, Research and Analysis Section, 2020), https://live.laborstats.alaska.gov/pop/estimates/pub/19popover.pdf. Active-duty military personnel are not part of the labor force, but military civilians are. In 2017, Alaska had 4,782 military civilians. For state totals, see Michael Maciag, “Military active-duty personnel, civilians by state,” Governing, October 2017, https://www.governing.com/archive/military-civilian-active-duty-employee-workforce-numbers-by-state.html.

⁶⁰ Joaqlin Estus, “The older adult population is skyrocketing in one of the youngest states: Alaska,” KNBA News, undated, https://www.knba.org/part-1-6-older-adult-population-skyrocketing-one-youngest-states-alaska.

⁶¹ See “Annual components of population change for Alaska, 1945 to 2021,” (Alaska Department of Labor and Workforce Development, Research and Analysis Section, 2021), https://live.laborstats.alaska.gov/pop/estimates/data/ComponentsOfChangeAK.xls. This file is updated annually.

⁶² Tiffany Wadel, “10 possible reasons unemployment claims are low,” Alaska Economic Trends 37, no. 12, December 2017, pp. 4–7, https://laborstats.alaska.gov/trends/dec17art1.pdf.

⁶³ Becky Bohrer, “Economist: Alaska is in a recession,” Washington Times, December 2, 2016, https://www.washingtontimes.com/news/2016/dec/2/economist-alaska-is-in-a-recession/.

⁶⁴ Karinne Wiebold, “2015–18 recession hit men harder,” Alaska Economic Trends 41, no. 4, April 2021, pp. 4–8, https://labor.alaska.gov/trends/apr21.pdf.

⁶⁵ Dan Robinson, “Is Alaska in a recession?,” Alaska Economic Trends 36, no. 2, February 2016, pp. 4–9, https://labor.alaska.gov/trends/feb16.pdf.

⁶⁶ Brown, “Identifying state-level recessions.”

⁶⁷ “State coincident indexes” (Surveys and data, Federal Reserve Bank of Philadelphia), https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/state-coincident-indexes.

⁶⁸ For a graph of personal income, see “Total personal income in Alaska” (FRED, Federal Reserve Bank of St. Louis), https://fred.stlouisfed.org/series/AKOTOT.