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Alaska: Oil and Related Industries Creating Stable Economy

Oct/Nov 09
Alaska, the largest state in the nation, is also the only one with 10,000 glaciers and 33,000 miles of coastline. Despite its impressive land mass it only has about 679,720 Inhabitants, according to Casey Campbell, economic development advisor for Alaska's Office of Economic Development. "I don't think a lot of people understand the unique distribution of our population," he says.

Nearly 42 percent of the state's residents live in Anchorage, home to almost 300,000 people who receive almost half of the state's personal income. The next most populous cities are Fairbanks and state capital Juneau, each with about 30,000 residents. The remainder of Alaska's citizens live in 300 or so small,  spread-out communities; many pockets of civilization are very isolated, and can only be accessed by river boat or bush plane.  

The state's foundational "Big Four" industries are oil and gas, tourism, seafood, and minerals. Campbell says there is very little opportunity outside of those industries. "Our electrical costs prohibit a lot of manufacturing," he says. Another problem is the cost/difficulty of transporting goods to hard-to-reach markets.

"Overall, Alaska has fared quite well in this economic climate," he says, pointing out that 86 percent of the state's budget monies come from oil revenues. "We have lots of reserve money saved. Alaska is well-positioned as a resource-based economy, now and in the future." A 2009 state budget crisis report published by the Center on Budget and Policy Priorities confirms that Alaska is doing fine: "Mineral-rich states such as New Mexico, Alaska, and Montana saw revenue growth as a result of high oil prices." The institute also confirms that as of September, Alaska was just one of eight states which have not made "spending cuts that hurt families and reduce necessary services" in five key areas. Another positive indicator: Alaska's July 2009 unemployment rate was 8.3 percent, lower than the national rate of 9.4 percent for the same time period.  

As Anchorage goes, so goes much of Alaska. A June 2009 article in BusinessWeek named it as one of the best 22 cities to ride out a recession and lauded the area's "strong economy that feeds off the state's rich oil and natural gas supplies, U.S. military presence, and tourism." The Anchorage Economic Development Corporation's recently published 2009-2012 economic outlook report says the city's mammoth energy industry, although a bit dinged, is helping insulate it from the national recession. Jobs are down slightly in shipping and tourism, but are growing in government - 20 percent of the city's total jobs - health services, education, and retailing.

The AEDC  report says that the jobs picture "will stabilize in 2010 and return to a slow growth trend of between 0.5 and 1.0 percent annually in 2011 and 2012." It forecasts that the "spending of federal stimulus money, preliminary activity related to the construction of a gas pipeline, and military and port construction activity, along with a general improvement in the business climate, will all contribute to stabilizing local employment trends."

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