Alaska’s economy has lagged behind the rest of the country lately, but last year the state’s total personal income grew 4.8% — twice the national rate. State economist Neal Fried says he sees signs for optimism in Alaska’s historically strong job market and cooling inflation rates, but says not to put too much stock in 2022’s income growth. He says the spike can be mostly explained by the large Permanent Fund dividend last year.
Neal Fried: Two things happened, one at the national level, and then on our level. In 2020 and 2021, the federal government was sending out a lot of money to all households — economic payments to help with the whole COVID thing. Whether it was enhanced unemployment benefits, checks that they sent to us, and other money — and that was going all over the country. Well, that pretty much dried up in 2022. And that’s called transfer income, and nationally that fell by 15%, a big decline. Ours did not. Surprisingly, ours actually increased by 1%, which doesn’t sound like a lot, but minus-15 versus plus-one is a lot. And the reason why ours increased was of course, because of the very large dividends that came out last year. So that is the reason why our income grew significantly more rapidly than the rest of the country, which has not happened in a very long time.
Michael Fanelli: But just looking at the wages and salaries, and setting everything else aside, did those seem to be going up as well?
Neal Fried: They’re going up. I mean, they went down in 2020 obviously, when we lost all those jobs. But every year since then, as our economy has been recovering, they’ve been going up. They went up in ‘21, they went up in ‘22, and they’re gonna go up this year as well. But we’re still lagging the country. We still have fewer jobs in Alaska today than we did in 2019. Whereas the nation went flying past that number in early 2022, and there are now more Americans in more jobs in this country than ever before. The American economy has been just an amazing performer over the last decade. The last decade for Alaska, for employment growth, has been pretty abysmal.
Michael Fanelli: Yeah. I know a lot of that struggle in the last decade has been due to the decline in oil prices, right?
Neal Fried: Oil [prices] and oil production and, some other indicators as well. But I do have to say this – in spite of all that, the job market is excellent. I mean, that’s another sort of weird contradiction that’s going on right now is that we have a great job market. You know, it’s a headache for employers, but it’s a great place to be looking for jobs. I’ve never seen a job market like this. And again, I’ve been doing this for a very, very long time. And so, that’s a real benefit. I mean, people who don’t like their jobs and want to find a different job, I don’t think they’ve ever seen opportunities like this before. Kids getting out of high school, in fact, there are more teenagers now working than since the 1950s.
Michael Fanelli: Okay, shifting gears a little bit, when it comes to spending power of these incomes, it looks like our notoriously high consumer prices are currently rising slower, at least in Anchorage, compared to the rest of the country. Any idea what’s driving that?
Neal Fried: Yeah I mean, it’s interesting. Last year, the CPI or the rate of inflation for the year was 8.1% in Alaska. And here, we’re talking about the change in the cost of living. And we just got the latest numbers for April, and if we compare April this year to April last year, it had dropped to 3.1%. So it does look like, given the numbers, that the average inflation rate for Alaska in 2023 is going to probably be significantly lower than it was in 2022, and that’s good news. Another good news was that food prices actually declined, relative to what happened last year, was slightly negative. That doesn’t mean that they’re coming down, just that the rate of increase has really slowed in that market. So you know, there’s some good news out there.