Editor's Note: This article was originally published in the Anchorage Daily News on March 5, 1989.
It was a dark and stormy economy.
But the 3 year old recession is over, several economists announced recently.
I recall reading that if all economists were laid end to end they would point in every direction. Not this time.
The recession is over, they say in unison. Admittedly, they say it with about the same meek conviction as my 5yearold assuring me she doesn't know how milk got spilled all over the kitchen table.
But they're saying it.
And just as they had predicted, it was over for a while before anyone knew for sure. We hit bottom last year.
Although the recession technically is over, it likely lingers for you if you work in construction, own real estate or are unemployed, the economists note. And the banking sector is staggering, not swaggering, even as it awaits word on whether regulators will save or close Alliance Bank.
How do they know it's over?
Because the economy sustains more jobs than a year ago. We're not losing jobs anymore. This is the best measure we have of economic health, and job growth translates as economic growth in Alaska.
Other emerging indicators of a more healthy economy include signs that more income might be in the wallets of consumers, who may be more inclined than a couple of years ago to spend the money. Also, the population might be growing again.
"If you use sort of a traditional definition, I'd say, yeah, the recession is over. But I wouldn't say we're out of the woods yet," said Neal Fried, a state labor economist.
Scott Goldsmith, a University of Alaska Anchorage economist, said employment "is up a tad, but not enough to write home about."
Much of the growth is based on surging state government employment, up 1,000 jobs statewide over a year ago.
But that surge could peter out quickly. And Goldsmith said the stabilizing influence of state employment could be a bad sign.
The state projects a $600 million gap between the budget Gov. Steve Cowper wants and the money available. That gap needs to be closed, and Fried said big cuts in state jobs could jerk the economy into reverse again.
Legislative budget leaders say they want to cut $150 million to $200 million from Cowper's budget proposal, with a minimal economic effect.
Hmmm. Legislators want to cut the government operating budget. But not hurt the economy.
I've heard that before, every year since 1985, in fact. How much have they really cut overall? Nothing.
How much will they cut this year? When asked, Senate Finance Cochairman Johne Binkley, RBethel, laughed and said, "We just now established a consensus that we do want to cut $200 million. That's the easy part. Now we have to decide where to make the cuts. And as you know, every dollar in the budget has a constituency. That's the hard part."
The $600 million "deficit" might not be that big anyway. It all depends on oil prices starting in four months, when the new fiscal year begins. The deficit would occur if oil which pays for fourfifths of the state budget fetches $13.50 a barrel over the next fiscal year.
That's $2 to $3 a barrel less than today's oil prices. This higher price, sustained over a year, would cut that "deficit" by more than $300 million.
So, it's hard to say now how much of a threat budget cuts are to continued economic growth.
Fried says the recovery is particularly fragile in Anchorage, where the growth isn't based on strong timber, fishing and hardrock mining industries causing expansion in other regions.
But some industries, like oil and gas, are downright robust.
And two key industries are growing as well: trade and services.
Trade includes wholesaling and retailing, including restaurants and bars.
Services include doctors' offices, law firms, motels, barber shops, movie theaters and the like.
Almost one of every two Anchorage workers has a job in trade and service businesses. These two sectors don't create wealth, they circulate the wealth generated by the oil, tourism, fishing, timber and government sectors.
Trade and services can grow only if wealthproducing sectors are expanding. And new figures from the Labor Department show Anchorage trade grew every month of last year, while services grew every month since May.
The new numbers "show the economy is a little bit stronger than we thought a couple of months ago," said John Boucher, another state labor economist. Even the pummeled construction industry isn't shrinking so fast any longer.
Alaska has a fairly large state budget and a need for better roads, ports and other infrastructure, Boucher said. Historically, construction workers have held about 5 to 5.5 percent of the jobs statewide. During the early1980s boom, they had 8 to 10 percent of the jobs. Last year they had 4 percent. "So it might pop back up," Boucher said.
"Statewide, this could be the year construction hits bottom," Fried said.
The state Labor Department now estimates payroll employment has been growing since last February, after shrinking by about 20,000 jobs in the previous two years.
Goldsmith, the UAA economist, estimates that seasonally adjusted employment statewide hit bottom last August or September. Goldsmith's figures look at employment with seasonal ups and downs smoothed out.
In Anchorage, payroll jobs have grown since last September, the Labor Department estimates. Anchorage lost about 15,000 jobs during the recession, about onethird of them in the construction industry.
As these figures indicate, the Anchorage recession was deeper and lasted longer than what the rest of the state experienced.
Overall, we seem to be left with employment roughly equivalent to what we had in 198283. That's about where Alaska's true, sustainable economy seems to lie. Employer payrolls aren't shrinking any more, either, and they, too, seem to be settling at about 198283 levels.
What of the tremendous economic bustle that occurred between 1983 and 1985? Well, that was blue smoke and mirrors, an illusion that made a lot of people think they were rich, smart and good looking. As a banker put it to me recently, "We were building houses for the people who were building houses."
The recession is clinically dead. That's the good news.
Here's the bad. The misery ain't entirely passed:
* The construction industry is still in intensive care. Employment stands at early 1970s levels. And even though some think the industry can't shrink much further, they also don't see enough big projects on this summer's horizon to cause major gains.
* We still have about 25,000 unemployed workers statewide, 8,000 of them in Anchorage.
* The economy may be growing, but it's fragile growth ever dependent on oil prices.
* Anchorage real estate is in a depression. Many values continue to fall. Most individual homeowners can't sell because they owe so much more on their mortgages than their homes are worth. Lots more investment properties particularly apartments and condos seemed destined for foreclosure. The good news is that some kinds of property may be bottoming out in value. This provides no immediate relief to individual homeowners, but it should help the lenders who own thousands of properties through foreclosures. A growing population also should start slowly eating the severe excess supply of housing and offices.
Still, Boucher observed, people's attitudes seem to have improved.
"Feeling good" is hard to measure.
But the UAA Institute of Social and Economic Research has tried.
ISER conducted two extensive surveys on the recession's impact on people, one in June 1987 and one last October.
A set of questions concerned the likelihood of spending more money on entertainment and vacations and of buying a car, said Linda Leask of ISER.
In June 1987, 17 percent of the respondents said they planned to spend more money on entertainment and vacations than a year earlier. Last October, 29 percent said spend more.
On the car question, 22 percent in June 1987 they were likely or very likely to buy a car, compared with 36 percent in October, she said.