No, the Exxon Valdez oil spill did not bring Alaska out of recession

The Exxon Valdez oil spill in March 1989 killed untold numbers of wildlife and devastated the prized fisheries of Prince William Sound, but in coldhearted economic terms there was an upside.

The urgent need for workers to remove the oil also created jobs. Lots of jobs. So many jobs that the spill is widely credited with lifting Alaska out of the worst recession in state history.

This oft-repeated redemptive epilogue to one of the state's worst tragedies has circulated for years at business luncheons, among government officials, and in the press (this news outlet included).

But the notion that the spill kicked off an economic recovery isn't true.

Alaska emerged from recession 10 months before the Exxon Valdez crashed into Bligh Reef, with employers across the state adding several thousand jobs in each of those months as the oil and gas sector rebounded and the retail and service sectors picked up steam. Job counts are the primary measure used by Alaska's economists to gauge growth and recession.

Admittedly, the recovery was hard to pinpoint. Even those who were watching closely could not know in real time that the economy had returned to growth mode well before the spill. That's because gathering, analyzing and publishing data from employers takes time. So does economic healing. Even as oil industry activity was picking up, other sectors, including banking, real estate and construction, were still enduring the recession's effects.

Bill White, former business editor for the Anchorage Daily News, didn't feel comfortable declaring the recession "clinically dead" until about nine months after it had actually ended. White's article, "Recession finally rolled over," came out on March 5, just three weeks before the spill.

"All the numbers were lagging," said White, now retired. "Nobody wanted to go out on a limb and declare the recession was over."

While the spill did not initiate Alaska's clawback from recession, it did provide a huge and very visible stimulus to what had been a quiet economic recovery.

"You're talking about something happening subtly to something — well, it's hard to get more dramatic than the spill," said Neal Fried, who was then, as he is now, working as an economist for the state of Alaska. "It was a major, singular, identifiable, dramatic event."

(Fried wrote a report published three months after the spill titled "Prince William Sound: Five Economies in Turm(oil).")

Post-spill Alaska stood in stark contrast to the recession years, when plummeting oil prices and a resulting pullback in state spending put an overheated economy on ice. Between 1985 and 1987, close to 20,000 jobs disappeared. Thousands of home mortgages went underwater and foreclosures soared. Forty percent of the banks failed. People left the state in droves.

But in the wake of the spill, Exxon and its contractors hired thousands of people to help remove 11 million gallons of North Slope crude oil and some of the hundreds of thousands of animals that died in the toxic ooze. The company spent more than $2 billion on the cleanup over a two-year period.

By April, worker shortages had hit Prince William Sound and the Kenai Peninsula, according an article by former Anchorage Daily News reporter George Frost. In June, with tourist season underway, hotels, tour companies and restaurants in Anchorage scrambled to recruit and retain workers, former Daily News reporter Hal Bernton wrote. Pizza Hut put up banners on the fronts of its restaurants saying, "Now Accepting Applications." Burger King was forced to bump up wages by 50 cents to $4.98 an hour.

And so a recovery that had been invisible to many Alaskans became observable reality. Bob Poe, who at the time of the spill was serving as director of international trade for Gov. Steve Cowper, said that until the spill, there was a very real contrast between what the economic data said and how people felt about the economy.

"Economists like to look at the numbers, but there was also an emotional aspect," Poe said.

The assumption that the spill caused the recovery, while incorrect, is not illogical. Some very visible industries, including construction, banking and the housing market, were still weak at the time of the disaster. It made sense to trace their revival to the spill. Poe said the 1980s recession put him "upside-down" on a home mortgage for 13 years, a situation not even the spill could change.

Stephen Haycox, professor emeritus of history at the University of Alaska Anchorage, said the replacement of one big event with another was so psychologically overwhelming that it was "natural for people to associate the curing of economic woe with the Exxon Valdez."

"These associations get settled in the popular mind and it's hard to dislodge them," said Haycox, who also lived through the recession and the spill. "It's a casual and easy association not really supported by the facts."

The economic boost was substantial, but temporary. Year-on-year job growth had topped 4 percent in February 1989, the month before the spill. In the months following, jobs were being added each month at an annualized rate of close to 9 percent. But by early 1991, employment growth was back to what it had been in the months leading up to the spill.

While the spill accelerated economic recovery and was a boon to individuals, Fried said Alaska's economy "would be where it is today without the spill."

With policymakers and business leaders searching for a solution to the current recession, state labor economist Dan Robinson felt the need to more formally debunk the "enduring myth" of the Exxon Valdez as the answer to the largest recession in Alaska's history.

He fears the story of the oil spill saving the economy creates the impression that Alaska will need another dramatic event to save it from the current recession, which so far has been milder than the 1980s downturn.

"Stories like this shift the focus away from some of the boring stuff that make economies strong, like institutions, education and infrastructure," Robinson said. "I want to stay policy-neutral here, but will say that the less-glam job of making a place somewhere people want to live is probably more effective than the more flashy stuff."

Mirroring his message, Robinson did his myth-busting in the very un-flashy Alaska Economic Trends report issued each month by the state Department of Labor.

"I'm not saying that governments shouldn't be very aware of an economy when it's in downturn and be focused on thinking about why and how to fix it," Robinson said.  "But we don't want people hoping for an earthquake. That's not how it works."