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Celebrating the end of the year and the end of this recession

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Merry Christmas and Happy Chanukah to all those who celebrate the Christian and Jewish holidays! There’s a certain amount of good riddance to 2017, but there’s something else to which we should say good riddance, and that’s the current recession in Alaska. For the first time since November 2015, the Halcyon Consulting Growth-Recession Indicator (GRI) is flashing a positive reading. A positive GRI means that in the last six months the Alaska economy averaged more wage and salary jobs than the same six months in the prior year based on the Alaska Department of Labor and Workforce Development’s (ADOLWD) monthly employment statistics (see Figure 1). Huzzah, Alaska’s current recession is ending! We are consistently showing more jobs in the economy compared to a year ago!

Figure 1. Halcyon Consulting Growth-Recession Indicator

Having shared our joint moment of celebration, let’s cover the caveats that come with this long-awaited moment. Economists should always be willing to discuss their caveats, if they aren’t willing then you should find new economists. Here are mine:

  • The GRI is based on the ADOLWD’s monthly survey of wage and salary employment. This data is less accurate than the Quarterly Census of Employment and Wages because it is a survey of employers and not a full census.
  • The most recent data is subject to year-end revisions by ADOLWD.
  • ADOLWD does not like some of the estimation techniques required of them by the U.S. Bureau of Labor Statistics to create these numbers as they don’t feel the techniques are well suited to low population states.

These caveats noted, this data accurately predicted the start of the recession, the depth of the recession, and the point of maximum depth. We have no reason to believe that it is inaccurately predicting the end of Alaska’s current recession.

The current recession may be ending (or even over), but this year has not been a good one for Alaska’s economy. Overall, from January to October, the wage and salary economy has average 2,300 fewer jobs per month than the same period last year with the goods-producing portion of the economy averaging nearly 3,300 fewer jobs. However, the service sectors of the economy are up just over 900 jobs. Compare those figures to the same data for the May to October period. Overall, the economy averaged nearly 300 more jobs with the service sectors leading the way with nearly 1,900 more jobs year over year. The first four months of the year were brutal compared to the year before, but for five straight months in a row (since June) we’ve had more jobs in the economy in 2017 than in 2016. For the year, employment gains in accommodation, leisure/hospitality, and the transportation/warehousing/utility sector are leading the way thanks to a strong U.S. economy.

Table 1. Average Wage & Salary Employment Jan-Oct vs. May-Oct. 2017

Now, we may be talking about the end of the recession, but that doesn’t mean that all sectors of the economy are healthy. The mining sector averaged nearly 1,800 fewer jobs per month since the start of 2017 compared to 2016, but losses are slowing, with that gap shrinking to 1,100 fewer monthly jobs over the last six months. The white-collar professional sector is down nearly 900 jobs year to date and state government is down 760 jobs year to date. Losses in these sectors are slowing with average monthly employment just 300 fewer monthly jobs for the private professional sector and 560 fewer monthly jobs for state government if we look at the May-October period. Over the last six months, two additional sectors which took the current recession on the chin where food service establishments and construction, but losses in construction seem to be slowing as well. Food service jobs won’t stop their losses until the consumer regains their mojo.

You may have noticed that throughout this blog, I’ve used the term “current recession” and that’s because the odds for a double dip recession are high. Our economy is stabilizing because oil industry spending and state government spending have stabilized, for the moment, and the U.S. economy is strong. Thus, the amount of fuel flowing into our economy has stopped going down and the economy is responding accordingly. However, our state spending is unsustainable without significant changes in the way we’ve historically done business whether that means additional spending cuts, treating the Permanent Fund like an endowment to fund services, raising revenues (i.e. taxes), or further cutting the Permanent Fund Dividend. All these options have economics effects. Additionally, and as always, we’re still at the mercy of world oil markets for desperately needed revenue. Our respite, while welcome, may be temporary. We need both luck and strong decision-making to avoid another dip into recession.

Jonathan’s Takeaway: The economy is weak, but it’s no longer in freefall. Jonathan predicts that by the end of 2018 ADOLWD will announce that the recession formally ended in very late 2017 or very early 2018. The first half of 2018 should be markedly more stable than 2017, but the second half is a wild card depending on oil markets and decisions in Juneau.

Jonathan King is a consulting economist and performance coach. His firm, Halcyon Consulting, is dedicated to helping clients reach their goals through accountability, integrity, and personal growth. Jonathan has 21 years of social science consulting experience including 14 years in Alaska. The comments in this blog do not necessarily represent the view of employers and clients past or present and are Jonathan’s alone. Suggested blog topics, constructive feedback, and comments are desired at askjonathan@apcm.net.

The views and opinions expressed in this article are those of the author and do not necessarily reflect APCM’s position.

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