Alaska growth slow in '90s

Posted: Thursday, June 07, 2001

ANCHORAGE (AP) -- Alaska ranked a dismal 49th in a new set of federal numbers showing growth in gross state product during an eight-year period of the last decade.

Gross state product is the market value of everything produced in the state and is an important indicator of economic health.

Alaska's gross state product grew at a tepid average of 0.5 percent during 1992-99, beating only Hawaii, which declined by 0.3 percent. Alaska's growth rate is far behind the nation's leader, Arizona, which surged ahead at 7.3 percent.

Alaska economists, though, said Alaskans should not be too alarmed. Though the figures are significant, they are only one indicator and they do not take into account encouraging news of the past year and a half, chiefly a resurgence of Alaska's oil industry.

And while the Lower 48 is talking about a possible tech-tinged recession, there's little of that chill way up here, again thanks mostly to stepped-up work in the oil patch.

''The rest of the country has become less optimistic in the last year where we've become more optimistic,'' Neal Fried, a state Department of Labor economist, told the Anchorage Daily News.

It means that Alaska could inch up a few notches among its peer states come the next report from the U.S. Department of Commerce's Bureau of Economic Analysis.

The bureau cites several reasons for Alaska's recent lagging economy, including declining oil production, the oil price slump in the late 1990s and a decline in paper products due to the closure of big Southeast pulp mills.

Timber harvests have tanked with the pulp industry and fish-processing employment has gradually tailed off from its 1992 peak, Fried said.

Losses on the resources side have been somewhat offset by growth in construction, health care and services, Fried said. Big federal spending has also steadied Alaska's economy.

Add it all up and you get Alaska's weak gross state product growth, he said.

''Yeah, we're underperforming,'' said Fried. ''It didn't just start happening yesterday. This has been a trend that's been with us for quite a while.''

One problem with gross state product as a measure for Alaska is that the economy relies so heavily on one industry, oil and gas. So in years when oil prices really drop, as they did in 1998 and 1999, that can really skew the average negatively, said Scott Goldsmith, a University of Alaska Anchorage economist.

On the other hand, when oil prices spike up, as they have in the last year and a half, Alaska's gross state product can look brilliant, he said.

Despite lots of talk that Alaska must diversify its economy, Goldsmith said, oil and gas will continue to be Alaska's best economic bet for growth.

''It's still our trump card, as it were,'' he said.

A possible North Slope natural gas pipeline, new Slope oil discoveries and reinvigorated drilling thanks to high prices could help the economy.


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