King, principal and senior economist with Northern Economics Inc., joined Greg Wolf, executive director of World Trade Center Alaska, in a presentation about the economic future of Alaska and the U.S. to a crowd of about 100 people in the Carlson Center.
King focused on “the big picture,” giving an overview of the unemployment situation, the county’s debt crisis and how Alaska has fared during the recession.
Recessions accompanied by financial crises tend to lead to significant losses of wealth and substantial and persistent increases in unemployment rates, said King.
“We said back in 2008-2009 that the recession was going to be led by a financial crisis and the implosion of a financial bubble. When that happens, we tend to see recovery times that are five, six, seven years in length or longer,” King said. “We think we probably have another three to four years to go with regard to employment in this country, and recovery.”
Even though employment figures for the last several months were stronger, it remains to be seen if the trend will continue past the holiday season. The loss of public-sector jobs — roughly a quarter million — has been “a real drag on the economy this year” and is expected to continue, King said.
Twenty-nine states have some sort of projected shortfalls for next year, King said, but Alaska is not one of them.
“We are truly, and have been, very lucky the last couple of years.” King said, pointing out that the national unemployment rate is 8.5 percent while the state’s is 7.2 percent. Alaska’s urban areas — including Fairbanks, at 6.3 percent — fall below the state average and well below the national average.
Nevertheless, oil production is down and the decline shows no signs of slowing or stopping, King said.
To balance the state budget, Alaska had to sell it’s oil for at least $64 per barrel in 2010, $77 in 2011 and $94 in 2012, King said. A projected price of $97 per barrel is needed for 2013.
“As you can see, we can no longer afford our state government on $50 a barrel oil. That’s just not possible for us,” King said. “It’s pretty scary, and the window is closing.”
Though Alaska experienced moderate job growth in 2011 — led by health and education, leisure and hospitality, natural resources and seafood processing — it can expect to “muddle through” 2012 with mild to flat growth.
“As you may sense — 2012, not so bad — 2013, we’ve got concerns about. Due to declining production in oil and reduced federal spending, we face strong headwinds,” King said.
Wolf, of World Trade Center Alaska, discussed Alaska’s role in the global marketplace.
International trade is big business for Alaska, Wolf said, with annual worldwide exports totaling $4.7 billion from January through October of 2011. This is a 20 percent increase from 2010 figures and represents nearly 10 percent of Alaska’s gross state product, Wolf said.
“The result of that, of course, is a stronger and a more diversified economy that can withstand some of these potential headwinds,” Wolf said.
These figures do not include the export of services such as construction, engineering and oil and gas services, which may add close to another $1 billion, Wolf said.
“That’s a bright light for our future, particularly for our young people going to our University of Alaska,” Wolf said.
Seafood and minerals are Alaska’s top exports, at 47 percent and 35 percent, respectively. Japan, traditionally the top market for Alaska’s exports, was superceded by China for the first time last year.
“At the beginning of 2000 we were at $100 million. Today we are estimating, when the final count comes in, we’ll be at $1.5 billion. I’ve been in this business 24 years — there has never been a market for Alaska that has grown so fast, and in such a significant way, than this,” Wolf said of exports to China.
It is agreed the oil tax structure and reporting need to be fixed but not by this Governor. His credibility was destroyed by last year's fiasco. and his election flip flops.
We learned last year that any Alaska Bill must:
1. Control Reporting and Accounting which has been left to the discretion of the Oil Companies. The State has no idea what is happening or throughput. We learned about lies.
2. Control by Revenue of Oil Tax waivers. Same reason.
3. Maybe allow future development incentives if 1 2 are done.
4. Fine Oil and jail accountants for tax cheating.
4. Fine media for Big Page false advertising.
4. Fine Governor for lying again.
4. Fine everyone for believing preposterous bs.