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Economic forum identifies federal spending as key to Alaska job growth

Construction equipment on display at theg the Groundbreaking ceremony for the new North Link Terminal Wednesday, October 11, 2023 (Shiri Segal/Alaska Public Media)
Construction equipment on display at the groundbreaking ceremony for the new NorthLink Aviation terminal Wednesday, October 11, 2023 (Shiri Segal/Alaska Public Media)

Alaska is leading the nation in job growth, and federal funding is a primary reason. That was a key takeaway from a virtual forum Thursday with economists from University of Alaska Anchorage’s Institute of Social and Economic Research.

Brett Watson is an assistant professor of economics at UAA. It took the economy longer to recover from the COVID pandemic, he said, but now, it’s the opposite. Alaska has been leading the nation in employment growth since late 2022, growing at almost twice the national rate of 3.3%.

The two sectors in particular that’ve driven that growth, he said, are healthcare and construction.

“Both of these have kind of been the leading industries for growth now for a long time in the state. As we can imagine, that federal spending has been a large driver of the post pandemic recovery that we’ve seen in the state, through these two channels,” he said.

Alaska’s aging population is driving the demand for healthcare, he said, while construction is being steered by resource projects, like Willow and Pikka on the North Slope.

The state gets more federal funding per capita than almost all other states– over $13 billion total annually, according to the presentation. That money supports things like nonprofits and Medicaid, the government insurance program for low-income families, pregnant women and others.

A graph from the forum shows oil revenues have declined, while federal dollars have increased. Federal spending in Alaska has accelerated over the last decade.
Brett Wastson
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ISER
A graph from the forum shows oil revenues have declined, while federal dollars have increased. Federal spending in Alaska has accelerated over the last decade.

Oil used to be the primary revenue source for the state’s general fund, but Watson said it’s become less reliant, partially because Alaska North Slope production has declined. Instead, there’s been a growing dependency on federal funds.

“One of the really dramatic things that I see in this figure is just the persistent increase in federal spending that's passed through our state's budget,” Watson said. “That’s really been on the rise, and it's kind of accelerated its trend in the last 10 years or so as well.”

About 15,000 Alaskans worked for the federal government when Trump took office in January, but economists don’t yet have a clear picture of how many workers were impacted by sweeping federal cuts by the administration.

Correction: This story has been corrected to note that job growth in Alaska has happened at almost twice the national rate, instead of more than twice.

Ava is the statewide morning news host and business reporter at Alaska Public Media. Reach Ava at awhite@alaskapublic.org or 907-550-8445.