Alaska’s economy looks a lot like the national economy right now. That was a message from Mary Daly, the President and CEO of the Federal Reserve Bank of San Francisco, who visited Anchorage this week. Her research focuses on employment, wage trends, economic growth and shocks.
The Federal Reserve, often called the Fed, is the central bank of the United States. The agency supervises and regulates banks nationwide and conducts monetary policy.
Daly keeps tabs on Alaska’s economy since the state is part of her west coast district. She told Alaska Public Media’s Ava White that national economic indicators look very similar to in-state indicators.
Mary Daly: That's not always been true. You know, Alaska has been growing very, very slowly while the nation was growing quickly, but now things are evening out.
And I see some of the same challenges here that I see back in the lower 48: prices are high, inflation still rising, people are feeling very nervous about the continuation of job growth and their own ability to hold their job and continue to build their income and ultimately, wealth. And housing and child care are problems everywhere that are top of mind as barriers to trying to, you know, grow your career, raise a family, and ultimately contribute to your community.
So universal problems or challenges, and I think that just shows where we are in the economy.
Ava White: I had a follow up question about if we should be measuring these indicators differently in rural Alaska, it sounds like the answer is no?
MD: Well, the very unique thing about Alaska, which I think few people appreciate, is that you don't have one economy. You have economies. And the rural economies are not like going to rural Missouri, where I grew up. It's actually remote, and it's a subsistence economy, often cashless.
That's a very different economy with different challenges. And so I think the thing that makes Alaska so unique is the fact that you have multiple economies in a single state.
And that is something I hear again and again when I talk to Alaskans, whether they're the Alaskan Native peoples or they're the people who have moved here and recognize that to be true. And that's why collective actions to work for everyone to get better, not just the urban areas, not just Anchorage, but and not just Fairbanks, but everywhere to get better.
AW: Many communities [in Alaska] either have a bank or don't have banks at all. So as currency continues to move digital, a lot of these communities don't have reliable internet. How do you make sure they don't get left behind?
MD: Let me reassure people, the Federal Reserve, and [the] San Francisco [bank] plays a large role in this. We are responsible for ensuring that people have the cash they need. So physical currency is still something we process that we ensure that gets distributed, and ultimately that doesn't go anywhere until everyone's ready.
AW: The Alaska PFD acts kind of like a basic income for all residents, and this year the legislature approved it for $1,000. How do you think the PFD impacts things like consumer behavior and spending, and has the Fed specifically looked into the PFD or similar, not programs, but similar things?
MD: We study a lot of the things that go on in any state by talking to the people who are living in that state. What we're hearing more and more is that the PFD amounts can't keep up with the rising cost of living, and so the real opportunity and challenge, those are dualities, is to figure out what else people can do that support them in a durable way.
And that's something I hear across the United States. If you think about government funding on anything, or government returns or dividends, as in Alaska, they're just not growing as quickly as the economy in prices are rising. And so I see more and more communities like here today in Alaska returning to what do we [know] that creates a sustainability for people where they can earn more as they do more, and how do we get that back in? That's the missing piece of things.
You can't just rely on oil and gas and tourism and fishing. You have to rely on other things. And what are those other things going to be? How do we train, how do you all train the populations that want to participate in those things? And ultimately, that's the virtuous cycle that makes a sustainable economy.
AW: Does Alaska's outsourced economy make us more susceptible to economic shocks?
MD: It makes you susceptible to different economic shocks, and so let me tell you what I mean by that.
Many states look like the US economy. And when the U.S. economy goes, the state goes. Or when the US economy rises, the state rises. In Alaska, there's a lot of, just, difference in the business cycle here, because it's related to the global commodity market.
It's related to tourism. That's not just local and US driven, but is international. It's related now to the you know, how are tariffs doing, and where do they get imposed, and how do you create the opportunities to grow when you have to pay higher more for goods. So all of that makes it a little unique. And I think it has been traditionally frustrating for people when I talk to them that they're I'm talking about a national economy that looks like this, and they're talking about a state that looks completely different.
What I'm hearing more and more, though, is that Alaska is looking more similar to the US. It may not that will only continue to the extent that Alaska continues to diversify away from just the things that you do well, not giving those up, but adding to and making sure you have a broader economy, because that's what insulates you from any shocks, be them national or global shocks.
AW: I know that Alaska isn't unique in this problem, but we do have a housing shortage, both urban and rural, along with comparatively a small population, but really high construction costs. Are there any policies or trends that the Fed is following that might ease lending or development hurdles for housing in places like Alaska or across the board?
MD: We heard from the mayor today that she's supportive as is the assembly of relaxing certain other zoning restrictions or building restrictions that have made it very difficult because you already have higher construction costs right now.
Interest rates are modestly restrictive, and then you add to it a slate of things that might have been the right thing at the moment, but are now hurdles to building multifamily housing.
And I think she also mentioned the 20 year hiatus on taxes for multifamily [homes] and that just generates an opportunity for builders, especially in the private sector, which is where you need the growth to get in there, create residential permits, get people at the houses they need.
Those are the kinds of policies that I see really breaking the log jam, is these things that make it harder and harder to build.
AW: I know it has happened in the past, but some Alaskans are concerned about a recession in the near future. What steps is the Fed taking, or can slash will the Fed take in the future to prevent that happening?
MD: One of the things that I'm highly focused on right now is, when do we need to recalibrate the interest rate to account for the fact that the economy is slowing and the labor market is slowing, so we don't want to let that slowing go forward too long? Or else you end up getting to a point where the economy, proverbially tips over.
I don't see us there yet, but the time is now to balance our two goals, price stability and full employment, and really do everything in our power to get the soft landing that I feel that Alaskans and. US, the nation as a whole, deserves.
AW: And you mentioned labor. Last week, President Trump fired the commissioner of the Bureau of Labor Statistics when the agency released job numbers that he didn't like and he called them rigged with no evidence to support that claim. How concerning is it to you if the basic data that underlies the US economy is called into question?
MD: The Federal Reserve and businesses and so many places in the US, policy makers of all types, state and local governments rely heavily on continuity of statistics. And the government, the US government and the statistical agencies that we have, are considered one of the premier crown jewels of the global data collection system. Many countries follow our models because we have consistent data collection. We have data collection that is always there. Earnest people work there. They're doing statistical work, and data collection that's really important.
So I think keeping those pieces of information that have integrity, have continuity and are accurate is critical to actually being able to do our work.
But in the meantime, as we I would expect those things to be true, but we also don't just rely on those statistics. We rely on a variety of new data sources that are collected privately, also talking to people, coming to the cities that we serve and the states that we serve, and learning from them directly.
And right now, I see the labor data that came out on Friday to be more consistent with what I'm hearing from people that the labor market is softening, maybe not to the magnitude that the revision suggested, because data at this point are always a little bit noisy when you have the transition period.
Ultimately, though, I think they are closer to what I'm hearing from individuals, households and businesses, than they are when it was growing so fast. And people would look at the data and say, that doesn't reflect me.
