Alaska Economy Bounces Back
After the weak late '80s, oil and mining production and development are rising robustly
THE two converted mobile homes comprising the maiden branch of three-month-old Northrim Bank are proof that Alaska's economic recovery is in full bloom. A leaner, meaner, and smarter Alaska is emerging from the economic dark years of 1986 to 1989, when nine banks and two savings-and-loans collapsed and home foreclosure rates reached over eight times the national average.Skip to next paragraph
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It's an ideal environment for a new bank, says Marc Langland, Northrim's president.
``After you've had the shakeout, you're lending to people who survived the shakeout,'' says Mr. Langland, sitting in an office above the construction site that will become the bank's permanent headquarters. ``If they've made it through that, they probably stand a better chance of making it through the next one.''
The oil industry leads the state's recovery. The Persian Gulf crisis and resulting high oil prices sparked enhanced-recovery programs and production in marginal fields on the North Slope. Daily output is near the all-time high of 2 million barrels. Once-dormant exploration programs are active again. A $1.8 billion investment in gas-handling expansion to extend the life of the Prudhoe Bay oil field, a project planned long before the Gulf war, is under way.
Alyeska Pipeline Service Company, operator of the trans-Alaska pipeline, is in the third year of a five-year program to replace corroded sections of the 800-mile line. Estimated to cost $800 million, the repair is the nation's biggest single construction project.
The state's mining industry has grown robust, thanks largely to two new major mines - Cominco Alaska Inc.'s Red Dog Mine near Kotzebue, expected soon to become the world's biggest zinc producer, and the Greens Creek Mine near Juneau, already the nation's top silver producer. Mineral deposits from Fairbanks to the Alaska Peninsula are being explored as possible mine sites.
Resource-rich Alaska has always had a wildly cyclical economy, with swings generally running counter to national cycles.
High oil prices, poison for US manufacturers, benefit Alaska - not only because they generate oil industry employment, but, more important, because they boost royalty and tax income for the state government, owner of most of the North Slope oil field.
If Alaska North Slope crude prices remain at $18 a barrel or higher through the end of the fiscal year in June, the state treasury will net a budget surplus of at least $600 million, state budget analysts say.
The low dollar is also good for the state. It boosts fish prices and enriches the commercial fishing industry, the state's top private employer, for example. Fishermen welcome a high yen: Japan buys 95 percent of Alaska's seafood exports, worth $1 billion in 1989, according to the Alaska Seafood Marketing Institute.
The low dollar, coupled with terrorism fears, also makes Alaska a more desirable travel destination than its chief rival, Europe; businesses catering to tourists expect a banner summer season.
Some of Alaska's new economic strength is unrelated to the Gulf war or energy issues. Anchorage's evolution as an international air-cargo hub and the bottomfish boom in the Gulf of Alaska and Bering Sea are among other factors contributing to the past year's employment growth of over 2.5 percent, as estimated by the Alaska Department of Labor.
The contrast with the recession-mired Lower 48 has grabbed job-hunters' attention. An avalanche of out-of-state telephone calls hit the state labor department's job hotline just after Jan. 1, according to Neal Fried, a department economist.
Many callers are quickly disappointed. Romantic gold-rush and pipeline-boom myths notwithstanding, Alaska is no place for easy fortunes, officials say.
``They think that because it's cold and dark, nobody wants to come here and all you have to do is make that effort and you'll make lots of money,'' says Mr. Fried, who fields many of the calls to the labor department.
Even highly skilled workers are sometimes disappointed. Ron Divine, a 37-year-old petroleum engineer who eight months ago fled a poor job market in Texas, found that Alaska's flowing wells and arctic conditions demand more technical expertise than he had. ``The facilities and the type of oil wells and gas wells up here are much different than they are in the Lower 48,'' he says.
Then there is the matter of numbers in this state, where the labor market is highly seasonal and is tinier than that of Seattle. An infusion or exodus of workers, as well as the change of seasons, skews Alaska statistics.
Migrants attracted by Alaska's booms quickly crowd the labor market, so Alaska's unemployment rate almost always exceeds the national rate. After statewide employment reached its all-time high and unemployment plummeted to 5.3 percent in July, the normal seasonal slowdown began; January's unemployment rate was 8.8 percent.
Alaska's high living costs and tight local housing markets can also shock newcomers.
Housing remains scarce in Valdez, where the population swelled from 3,500 to 10,000 during the peak of the 1989 Exxon Valdez oil spill cleanup and is now holding at 4,500.
In booming Juneau, crammed with state employees and mine workers, rental vacancies are nearly nonexistent. To accommodate families shut out of the housing market - many of them newcomers - the St. Vincent de Paul Society is building a sorely needed homeless shelter.