State of the economy: Alaska faces challenges as it works to strengthen and diversify its economy.

• Author: Stewart, Regan

Alaska is now enjoying 17 years of uninterrupted job growth. The most recent information from the Department of Labor predicts 47,700 jobs will be added in the next decade--the majority of them in the services industry. This amounts to a 1.7 percent annual growth rate for employment in Alaska (2002 Trends). Economic stability continues due to long-term oil production and the success of other sectors, such as tourism, construction, retail, trade, health services, mining, fishing and services.

Local, state and federal government spending fuel the private support sector. About a quarter of total state spending goes directly to Alaska businesses and another quarter goes directly to households. About 18 percent of state spending is for wages and salaries. In addition, 63 percent of all federal spending in Alaska goes directly to Alaska businesses and households.

Dan Robinson, economist, Labor and Workforce Development, says "In terms of employment, state government has been down this year due to the budget crunch. It has not been layoffs, just people leaving and those jobs are not getting filled." Local government has been pretty flat, but with slow growth, he says. There is less budgetary pressure on the local side. Local government has different revenue streams than the state government. "The state is giving less money to the local government than they used to, so the effect gets passed down," says Robinson.

The rich fishing waters off Alaska's coast make it one of the world's finest sources for wild seafood. Unfortunately, for several years, the Alaska seafood industry has seen a decline. Alaska is the No. 1 producer of wild salmon in the world, but also is under constant pressure to keep up with technical advances in fishing and seafood processing, and to maintain and improve its global market position. The value of the catch is declining, largely due to competition with farmed salmon (Governor's 2003 report).

Alaska still has vast natural resources--oil, minerals, fish and timber, scenic beauty and wildlife, as well as a strategic commercial location relative to the growing Asian economies. Future expansion of the economic base, such as hard-rock mining, air cargo, tourism, medical services and federally funded construction, will begin to offset declines in state spending. Robinson says, "We have resources that we have always been dependent on, such as the natural beauty (of the state which brings in tourism revenues). The distance is a...