Moody's Analytics concluded recently that Alaska and three other resource-dependent states have entered recession as oil prices skid, but Alaska's economists aren't so sure and the state's latest employment data shows continued growth.
But with oil and gas companies in recent months announcing hundreds of job cuts in that high-paying sector, and with reductions to public services mounting, Alaska may in fact be in the start of a recession, state experts said.
"We're not saying we are and we're not saying we're not," said Dan Robinson, research and analysis director for the state Labor Department. "It's a little bit of an academic question so we wouldn't see the need to argue with someone who says we're in recession now."
The state won't be able to make that call until at least this summer, because Alaska defines a recession as three straight quarters of year-over-year job losses. Economists don't yet know if that has begun to happen, Robinson said.
The Labor Department on Tuesday announced that its latest, final employment figures show slight job growth in the third quarter of 2015 compared to the same period the year before. Gains in retail, leisure and hospitality, and health care helped drive growth.
Preliminary job numbers for the final quarter of 2015 also show slight job growth. But the numbers could change in the coming months as the state collects more data from employers, Robinson said. If the final report shows year-over-year job loss, those last three months of 2015 could be the start of a recession by Alaska's measure.
"Recessions are like that — you don't know until after the fact," Robinson said.
But New York-based Moody's Analytics, which relies on data from the U.S. Census Bureau and other national sources to provide investors with state-by-state economic analysis, said in a report provided to clients in late December that Alaska joined North Dakota, West Virginia and Wyoming in a recession. Moody's Analytics operates separately from Moody's Investors Service, which rates the financial risks of bonds.
"The failure of energy prices to rebound has pushed Alaska into recession," the report said. "Job growth is among the slowest in the nation, on par with that in other energy-dependent states such as North Dakota and West Virginia. Mining and energy-related firms have been steadily cutting workers over the past year, and lower state severance tax revenues are pressuring Alaska's ailing public sector."
"The downturn in the energy sector will ripple throughout Alaska's service economy," the report said.
The negative effects will include falling demand for administrative and office-based services, higher business costs that deter business expansions, and weaker wage growth that slows consumer-driven sectors, the report said.
It's not all gloomy for Alaska, said Steve Cochrane, managing director of economic research at Moody's Analytics in Philadelphia.
One bright spot is that home prices continue rising, perhaps because interest rates remain low, said Cochrane. On the other hand, other key factors reviewed by Moody's Analytics -- employment, residential construction and industrial production -- have struggled long enough to meet the firm's definition of a recession.
"If we are correct, the data makes it look like so far there is a recession in Alaska. But it's not too deep," said Cochrane, who led the team that wrote the report.
The "recession" label may mean most to investors eyeing projects in Alaska such as new apartment buildings or oil and gas plays, officials said.
But it can also have an important psychological effect that weighs on the economy, Robinson said.
"The fuzzy thing about a recession is it's a confidence issue," said Robinson. "If people believe you're in a recession, you are less likely to buy a house and do other things, and that has its own effect."
The last time Moody's Analytics determined the state was in recession came during a roughly year-long period in 2008 and 2009, as the tailwinds of the nation's housing crisis and wildly fluctuating oil prices dragged on the economy, said Cochrane.
Moody's bond-rating company, Moody's Investors Service, warned Alaska in December 2014 it is considering downgrading the state's prized AAA rating.
David Jacobson, spokesperson with Moody's Investors Service, said the agency is still analyzing that option, and may continue doing so until the end of the year.
The sister company's decision to label Alaska as in a recession will have no bearing on the potential rating downgrade, said Jacobson.
Another major credit ratings agency, Standard and Poor's, decided in January to lower Alaska's general obligation credit to AA+ from its top ranking of AAA, a decision that could cost the state an estimated $1 million annually for each $1 billion in general obligation bonds issued.
Moody's rating agency in early January essentially gave a thumbs-up to Gov. Bill Walker's proposed fiscal reform to deal with the state's $3.8 billion budget deficit, an overhaul to state finances that would include tapping the $50 billion Permanent Fund to help pay for state services. The agency called it "a bold effort to address the state's enormous budget imbalance."
The Legislature is currently considering that and other solutions to the budget crisis.
Moody's Analytics did not comment on the $50 billion Alaska Permanent Fund, an unusual savings account that provides the state with important options for surviving years of low oil prices. But the firm said the state's long-term economic outlook is positive, in part because of abundant natural resources.
"State fiscal policy is a tool that could be used to prevent a recession from getting any deeper and pull the economy out of a recession," Cochrane said. "But until the state decides to do that, it's out there only as a potential tool."