July 2020 Alaska Economic Trends - Alaska Department of
Transcript Of July 2020 Alaska Economic Trends - Alaska Department of
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JULY
2020
Volume 40 Number 7
ISSN 0160-3345
SARA WHITNEY
Editor
DAN ROBINSON
Chief, Research and Analysis
TRENDS ALASKA ECONOMIC
4
THE COST OF LIVING
Design by Sara Whitney
ON THE COVER:
Locally grown beefsteak tomatoes sold at an Anchorage grocery store, photo courtesy of
Flickr user Wonderlane
License:
creativecommons.org/licenses/by/2.0/
13
WHO’S GONE BACK TO WORK
15
GAUGING
THE ECONOMY
ALASKA
DEPARTMENT of LABOR and WORKFORCE DEVELOPMENT
Governor Mike Dunleavy
Commissioner Dr. Tamika L. Ledbetter
Trends is a nonpartisan, data-driven magazine that covers a range of economic topics in Alaska.
If you have questions or comments, contact editor Sara Whitney at [email protected] or (907) 465-6561. This material is public information, and with appropriate credit it may be reproduced without permission. To sign up for a free
electronic subscription, read past issues online, or purchase a print subscription, visit labor.alaska.gov/trends.
ON THIS SPREAD: The background image for 2020 is the aurora borealis in the arctic in Alaska, taken by Noel Bauza.
The Cost of Living in Alaska
2019 inflation modest, April brings historic -2.5% deflation
By NEAL FRIED
Alaska’s inflation was low in 2019, but data through April of this year show prices took a sharp downward turn with the pandemic.
Prices rose 1.4 percent last year — the 10-year average is 1.8 percent — but April’s index registered -2.5 percent deflation from last April. While prices have fallen modestly before, this was the largest deflation Alaska’s consumer price index has recorded, as far back as 1960.
Specifically, energy prices fell 22 percent in early 2020 due to the oil price collapse, causing transportation and housing costs to decline as well.
Demand for many goods and services plunged globally in March as the economy began to shut down to slow the spread of the coronavirus. Prices typically fall when demand drops and supply remains high. Some of the declines will be temporary, but we won’t know how much until later this year.
Urban Alaska prices rose 1.4% in 2019 ...
4.6%
2.2%
3.2%
3.1%
3.0%
1.8% 1.2%
2.2%
1.6% 0.5% 0.4% 0.5%
1.4%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
... then dropped in April 2020 with pandemic
-22.3% Energy
Overall -2.5%
-6.8% Clothing -14.4% Transportation
Housing -1.6%
Recreation -0.4%
4.6% Food 3.3% Medical
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Alaska (CPI-U)
Clothing costs fell in 2019, and health care rose the most again
April 2020’s 6.8 percent drop in clothing prices was a continuation of 2019’s decline. Last year, clothing costs fell 8.3 percent, which was the largest-ever decrease.
Apparel is a highly competitive market, with large parts of the world vying to make clothes for U.S. sale. The ongoing battle between brick-and-mortar stores and online shopping has also continued to reduce expenses.
The cost of medical care went up last year, as it has nearly every year, increasing 6.6 percent.
4 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
How Alaska households spent their money in 2019
Clothing 3%
Transportation 15%
Medical care 8%
Housing 42%
Recreation 7%
3% Other
Food and beverages
16%
6%
Education/ communication
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Alaska (CPI-U), December 2019
Consumer price index shows changes in purchasing power
The Consumer Price Index for Urban Alaska is Alaska’s only measure of inflation. It’s based mostly on Anchorage, but it has ramifications statewide. The minimum wage is adjusted annually according to this index. Inflation also figures into bargaining agreements, wage negotiations, child support payments, and real estate contracts. (See the sidebar on the next page for more on how the CPI is used.)
In general, the CPI only shows change in costs in a single area over time, but it’s also useful for calculating change in the value of the dollar. It can help you track your purchasing power over time or figure out whether something was a better deal earlier. For example, in 2010, renting an apartment in Sitka was $1,132 a month on average. In 2019, the same apartment would have rented for $1,301. But while rent was lower in 2010, it wasn’t a better deal back then. In 2019 dollars, that apartment rented for $1,327 in 2010.
Try our inflation calculator at: https://live.laborstats.alaska.gov/cpi/calc.cfm.
Although the consumer price index can’t be used to compare costs between places, a range of other data sources are available for comparing Alaska to the nation and
Urban Alaska and U.S. metro inflation by category, 2009 to 2019
Year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ALL ITEMS
Urban AK % chg from previous yr
U.S. % chg from previous yr
1.2% 1.8% 3.2% 2.2% 3.1% 1.6% 0.5% 0.4% 0.5% 3.0% 1.4%
-0.4% 1.6% 3.2% 2.1% 1.5% 1.6% 0.1% 1.3% 2.1% 2.4% 1.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
HOUSING
3.7% 0.9% 2.9% 2.7% 3.1% 2.7% 2.4% 0.9% 0.3% 1.8% 1.2%
0.4% -0.4% 1.3% 1.6% 2.1% 2.6% 2.1% 2.5% 3.0% 2.9% 2.9%
FOOD AND BEVERAGES
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-0.2% -0.2% 3.6% 2.4% 0.4% 1.3% 1.7% -0.7% -0.05% 0.05% 2.7%
1.9% 0.8% 3.6% 2.6% 1.4% 2.3% 1.8% 0.3% 0.9% 1.4% 1.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CLOTHING
3.6% 3.0% 2.2% 4.3% 4.8% 1.5% 0.5% 2.6% 0.3% 2.0% -8.3%
1.0% -0.5% 2.2% 3.4% 0.9% 0.1% -1.3% 0.1% -0.3% 0.03% -1.3%
ALL ITEMS MINUS HOUSING
Year
Urban AK % chg from previous yr
U.S. % chg from previous yr
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0.6% 1.5% 3.4% 1.7% 3.0% 1.0% -0.3% 0.3% 1.1% 3.7% 1.9%
-1.0% 2.6% 4.0% 2.0% 1.1% 1.1% -1.3% 0.2% 1.5% 2.0% 1.0%
TRANSPORTATION
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-4.8% 4.4% 4.7% 2.0% 7.0% -0.6% -6.8% -1.7% 2.4% 7.0% 0.2%
-8.3% 7.9% 9.8% 2.3% 0% -0.7% -7.8% -2.1% 3.4% 4.5% -0.3%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MEDICAL CARE
4.3% 5.7% 5.3% 4.3% 3.2% 3.2% 3.3% 4.5% 1.5% 7.6% 6.6%
3.2% 3.4% 3.0% 3.7% 2.5% 2.4% 2.6% 3.8% 2.5% 2.0% 2.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ENERGY
-7.8% 3.5% 10.8% 1.1% -2.7% 2.4% -10.3% -5.8% 12.3% 8.0% 1.5%
-18.4% 9.5% 15.4% 0.9% -0.7% -0.3% -16.7% -6.6% 7.9% 7.5% -2.1%
Source: U.S. Department of Labor, Bureau of Labor Statistics
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 5
Two ways to measure the cost of living
1. In one place over time (inflation)
Alaska has a single measure to track inflation, or how much prices have changed: the Consumer Price Index for Urban Alaska.
Although there’s a national consumer price index and CPIs for 31 cities and larger areas around the country, these only track costs over time in a single area and can’t be used to compare costs between areas. For example, 2019’s index for Alaska was 228.676, and the national index was 255.657. This doesn’t mean the cost of living in the U.S. was higher; it just means prices have increased a bit faster in the nation as a whole since the early 1980s than they have in Alaska cities.
The U.S. Bureau of Labor Statistics produces the CPI through elaborate surveys of consumer spending habits. These surveys cover a “market basket” of common items, to which BLS assigns location-specific “weights” to determine how people spend their money. (The pie chart on the previous page shows Alaska households’ typical expenditures in 2019.) The categories include housing, food, transportation, medical care, and entertainment. In most categories, Alaska’s weights tend to resemble the national values, but recreation is an exception. The average American spends less than 6 percent on recreation, and the average Alaskan spends more than 7 percent.
The inflation rate is also used to adjust the value of the dollar over time. Workers, unions, and employers watch the CPI because bargaining agreements and other wage rate negotiations often incorporate an adjustment for inflation. The CPI also plays a role in long-term real estate rental contracts, annual adjustments to the state’s minimum wage, child support
payments, and budgeting. The Alaska Permanent Fund Corporation uses the CPI to inflation-proof the fund, and senior citizens are affected nearly every year because Social Security payments are adjusted using the CPI.
The bureau produces the CPI for Urban Alaska bimonthly (in February, April, June, August, October, and December) as well as annually and semiannually.
2. In different places at the same time
The other way to assess the cost of living is to compare costs between two or more places. For example, is it more expensive to live in Portland or Dillingham?
While measuring inflation has a single source, a range of sources are available for contrasting costs between areas. These sources have varying degrees of reliability and different methods, so it’s important to take their strengths and weaknesses into account. Some rely on random private individuals to enter prices for various goods and services in their communities and then automatically generate a cost-of-living index, while others use rigorous, broad-based, and transparent statistical methods. A good solution is to use multiple sources and look for patterns.
Other sources that aren’t even marketed as cost-of-living measures can shed light on price differences, too. One is the U.S. Census Bureau’s annual American Community Survey, which includes the median value of a home and median gross rental cost data for every community in the country. Because of the small sample sizes and large margins of error for many places, the five-year average is recommended when using the ACS.
Calculating consumer price index change
Index changes in an index are usually expressed as percents rather than index points, because points are affected by the level of the index in relation to its base period. Here’s how to compute both types of change:.
Index point change
CPI for Urban Alaska 2019.....228.676 Minus CPI for 2018.................225.545 Equals index point change............3.1
Percent change
Index point difference.............…….3.1 Divided by 2018 index...........225.545 Times 100 equals % chg.............1.4%
communities to each other, and the rest of this article will focus on those comparisons.
For more on the two broad ways to measure the cost of living, see the sidebar above.
Where Alaska’s largest communities stand nationally
One important source for comparisons between places is the cost-of-living index the Council for Community and Economic Research, or C2ER, puts out each quarter and annually. This survey, whose results start with the table on the next page, covers more than 250 cities, including three in Alaska:
6 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
How Alaska cities compared to other cities in early 2020*
LOWEST HIGHEST
Category’s weight in total index
Total Index Groceries Housing
100.0% 13.89% 27.53%
TransUtilities portation
9.55% 9.20%
U.S. average
100.0
100.0 100.0
100.0
100.0
Region and city
Anchorage, AK Fairbanks, AK Juneau, AK
124.4 127.9 132.9
132.6 123.7 139.2
134.7 110.8 155.1
127.2 217.9 135.3
111.9 116.7 131.4
West Portland, OR Honolulu, HI San Francisco, CA Los Angeles-Long Beach, CA Reno, NV Seattle, WA Spokane, WA Boise, ID Bozeman, MT Laramie, WY Salt Lake City, UT
134.3 197.6 194.7 146.6 112.8 156.7 104.9 100.1 108.2 90.5 100.5
113.3 169.3 132.7 113.0 113.9 129.4 96.2
95.5 103.5 106.2
99.3
184.2 334.2 355.3 228.6 121.1 234.7 101.7
98.3 131.9 79.3 104.3
88.6 199.4 139.3 107.7 85.2 109.6
97.7 83.1 86.3 86.5 89.2
133.2 146.6 142.3 133.6 130.4 138.8 108.7 104.1
90.7 80.0 113.2
Southwest/Mountain Phoenix, AZ Denver, CO Colorado Springs, CO Dallas, TX Houston, TX McAllen, TX Midland, TX Oklahoma City, OK
100.9 111.1 102.9 107.6 95.6 75.2 98.9 85.8
94.9 94.2 96.8 101.4 88.4 82.8 91.9 89.3
114.6 135.2 104.7 116.6
87.1 55.4 91.1 69.8
107.0 79.3 97.8 107.3 112.0 101.8 99.7 94.3
100.6 107.0 109.2 95.3 96.7 90.3 98.3 88.6
Midwest Cleveland, OH Peoria, IL Minneapolis, MN Sioux City, IA
95.9 88.6 105.7 88.8
105.0 94.7
103.3 92.0
82.6 75.4 102.5 65.9
92.8 97.6 97.0 111.0
101.1 101.9 102.0
91.4
Southeast Alexandria, VA Fort Lauderdale, FL Miami, FL Birmingham, AL Atlanta, GA New Orleans, LA
140.0 113.0 117.1 91.4 99.9 111.1
126.8 105.0 111.0 88.5 103.2 100.3
225.0 149.6 149.2 76.5 96.2 137.3
96.9 101.1 101.1 102.7 84.5 75.6
107.8 109.8 111.9
97.2 103.1 103.2
Atlantic/New England New York City (Manhattan), NY Boston, MA Pittsburgh, PA Hartford, CT
245.7 148.8 102.9 115.8
144.0 110.7 109.5 109.1
553.2 219.6 102.8 112.5
100.3 121.9 114.7 126.9
128.5 113.9 120.0 111.6
*Based on professional households with earnings in the top quintile, first quarter 2020 Source: The Council for Community and Economic Research
Health care
4.31%
Misc 35.52%
100.0 100.0
143.5 155.0 152.8
113.4 118.3 110.5
117.9 118.7 124.0 109.6 116.9 128.7 115.4 100.4 93.8 93.7 100.4
118.5 125.1 131.5 114.4 108.3 127.6 110.6 106.9 103.8 96.4
97.7
87.2 100.0 104.9 110.5
94.6 69.6 94.7 96.2
92.6 109.9 103.5 106.1 100.5
77.3 108.1
92.7
109.8 91.7
104.1 98.1
100.4 90.2 112.6 97.4
101.6 99.6 99.1 91.1 103.3 115.1
104.0 93.4
102.3 99.6
104.3 106.1
109.4 122.9
93.1 104.1
133.2 128.3
94.0 120.4
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 7
Note: From C2ER’s first quarter 2020 survey
Sources: The Council for Community and Economic Research; and Alaska Department of Labor and Workforce Development, Research and Analysis Section
Anchorage, Fairbanks, and Juneau.
C2ER designed a typical consumption pattern based on professional households with incomes in the top 20 percent. The survey tracks costs for 57 items in categories such as groceries, housing, utilities, transportation, health care, and miscellaneous goods and services. (The illustration above shows some of those items and how much they cost in Alaska, plus the high and low cities and national averages.) From this sample, C2ER sets the average U.S. city’s costs at 100.
Like every source, C2ER has a few major drawbacks.
Its “weights” — how much of their income people typically spend in each category — differ from the consumer price index and are far less detailed. It also doesn’t account for state or local taxes, which is a major omission for some places.
The costs of living in Juneau, Fairbanks, and Anchorage were well above the national average in the first quarter of 2020. Juneau’s index was highest at 132.9, or 32.9 percent above the national average, followed by Fairbanks at 127.9 and Anchorage at 124.4.
Alaskans’ expenditures were higher than average
8 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
The most expensive cities in the U.S. in early 2020
City U.S. average
Index 100.0
1 New York (Manhattan), NY
245.7
2 Honolulu, HI
197.6
3 San Francisco, CA
194.7
4 New York (Brooklyn), NY
180.5
5 Washington, DC
160.7
6 Seattle, WA
156.7
7 Oakland, CA
153.9
8 Arlington, VA
150.5
9 Orange County, CA
150.2
10 Boston, MA
148.8
11 New York (Queens), NY
147.8
12 Los Angeles-Long Beach, CA
146.6
13 Bethesda-Gaithersburg-Frederick, MD 145.5
14 San Diego, CA
141.1
15 Alexandria, VA
140.0
16 Stamford, CT
136.4
17 Portland, OR
134.3
18 Juneau, AK
132.9
19 Fairbanks, AK
127.9
20 Bergen-Passaic, NJ
126.6
21 Anchorage, AK
124.4
22 Sacramento, CA
123.5
Source: The Council for Community and Economic Research
in every category. Fairbanks’ utility index of 217.9 remains the highest in the nation, followed by Hilo, Hawaii, at 199.4.
Although Alaska’s costs remain high, a growing number of U.S. cities’ costs have overtaken Alaska’s, and that list gets longer each year. In 2000, when C2ER surveyed more than 300 cities, just five were more expensive than Alaska cities. By early 2020, it was 17 (shown above). Juneau fell to 18th place and Anchorage to 21st — both record lows.
Nearly all of these high-cost cities are metropolitan areas with populations larger than the entire state of Alaska. Most are concentrated in California and the boroughs of New York City, although Seattle’s costs were also high, placing it sixth. Manhattan topped the list in early 2020 at 245.7. The lowestcost city was McAllen, Texas, at 75.2.
Alaska’s health care costs high by multiple measures
When it comes to health care costs, Alaska’s are
Costs of living in Anchorage, Seattle continue to diverge
Anchorage Seattle U.S. average=100
141 108
136 111
128 120
120 117
125 123
140 132
157 124
1986
1990
1995
2005
2010
2015
2020
Source: The Council for Community and Economic Research
Public health care premiums* in 2020
State U.S. average
Avg monthly premium
$442
1 Wyoming 2 Alaska 3 Nebraska 4 Vermont 5 Iowa 6 West Virginia 7 New York 8 South Dakota 9 Connecticut 10 Oklahoma
$875 $698 $667 $645 $636 $619 $588 $588 $547 $527
*Silver tier premium care insurance for a 40-year-old under the Affordable Care Act
Source: The Henry J. Kaiser Family Foundation
typically among the highest in the nation. C2ER ranked Alaska’s three cities at the top for expensive health care in the first quarter of 2020.
Another way to look at medical costs is the typical health insurance premium through the public marketplace. The table above shows Alaska’s average premium via the Affordable Care Act was secondhighest for 2020, at $698 per month, after Wyoming ($875). The national average was $442.
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 9
Alaska had the sixth-highest costs in 2019 ... maybe
A number of sources base their products on C2ER’s data. Each year, the Missouri Economic Research and Information Center publishes a cost-of-living series by state that averages the indexes of the participating cities. This index’s accuracy is questionable because it doesn’t apply any weight by city size, but it might be useful in some cases.
In 2020, Alaska ranked sixth among the highestcost states at 128.4, or about 28 percent above average U.S. costs. That represents Anchorage, Juneau, and Fairbanks, which are home to about 57 percent of the state’s population.
The military’s index compares Alaska towns to U.S. average
The U.S. Department of Defense produces a
How the military ranks the cost of living
City U.S. average
Index 100
Bethel
150
Utqiagvik
144
Nome
144
Petersburg
144
Wainwright
144
Sitka
140
Valdez
140
Cordova
138
Juneau
138
Spuce Cape
138
Unalaska
138
Homer (includes Anchor Point)
134
Kenai (inlcudes Soldotna)
134
Ketchikan
134
King Salmon (incl Bristol Bay Borough) 134
Tok
132
Seward
130
Eielson AFB (Fairbanks)
128
Kodiak
128
Clear AFS
126
College
126
Fort Wainwright (Fairbanks)
126
Anchorage (inc. Eagle River)
124
Delta Junction
124
Wasilla
122
Source: OCONUS, effective May 16, 2020
States with the highest cost of living in 2020
State U.S. average
Index 100.0
1 Hawaii 2 New York 3 California 4 Oregon 5 Massachusetts 6 Alaska 7 Maryland 8 Connecticut 9 New Jersey 10 Rhode Island
197.6 153.9 142.7 134.3 129.7 128.4 128.0 124.2 122.4 118.6
Sources: Missouri Economic Research and Information Center; and The Council for Community and Economic Research
cost-of-living index called Outside Continental United States Overseas, or OCONUS, for all of its “overseas” locations, which include Alaska and Hawaii. OCONUS’s strengths are its broad geographic coverage and frequent updates.
For the most part, OCONUS lines up with the other data sources in this article, but one major difference is it’s based on spendable income rather than total income. OCONUS doesn’t factor in housing, because the military deals with housing through a separate allowance program.
With OCONUS’s index set at 100 for the average U.S. city, Alaska’s communities ranged from a low of 122 in Wasilla to a high of 150 in Bethel in early 2020.
An average house cost just $264,638 in Fairbanks last year
For tracking housing costs in Alaska, we publish detailed rent and sales data each year in cooperation with the Alaska Housing Finance Corporation.
In the first quarter of 2020, Fairbanks’ single-family houses cost the least, on average, and the average home was the most expensive in Juneau.
Over the years, Fairbanks and the Kenai Peninsula Borough have typically had the least expensive houses, and Matanuska-Susitna Borough homes have often fallen below the statewide average as well. For many years, more than half of the state’s new homes were built in Mat-Su, even though only
10 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
JULY
2020
Volume 40 Number 7
ISSN 0160-3345
SARA WHITNEY
Editor
DAN ROBINSON
Chief, Research and Analysis
TRENDS ALASKA ECONOMIC
4
THE COST OF LIVING
Design by Sara Whitney
ON THE COVER:
Locally grown beefsteak tomatoes sold at an Anchorage grocery store, photo courtesy of
Flickr user Wonderlane
License:
creativecommons.org/licenses/by/2.0/
13
WHO’S GONE BACK TO WORK
15
GAUGING
THE ECONOMY
ALASKA
DEPARTMENT of LABOR and WORKFORCE DEVELOPMENT
Governor Mike Dunleavy
Commissioner Dr. Tamika L. Ledbetter
Trends is a nonpartisan, data-driven magazine that covers a range of economic topics in Alaska.
If you have questions or comments, contact editor Sara Whitney at [email protected] or (907) 465-6561. This material is public information, and with appropriate credit it may be reproduced without permission. To sign up for a free
electronic subscription, read past issues online, or purchase a print subscription, visit labor.alaska.gov/trends.
ON THIS SPREAD: The background image for 2020 is the aurora borealis in the arctic in Alaska, taken by Noel Bauza.
The Cost of Living in Alaska
2019 inflation modest, April brings historic -2.5% deflation
By NEAL FRIED
Alaska’s inflation was low in 2019, but data through April of this year show prices took a sharp downward turn with the pandemic.
Prices rose 1.4 percent last year — the 10-year average is 1.8 percent — but April’s index registered -2.5 percent deflation from last April. While prices have fallen modestly before, this was the largest deflation Alaska’s consumer price index has recorded, as far back as 1960.
Specifically, energy prices fell 22 percent in early 2020 due to the oil price collapse, causing transportation and housing costs to decline as well.
Demand for many goods and services plunged globally in March as the economy began to shut down to slow the spread of the coronavirus. Prices typically fall when demand drops and supply remains high. Some of the declines will be temporary, but we won’t know how much until later this year.
Urban Alaska prices rose 1.4% in 2019 ...
4.6%
2.2%
3.2%
3.1%
3.0%
1.8% 1.2%
2.2%
1.6% 0.5% 0.4% 0.5%
1.4%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
... then dropped in April 2020 with pandemic
-22.3% Energy
Overall -2.5%
-6.8% Clothing -14.4% Transportation
Housing -1.6%
Recreation -0.4%
4.6% Food 3.3% Medical
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Alaska (CPI-U)
Clothing costs fell in 2019, and health care rose the most again
April 2020’s 6.8 percent drop in clothing prices was a continuation of 2019’s decline. Last year, clothing costs fell 8.3 percent, which was the largest-ever decrease.
Apparel is a highly competitive market, with large parts of the world vying to make clothes for U.S. sale. The ongoing battle between brick-and-mortar stores and online shopping has also continued to reduce expenses.
The cost of medical care went up last year, as it has nearly every year, increasing 6.6 percent.
4 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
How Alaska households spent their money in 2019
Clothing 3%
Transportation 15%
Medical care 8%
Housing 42%
Recreation 7%
3% Other
Food and beverages
16%
6%
Education/ communication
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Alaska (CPI-U), December 2019
Consumer price index shows changes in purchasing power
The Consumer Price Index for Urban Alaska is Alaska’s only measure of inflation. It’s based mostly on Anchorage, but it has ramifications statewide. The minimum wage is adjusted annually according to this index. Inflation also figures into bargaining agreements, wage negotiations, child support payments, and real estate contracts. (See the sidebar on the next page for more on how the CPI is used.)
In general, the CPI only shows change in costs in a single area over time, but it’s also useful for calculating change in the value of the dollar. It can help you track your purchasing power over time or figure out whether something was a better deal earlier. For example, in 2010, renting an apartment in Sitka was $1,132 a month on average. In 2019, the same apartment would have rented for $1,301. But while rent was lower in 2010, it wasn’t a better deal back then. In 2019 dollars, that apartment rented for $1,327 in 2010.
Try our inflation calculator at: https://live.laborstats.alaska.gov/cpi/calc.cfm.
Although the consumer price index can’t be used to compare costs between places, a range of other data sources are available for comparing Alaska to the nation and
Urban Alaska and U.S. metro inflation by category, 2009 to 2019
Year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ALL ITEMS
Urban AK % chg from previous yr
U.S. % chg from previous yr
1.2% 1.8% 3.2% 2.2% 3.1% 1.6% 0.5% 0.4% 0.5% 3.0% 1.4%
-0.4% 1.6% 3.2% 2.1% 1.5% 1.6% 0.1% 1.3% 2.1% 2.4% 1.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
HOUSING
3.7% 0.9% 2.9% 2.7% 3.1% 2.7% 2.4% 0.9% 0.3% 1.8% 1.2%
0.4% -0.4% 1.3% 1.6% 2.1% 2.6% 2.1% 2.5% 3.0% 2.9% 2.9%
FOOD AND BEVERAGES
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-0.2% -0.2% 3.6% 2.4% 0.4% 1.3% 1.7% -0.7% -0.05% 0.05% 2.7%
1.9% 0.8% 3.6% 2.6% 1.4% 2.3% 1.8% 0.3% 0.9% 1.4% 1.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CLOTHING
3.6% 3.0% 2.2% 4.3% 4.8% 1.5% 0.5% 2.6% 0.3% 2.0% -8.3%
1.0% -0.5% 2.2% 3.4% 0.9% 0.1% -1.3% 0.1% -0.3% 0.03% -1.3%
ALL ITEMS MINUS HOUSING
Year
Urban AK % chg from previous yr
U.S. % chg from previous yr
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0.6% 1.5% 3.4% 1.7% 3.0% 1.0% -0.3% 0.3% 1.1% 3.7% 1.9%
-1.0% 2.6% 4.0% 2.0% 1.1% 1.1% -1.3% 0.2% 1.5% 2.0% 1.0%
TRANSPORTATION
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-4.8% 4.4% 4.7% 2.0% 7.0% -0.6% -6.8% -1.7% 2.4% 7.0% 0.2%
-8.3% 7.9% 9.8% 2.3% 0% -0.7% -7.8% -2.1% 3.4% 4.5% -0.3%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MEDICAL CARE
4.3% 5.7% 5.3% 4.3% 3.2% 3.2% 3.3% 4.5% 1.5% 7.6% 6.6%
3.2% 3.4% 3.0% 3.7% 2.5% 2.4% 2.6% 3.8% 2.5% 2.0% 2.8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ENERGY
-7.8% 3.5% 10.8% 1.1% -2.7% 2.4% -10.3% -5.8% 12.3% 8.0% 1.5%
-18.4% 9.5% 15.4% 0.9% -0.7% -0.3% -16.7% -6.6% 7.9% 7.5% -2.1%
Source: U.S. Department of Labor, Bureau of Labor Statistics
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 5
Two ways to measure the cost of living
1. In one place over time (inflation)
Alaska has a single measure to track inflation, or how much prices have changed: the Consumer Price Index for Urban Alaska.
Although there’s a national consumer price index and CPIs for 31 cities and larger areas around the country, these only track costs over time in a single area and can’t be used to compare costs between areas. For example, 2019’s index for Alaska was 228.676, and the national index was 255.657. This doesn’t mean the cost of living in the U.S. was higher; it just means prices have increased a bit faster in the nation as a whole since the early 1980s than they have in Alaska cities.
The U.S. Bureau of Labor Statistics produces the CPI through elaborate surveys of consumer spending habits. These surveys cover a “market basket” of common items, to which BLS assigns location-specific “weights” to determine how people spend their money. (The pie chart on the previous page shows Alaska households’ typical expenditures in 2019.) The categories include housing, food, transportation, medical care, and entertainment. In most categories, Alaska’s weights tend to resemble the national values, but recreation is an exception. The average American spends less than 6 percent on recreation, and the average Alaskan spends more than 7 percent.
The inflation rate is also used to adjust the value of the dollar over time. Workers, unions, and employers watch the CPI because bargaining agreements and other wage rate negotiations often incorporate an adjustment for inflation. The CPI also plays a role in long-term real estate rental contracts, annual adjustments to the state’s minimum wage, child support
payments, and budgeting. The Alaska Permanent Fund Corporation uses the CPI to inflation-proof the fund, and senior citizens are affected nearly every year because Social Security payments are adjusted using the CPI.
The bureau produces the CPI for Urban Alaska bimonthly (in February, April, June, August, October, and December) as well as annually and semiannually.
2. In different places at the same time
The other way to assess the cost of living is to compare costs between two or more places. For example, is it more expensive to live in Portland or Dillingham?
While measuring inflation has a single source, a range of sources are available for contrasting costs between areas. These sources have varying degrees of reliability and different methods, so it’s important to take their strengths and weaknesses into account. Some rely on random private individuals to enter prices for various goods and services in their communities and then automatically generate a cost-of-living index, while others use rigorous, broad-based, and transparent statistical methods. A good solution is to use multiple sources and look for patterns.
Other sources that aren’t even marketed as cost-of-living measures can shed light on price differences, too. One is the U.S. Census Bureau’s annual American Community Survey, which includes the median value of a home and median gross rental cost data for every community in the country. Because of the small sample sizes and large margins of error for many places, the five-year average is recommended when using the ACS.
Calculating consumer price index change
Index changes in an index are usually expressed as percents rather than index points, because points are affected by the level of the index in relation to its base period. Here’s how to compute both types of change:.
Index point change
CPI for Urban Alaska 2019.....228.676 Minus CPI for 2018.................225.545 Equals index point change............3.1
Percent change
Index point difference.............…….3.1 Divided by 2018 index...........225.545 Times 100 equals % chg.............1.4%
communities to each other, and the rest of this article will focus on those comparisons.
For more on the two broad ways to measure the cost of living, see the sidebar above.
Where Alaska’s largest communities stand nationally
One important source for comparisons between places is the cost-of-living index the Council for Community and Economic Research, or C2ER, puts out each quarter and annually. This survey, whose results start with the table on the next page, covers more than 250 cities, including three in Alaska:
6 JULY 2020 ALASKA ECONOMIC TRENDS MAGAZINE
How Alaska cities compared to other cities in early 2020*
LOWEST HIGHEST
Category’s weight in total index
Total Index Groceries Housing
100.0% 13.89% 27.53%
TransUtilities portation
9.55% 9.20%
U.S. average
100.0
100.0 100.0
100.0
100.0
Region and city
Anchorage, AK Fairbanks, AK Juneau, AK
124.4 127.9 132.9
132.6 123.7 139.2
134.7 110.8 155.1
127.2 217.9 135.3
111.9 116.7 131.4
West Portland, OR Honolulu, HI San Francisco, CA Los Angeles-Long Beach, CA Reno, NV Seattle, WA Spokane, WA Boise, ID Bozeman, MT Laramie, WY Salt Lake City, UT
134.3 197.6 194.7 146.6 112.8 156.7 104.9 100.1 108.2 90.5 100.5
113.3 169.3 132.7 113.0 113.9 129.4 96.2
95.5 103.5 106.2
99.3
184.2 334.2 355.3 228.6 121.1 234.7 101.7
98.3 131.9 79.3 104.3
88.6 199.4 139.3 107.7 85.2 109.6
97.7 83.1 86.3 86.5 89.2
133.2 146.6 142.3 133.6 130.4 138.8 108.7 104.1
90.7 80.0 113.2
Southwest/Mountain Phoenix, AZ Denver, CO Colorado Springs, CO Dallas, TX Houston, TX McAllen, TX Midland, TX Oklahoma City, OK
100.9 111.1 102.9 107.6 95.6 75.2 98.9 85.8
94.9 94.2 96.8 101.4 88.4 82.8 91.9 89.3
114.6 135.2 104.7 116.6
87.1 55.4 91.1 69.8
107.0 79.3 97.8 107.3 112.0 101.8 99.7 94.3
100.6 107.0 109.2 95.3 96.7 90.3 98.3 88.6
Midwest Cleveland, OH Peoria, IL Minneapolis, MN Sioux City, IA
95.9 88.6 105.7 88.8
105.0 94.7
103.3 92.0
82.6 75.4 102.5 65.9
92.8 97.6 97.0 111.0
101.1 101.9 102.0
91.4
Southeast Alexandria, VA Fort Lauderdale, FL Miami, FL Birmingham, AL Atlanta, GA New Orleans, LA
140.0 113.0 117.1 91.4 99.9 111.1
126.8 105.0 111.0 88.5 103.2 100.3
225.0 149.6 149.2 76.5 96.2 137.3
96.9 101.1 101.1 102.7 84.5 75.6
107.8 109.8 111.9
97.2 103.1 103.2
Atlantic/New England New York City (Manhattan), NY Boston, MA Pittsburgh, PA Hartford, CT
245.7 148.8 102.9 115.8
144.0 110.7 109.5 109.1
553.2 219.6 102.8 112.5
100.3 121.9 114.7 126.9
128.5 113.9 120.0 111.6
*Based on professional households with earnings in the top quintile, first quarter 2020 Source: The Council for Community and Economic Research
Health care
4.31%
Misc 35.52%
100.0 100.0
143.5 155.0 152.8
113.4 118.3 110.5
117.9 118.7 124.0 109.6 116.9 128.7 115.4 100.4 93.8 93.7 100.4
118.5 125.1 131.5 114.4 108.3 127.6 110.6 106.9 103.8 96.4
97.7
87.2 100.0 104.9 110.5
94.6 69.6 94.7 96.2
92.6 109.9 103.5 106.1 100.5
77.3 108.1
92.7
109.8 91.7
104.1 98.1
100.4 90.2 112.6 97.4
101.6 99.6 99.1 91.1 103.3 115.1
104.0 93.4
102.3 99.6
104.3 106.1
109.4 122.9
93.1 104.1
133.2 128.3
94.0 120.4
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 7
Note: From C2ER’s first quarter 2020 survey
Sources: The Council for Community and Economic Research; and Alaska Department of Labor and Workforce Development, Research and Analysis Section
Anchorage, Fairbanks, and Juneau.
C2ER designed a typical consumption pattern based on professional households with incomes in the top 20 percent. The survey tracks costs for 57 items in categories such as groceries, housing, utilities, transportation, health care, and miscellaneous goods and services. (The illustration above shows some of those items and how much they cost in Alaska, plus the high and low cities and national averages.) From this sample, C2ER sets the average U.S. city’s costs at 100.
Like every source, C2ER has a few major drawbacks.
Its “weights” — how much of their income people typically spend in each category — differ from the consumer price index and are far less detailed. It also doesn’t account for state or local taxes, which is a major omission for some places.
The costs of living in Juneau, Fairbanks, and Anchorage were well above the national average in the first quarter of 2020. Juneau’s index was highest at 132.9, or 32.9 percent above the national average, followed by Fairbanks at 127.9 and Anchorage at 124.4.
Alaskans’ expenditures were higher than average
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The most expensive cities in the U.S. in early 2020
City U.S. average
Index 100.0
1 New York (Manhattan), NY
245.7
2 Honolulu, HI
197.6
3 San Francisco, CA
194.7
4 New York (Brooklyn), NY
180.5
5 Washington, DC
160.7
6 Seattle, WA
156.7
7 Oakland, CA
153.9
8 Arlington, VA
150.5
9 Orange County, CA
150.2
10 Boston, MA
148.8
11 New York (Queens), NY
147.8
12 Los Angeles-Long Beach, CA
146.6
13 Bethesda-Gaithersburg-Frederick, MD 145.5
14 San Diego, CA
141.1
15 Alexandria, VA
140.0
16 Stamford, CT
136.4
17 Portland, OR
134.3
18 Juneau, AK
132.9
19 Fairbanks, AK
127.9
20 Bergen-Passaic, NJ
126.6
21 Anchorage, AK
124.4
22 Sacramento, CA
123.5
Source: The Council for Community and Economic Research
in every category. Fairbanks’ utility index of 217.9 remains the highest in the nation, followed by Hilo, Hawaii, at 199.4.
Although Alaska’s costs remain high, a growing number of U.S. cities’ costs have overtaken Alaska’s, and that list gets longer each year. In 2000, when C2ER surveyed more than 300 cities, just five were more expensive than Alaska cities. By early 2020, it was 17 (shown above). Juneau fell to 18th place and Anchorage to 21st — both record lows.
Nearly all of these high-cost cities are metropolitan areas with populations larger than the entire state of Alaska. Most are concentrated in California and the boroughs of New York City, although Seattle’s costs were also high, placing it sixth. Manhattan topped the list in early 2020 at 245.7. The lowestcost city was McAllen, Texas, at 75.2.
Alaska’s health care costs high by multiple measures
When it comes to health care costs, Alaska’s are
Costs of living in Anchorage, Seattle continue to diverge
Anchorage Seattle U.S. average=100
141 108
136 111
128 120
120 117
125 123
140 132
157 124
1986
1990
1995
2005
2010
2015
2020
Source: The Council for Community and Economic Research
Public health care premiums* in 2020
State U.S. average
Avg monthly premium
$442
1 Wyoming 2 Alaska 3 Nebraska 4 Vermont 5 Iowa 6 West Virginia 7 New York 8 South Dakota 9 Connecticut 10 Oklahoma
$875 $698 $667 $645 $636 $619 $588 $588 $547 $527
*Silver tier premium care insurance for a 40-year-old under the Affordable Care Act
Source: The Henry J. Kaiser Family Foundation
typically among the highest in the nation. C2ER ranked Alaska’s three cities at the top for expensive health care in the first quarter of 2020.
Another way to look at medical costs is the typical health insurance premium through the public marketplace. The table above shows Alaska’s average premium via the Affordable Care Act was secondhighest for 2020, at $698 per month, after Wyoming ($875). The national average was $442.
ALASKA ECONOMIC TRENDS MAGAZINE JULY 2020 9
Alaska had the sixth-highest costs in 2019 ... maybe
A number of sources base their products on C2ER’s data. Each year, the Missouri Economic Research and Information Center publishes a cost-of-living series by state that averages the indexes of the participating cities. This index’s accuracy is questionable because it doesn’t apply any weight by city size, but it might be useful in some cases.
In 2020, Alaska ranked sixth among the highestcost states at 128.4, or about 28 percent above average U.S. costs. That represents Anchorage, Juneau, and Fairbanks, which are home to about 57 percent of the state’s population.
The military’s index compares Alaska towns to U.S. average
The U.S. Department of Defense produces a
How the military ranks the cost of living
City U.S. average
Index 100
Bethel
150
Utqiagvik
144
Nome
144
Petersburg
144
Wainwright
144
Sitka
140
Valdez
140
Cordova
138
Juneau
138
Spuce Cape
138
Unalaska
138
Homer (includes Anchor Point)
134
Kenai (inlcudes Soldotna)
134
Ketchikan
134
King Salmon (incl Bristol Bay Borough) 134
Tok
132
Seward
130
Eielson AFB (Fairbanks)
128
Kodiak
128
Clear AFS
126
College
126
Fort Wainwright (Fairbanks)
126
Anchorage (inc. Eagle River)
124
Delta Junction
124
Wasilla
122
Source: OCONUS, effective May 16, 2020
States with the highest cost of living in 2020
State U.S. average
Index 100.0
1 Hawaii 2 New York 3 California 4 Oregon 5 Massachusetts 6 Alaska 7 Maryland 8 Connecticut 9 New Jersey 10 Rhode Island
197.6 153.9 142.7 134.3 129.7 128.4 128.0 124.2 122.4 118.6
Sources: Missouri Economic Research and Information Center; and The Council for Community and Economic Research
cost-of-living index called Outside Continental United States Overseas, or OCONUS, for all of its “overseas” locations, which include Alaska and Hawaii. OCONUS’s strengths are its broad geographic coverage and frequent updates.
For the most part, OCONUS lines up with the other data sources in this article, but one major difference is it’s based on spendable income rather than total income. OCONUS doesn’t factor in housing, because the military deals with housing through a separate allowance program.
With OCONUS’s index set at 100 for the average U.S. city, Alaska’s communities ranged from a low of 122 in Wasilla to a high of 150 in Bethel in early 2020.
An average house cost just $264,638 in Fairbanks last year
For tracking housing costs in Alaska, we publish detailed rent and sales data each year in cooperation with the Alaska Housing Finance Corporation.
In the first quarter of 2020, Fairbanks’ single-family houses cost the least, on average, and the average home was the most expensive in Juneau.
Over the years, Fairbanks and the Kenai Peninsula Borough have typically had the least expensive houses, and Matanuska-Susitna Borough homes have often fallen below the statewide average as well. For many years, more than half of the state’s new homes were built in Mat-Su, even though only
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