Government.

State employment data, as a proxy for measuring the level of government activity in Alaska's economy, finds 2006 should mirror the trends of recent years--moderate growth.

On the federal civilian side, employment may actually decline slightly in 2006. This is not because of a sudden retrenchment of the federal government's role in Alaska's economy, but instead comes as a result of the continued privatization of some federal activities--particularly those tied to the military. In contrast to federal civilian employment, the number of uniformed military personnel in Alaska should climb for the third year in a row. Most of the gains will be tied to the U.S. Army's new airborne brigade that began arriving in 2005 at Fort Richardson in Anchorage and the coming of a new Army aviation task force at Fort Wainwright in Fairbanks.

This represents a dramatic turnaround from the outlook of just four months ago when the state was looking at the possibility of steep cuts in its military presence. Given the demands on the U.S. military in the world today, however, there will likely be more volatility in the number of military personnel in Alaska than there has been over most of the previous decade.

The federal dollar juggernaut that began in 1998 should continue through this next year. The most recent figures that exist are for 2003, but there is little doubt these numbers will remain impressive through calendar year 2006.

Very high oil prices are good news at both the state and local government levels. Although state government employment, including the University of Alaska system, only grew slightly in 2005-less than 100and will probably grow moderately again in 2006, the state's finances are on firmer ground. This strong fiscal picture also bodes well for local government. In 2005, strong state finances translated into significant increases in local education funding; another significant increase is being proposed for 2006. This should mean school district employment will continue to sustain current levels or could even grow slightly. Many local communities have been struggling in recent years, but a new proposed revenue-sharing program could help shore up the finances of these communities around the state.

Bottom line: Government's role in Alaska's economy should remain healthy in 2006.

Neal Fried, Alaska State Labor Economist