The odds of Gov. Mike Dunleavy mentioning the unemployment rate in his State of the State speech tonight are about as good as that of him saying “Alaska is Open for Business.”

“Record low unemployment numbers for much of 2019 confirms Alaska has a prosperous future ahead,” Dunleavy said in a press release this week. He makes some version of that statement in almost every public appearance.

What the governor is unlikely to mention in his speech is that one reason for the declining rate is a significant decline in the size of the labor force, which makes the percentage misleading.

“More than 15,400 people have dropped out of Alaska’s labor force since November 2011. People leave the labor force for a number of reasons, including retirement, leaving the state, going to school, caring for family members, or giving up on finding work,” Lennon Weller, a state economist in Juneau, wrote last fall in the handy state publication Alaska Economic Trends.

“The point is that the unemployment rate only tells part of the story; its components are just as important. In Alaska’s case, a shrinking labor force and relatively fewer people engaging in the labor force for multiple reasons, some of which aren’t yet clear, suggests we should be cautious about assuming the declining unemployment rate is a positive sign,” Weller wrote.

The governor is not at all cautious in making assumptions about the declining unemployment rate.

The jobless rate would be higher than the 6.1 percent recorded in December, except the Alaska labor force that was about 367,000 in 2011 has transformed into a labor force of about 351,000 in 2020.

Total nonfarm employment was 315,200 in December, up by 1,900 from a year earlier.

The labor force decline since 2011 is made up of 10,045 fewer people working and 5,389 fewer people looking for work, according to state calculations.

The unemployment rate has dropped more than a full percentage point since 2011, aided by this drop in the number of people working and/or looking for work.

“Given the decrease in the size of the labor force, this suggests people who lost their jobs have been more likely to simply leave the labor force altogether than to look for new jobs in Alaska,” Weller wrote.

The aging population is one reason for the decline in labor force participation, but Alaska also has fewer middle-age workers, ages 45-54, and fewer teenage workers.

More workers ages 55-64 are working longer, “making up for some loss in the younger groups, and particularly the middle-aged,” Weller wrote.

“But working older can only go so far, so this buffer isn’t sustainable. In the not-too-distant future, this mitigating factor will disappear and, if nothing else changes, the labor force participation rate will fall even lower.”

In another recent analysis of unemployment rates, Economist Mouhcine Guettabi of the Institute of Social and Economic Research said the share of people in Alaska ages 16 and above who are employed or looking for work has dropped from 75 percent in 1999 to 65 percent in 2018.

“These declines in labor force participation rates make changes in the unemployment rate misleading as declines in the unemployment rate are influenced not only by increases in the number of people who are employed but also by the—denominator—total number of people in the labor force,” Guettabi wrote.

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