Recession... What Recession? Alaska entrepreneurs continue to launch businesses

By Nolan Klouda, CED Executive Director

 CED Executive Director Nolan Klouda discusses entrepreneurship in Alaska with Senator Mia Costello.

CED Executive Director Nolan Klouda discusses entrepreneurship in Alaska with Senator Mia Costello.

January in Alaska means gaining daylight, Hawaiian vacations, and economic forecasts.

To the latter end, I was in Juneau last week adding my voice to the Senate Labor and Commerce Committee’s panel on the state economy. (Available here, my portions are at 39 minutes and one hour 19 minutes.) It was a fun experience, and being on the panel gave me a chance to organize my thoughts on the current state of the economy, and which direction it’s heading. I was asked specifically to speak to the role of entrepreneurship in the Alaska economy.

Based on our preliminary number crunching, 2017 was a good year for entrepreneurs in the state. Over 1,000 employer businesses started (firms with at least one employee other than the owner), and these new businesses hired about 4,600 Alaskans. Both the number of new firms and the jobs created by them actually increased in 2017 over 2016. Since the state lost jobs in 2016 and 2017, it’s welcome--and surprising--news that entrepreneurs are still launching businesses and hiring.

New Firms by Year in Alaska
 
Jobs Created by New Firms in Alaska

These two indicators, new employer firms and job creation, are some of my favorite metrics because they speak volumes about the importance of new firms. The estimate of 4,600 new jobs from startups in similar to the magnitude of job losses in 2016 and 2017, at 6,300 and 3,600 respectively. Without the resiliency of Alaska’s entrepreneurs, these employment drops would have been significantly worse.

Another useful signpost is the number of new business licenses sold by the state. These were also up for Fiscal Year 2017 over the year prior.

New Business Licenses Sold

Business license data is imperfect for a number of reasons. Not every license is associated with an active, operating firm. The database contains duplicate entries for the same firm and other errors. Still, it gives some sense of new business creation.

(If you’re wondering why there are so many more business licenses than employer firms, the biggest reason is the sheer number of nonemployer businesses, such as independent contractors, freelancers, and other businesses without employees. These typically outnumber employer businesses by a wide margin.)

The resiliency of entrepreneurs impresses me, especially in a time when the state economy faces so much uncertainty. It also convinces me that public investment in entrepreneurship can lead to serious payoffs and raise the general level of prosperity. I’m nervous about our state economy just like so many others, but this is an encouraging sign.