If it seemed prices rose again in 2023, well, they did. But then again, the pace of inflation in Alaska slowed to a more historically typical rate, state labor economists reported in the July issue of Alaska Economic Trends.
After two years of rapid price increases, urban Alaska prices rose about 1.5 % from the previous year while inflation nationally slowed, but not as dramatically, to 4.1 %. Still, prices went up 14 % between 2019, before the COVID-19 pandemic, and 2023, wrote Gunnar Schultz — an economist with the Alaska Department of Labor and Workforce Development.
Over the previous few years, the Consumer Price Index (CPI) for Urban Alaska recorded its only year of deflation since at least 1962, followed by the two highest years of inflation in decades. Between 2019 and 2023, prices increased 27% for most for transportation and other goods and services, followed by 17% for medical care, 10% for housing, 8% for recreation, and 2% for clothes. Prices for education and communication, meanwhile, fell about 1% from 2019 to 2023.
Schultz calculated that the cumulative increase in prices over the last four years was on par with the eight years before that, from 2011 through 2019. That period, especially 2015 to 2017 when the state was in a recession precipitated by plunging oil prices, contained some of the state’s lowest years of inflation on record, he said.
To reach these conclusions state economists measured the cost of living in one area over time and between areas at the same time.
The CPI for Urban Alaska is the state’s only official measure of how prices change over time. Alaska’s CPI tracks changes of price levels of a “market basket” of goods and services for the average consumer through surveys of consumer expenditure patterns and prices collected in Anchorage and the Mat-Su Borough.
The inflation rate, or price change between two periods, is calculated as a percent change in the index. CPIs for many cities are published by the U.S. Bureau of Labor statistics but these cannot be used to compare costs between area because each one is indexed to process at a specific time in a given place.
Another way to calculate the cost of living is by comparing costs between two or more place at a given time. When prices are indexed to a base area rather than a time, the resulting index allows comparisons across areas, although not over time. Such indexes are often called price differentials and differences between places are calculated as the percent difference between their index values. Schultz notes that while inflation has a single source in Alaska, multiple sources are available to compare costs across areas. Many sources only cover some parts of the state, and each comes with its own methods, so it is important to consider the strengths and weaknesses.
One solution is to look for patterns in multiple sources, he said.
Schultz also noted that while cities in Alaska are more expensive than most, they don’t come close to the highest-cost cities in the Lower 48, mainly in large metropolitan areas on the east and west coasts and Hawai’i.
The Council for Community and Economic Research produces quarterly and annual cost-of-living indexes that compare the costs for a fixed standard of living in hundreds of cities, including Anchorage, Fairbanks and Juneau. Of 276 participating cities, the three in Alaska ranked 18th, 21st and 24th for their overall costs, behind places including New York City, Washington D.C., Boston, Seattle, the San Francisco Bay area, Southern California and Honolulu.
