Legislature(2021 - 2022)BARNES 124
02/26/2021 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Informational Hearing on Pandemic-related Job Losses & Rebuilding Alaska's Economy | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 26, 2021
3:18 p.m.
MEMBERS PRESENT
Representative Zack Fields, Co-Chair (via teleconference)
Representative Ivy Spohnholz, Co-Chair (via teleconference)
Representative Calvin Schrage (via teleconference)
Representative Liz Snyder (via teleconference)
Representative David Nelson (via teleconference)
Representative James Kaufman (via teleconference)
MEMBERS ABSENT
Representative Ken McCarty
COMMITTEE CALENDAR
PRESENTATION(S): INFORMATIONAL HEARING ON PANDEMIC-RELATED JOB
LOSSES & REBUILDING ALASKA'S ECONOMY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN ROBINSON, Chief, Labor Research and Analysis
Research and Analysis Section
Department of Labor and Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
titled "The Employment Impact of COVID-19 and Alaska's
Underlying Economic Health," dated 2/26/21.
NEAL FRIED, Economist
Research and Analysis Section
Department of Labor and Workforce Development (DLWD)
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
titled "The Employment Impact of COVID-19 and Alaska's
Underlying Economic Health," dated 2/26/21.
NOLAN KLOUDA, Executive Director
Center for Economic Development (CED)
Business Enterprise Institute
University of Alaska Anchorage
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation titled
"COVID-19, Households, and Businesses," dated 2/26/21.
MOUHCINE GUETTABI, PhD, Associate Professor of Economics
Institute of Social and Economic Research (ISER)
University of Alaska Anchorage (UAA)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation titled
"COVID-19 and the Alaska economy," dated 2/26/21.
ACTION NARRATIVE
3:17:34 PM
CO-CHAIR IVY SPOHNHOLZ called the House Labor and Commerce
Standing Committee meeting to order at 3:18 p.m.
Representatives Nelson, Kaufman, Snyder, Fields, and Spohnholz
were present (via teleconference) at the call to order.
Representative Schrage arrived (via teleconference) as the
meeting was in progress.
^PRESENTATION(s): Informational Hearing on Pandemic-Related Job
Losses & Rebuilding Alaska's Economy
3:18:59 PM
CO-CHAIR SPOHNHOLZ announced that the only order of business
would be three informational presentations on pandemic-related
job losses and rebuilding Alaska's economy.
3:19:40 PM
DAN ROBINSON, Chief, Labor Research and Analysis, Research and
Analysis Section, Department of Labor and Workforce Development
(DLWD), co-provided the PowerPoint presentation titled "The
Employment Impact of COVID-19 and Alaska's Underlying Economic
Health," dated 2/26/21 [hard copy included in the committee
packet]. He displayed slide 1 and drew attention to his
section's monthly publication, "Alaska Economic Trends." He
explained that two-thirds of the section's task is to produce
data: job numbers, wage data, population numbers, and
unemployment rates. The section also disseminates data and
trends and tries to guide people to the relevance of specific
points to give the data context. He further explained that
producing the data is especially relevant because it gives a
special sense of when the data has problems in precision and
when the data is especially good and helpful. The information
is provided objectively and with policy neutrality, he pointed
out. In addition to producing and disseminating the
information, he added, [staff] are available to answer questions
about it.
3:21:29 PM
NEAL FRIED, Economist, Research and Analysis Section, Department
of Labor and Workforce Development (DLWD), co-provided the
PowerPoint presentation titled "The Employment Impact of COVID-
19 and Alaska's Underlying Economic Health," dated 2/26/21 [hard
copy included in the committee packet]. He addressed the job
loss graph on slide 2 for 2012-2020, and stated that it is the
most important slide he will be showing. More than just last
year must be looked at, he advised. A lot of the next three or
four years is being defined not just by what happened last year
but also by what's been happening during the last decade. The
preliminary estimate, he reported, is that in 2020 Alaska lost
about 28,000 jobs, or 8 percent. That is the largest number of
jobs Alaska has ever lost in any recession. On a percent basis
it is close to the 1980s, and this recession is not quite over
yet; the department's expectation is to at least lose jobs for
the next two or three months of 2021.
MR. FRIED remained on slide 2 and said it's important to talk
about recovery. He explained that when talking about recovery
in most places in the nation as a whole, they are talking about
recovering what they lost in 2020, and when they do that, they
will reach a new record high of employment. That isn't going to
happen to Alaska, he advised, because Alaska has had a different
experience - Alaska has lost employment in four out of the last
10 years. When those losses are added together, including the
slight rebound in 2019, it pushes Alaska back to the levels of
employment that it had in 2003 and 2004. This is because from
2012-2015 the growth was very modest. When talking about
recovery, he continued, full recovery would be reaching the high
that Alaska had in 2015, and this is going to take significantly
longer than the rest of the country.
3:24:16 PM
MR. FRIED discussed the 2020 job losses by industry as portrayed
on slide 3. He noted that almost every industry in Alaska lost
ground in 2020, with the exception of the federal government
because the census was taking place, which is now gone. He
reported that the biggest loser both on a percent basis and in
absolute jobs was leisure and hospitality, which got slaughtered
because of social distancing. Hotels lost about 50 percent of
their employment; the largest sector was eating and drinking,
which lost about 25 percent. Transportation had huge loses
because of the visitor sector, he added. He related that retail
was another big loser given social distancing, but retail in
Alaska had already been losing ground for many years to e-
commerce. The pandemic accelerated the biggest ever jump in e-
commerce in the U.S. and was no exception in Alaska. That's
unlikely to change, he continued, and the retail industry is
unlikely to ever recover. Looking at these numbers on a percent
basis, he pointed out that oil would be number two in its
losses. Health care hasn't fully recovered yet, he said, but
light can be seen at the end of tunnel. However, that isn't the
case for the other industries.
MR. FRIED moved to slide 4 and examined the 2020 job losses by
geography. He stated that if the geography seen on this slide
were to be broken into boroughs and census areas, the
differences would be even more dramatic. He said Southeast
Alaska was the most seriously hit during COVID-19 for several
reasons: social distancing, the reluctance of local consumers
to engage in the economy, the cruise industry, and a terrible
fishing season. Southwest Alaska was hurt the least, he noted.
Comprised of the Aleutian Islands and the Bristol Bay region,
Southwest Alaska had a good fishing season from a volume
standpoint, and it doesn't have big leisure and hospitality or
visitor sectors. He reported that almost all the losses of the
Northern Alaska region are tied to the oil sector. This area is
comprised of the North Slope Borough, Nome census area, and the
Fairbanks North Star Borough. He related that Gulf Coast Alaska
is comprised of the Kenai Peninsula, Kodiak, Valdez, and
Cordova. The Gulf Coast region has a diverse economy and got
hit hard with the visitors and consumers sectors. The
Fairbanks, Anchorage, Alaska, and Mat-Su regions, he continued,
were affected in a similar way, with some differences.
3:28:32 PM
MR. FRIED reviewed Alaska employment by month over the last few
years, as depicted on slide 5. He said the timing of this
COVID-19 was really bad for Alaska because Alaska has the most
seasonal economy in the U.S., with this seasonality happening
during late spring, summer, and early fall. The visitor sector
is the biggest, but there is also construction, and fish
processing. He noted that while almost all sectors add to
Alaska's seasonality, the only counter-cyclical sectors are
education, local government, and the university. The timing of
the COVID-19 hit Alaska especially hard, he continued, but the
losses stayed significant all year long. Alaska was still
losing 8-9 percent of its jobs in December [2020] compared to
December [2019] and seasonality is a big factor.
MR. FRIED brought attention to slide 6, titled "We've never lost
as many jobs in a year." He said the graph of Alaska's long-
term employment change from 1970-2020 helps explain the
challenge that Alaska has in the future. This challenge didn't
just start with COVID-19; it has been for a while, he pointed
out. The size of this recession added together with the
recession of just a couple years ago is bigger than anything
Alaska has seen in the past. More important is that after
previous recessions Alaska had strong growth, but that is very
unlikely this time around for a number of reasons. Although the
base was smaller, the growth was 6 or 7 percent a year during
the 1970s, he said. Though there was then a giant crash, the
growth in the 1980s was still 3 percent a year. Growth in the
1990s was close to 2 percent a year and in 2010 it was a little
over 1 percent. Over this last decade, he continued, Alaska's
employment has declined by 1 percent a year on average. That is
why moving out of this and forward will be more difficult.
3:31:32 PM
MR. FRIED spoke to the graph on slide 7 of oil and gas
employment from 2014-2020. He noted that the highest paid jobs
in Alaska's economy are in the oil and gas sector. He specified
that the overall peak in oil and gas employment in Alaska's
history was in 2015, from 2016-2018 it dropped during the
recession, then it began to recover a little bit, and then
Alaska got hit hard again and no positives have yet been seen in
those numbers. The good news is that oil is at $66 per barrel
now, but that isn't showing up in the employment sector.
MR. FRIED displayed slide 8 titled "Our 2021 forecast is for a
recovery of about a third of the jobs lost in 2020." He then
turned to slide 9 depicting the details of the department's
official forecast for 2021. He noted the department forecasts
Southeast Alaska, Anchorage, and Fairbanks.
3:32:57 PM
MR. ROBINSON continued on slide 9. He urged committee members
to ask questions, request data, or suggest articles for the
"Alaska Economic Trends" publication. He stated that while the
department is policy neutral, good and reliable data is a key
part of making good policy decisions.
MR. ROBINSON moved to slide 10 and noted that the Research and
Analysis Section performs the actuarial function for the
unemployment insurance system. The section tracks the funding
in the Alaska Unemployment Insurance Trust Fund and, using auto-
mechanisms, calculates the tax rates to make sure the state can
meet its obligation to pay these claims to people who meet the
criteria. He pointed out that the unemployment rate for Alaska
has been an unreliable economic measure during the COVID-19
pandemic, and the section thinks it knows why. The department
works with the federal Bureau of Labor Statistics to produce
that number, but the section's ability to change the way it is
produced is almost nonexistent. So, the section is trying to
alert people that the unemployment rate is not very useful right
now and not nearly as accurate or reliable as an economic
measure as job numbers and these claims numbers. It is known
with a fair amount of precision how many people are out of work,
or at least a subset of them, by this claims data.
MR. ROBINSON continued on slide 10. He noted that before COVID-
19 the highest ever number of claims in a week was about 22,000
[in January 2011]. He explained that these big data sets don't
change by large numbers and they don't change quickly, so that's
why the highest number during the pandemic of 52,000 [in April
2020] reinforces that this is unprecedented. This number of
temporarily unemployed people is off the charts, and required
that the charts be adjusted. As of February [2021], he related,
the number of unemployment claims is about 19,000, more than
twice what it was a year ago [9,161]. He noted that some extra
programs, including the Pandemic Unemployment Assistance,
provide benefits to people who aren't covered by the normal
unemployment insurance system, such as self-employed and gig
workers who don't pay into the unemployment insurance system.
3:36:49 PM
MR. ROBINSON showed slide 11 and related that an article in the
[February 2021] issue of "Alaska Economic Trends" examines where
Alaska's economy stood pre-COVID-19. He noted that there is now
good news of declining hospitalizations, case rates, and deaths.
MR. ROBINSON turned to slide 12 and examined a data set that the
department thinks merits attention. He explained that the graph
represents domestic net migration, or movement from state to
state, over the five years prior to COVID-19 (2014-2019). The
graph is per 1,000 in population so that legitimate comparisons
can be made across states. Net migration is the number of
people who moved into a state minus the number who left. He
reported that the net migration for Alaska per 1,000 people was
a loss of 60. So, with a population of around 730,000, Alaska
lost approximately 50,000 people. Mr. Robinson said the states
that gained population have things in common - warm weather,
western location, and especially strong job growth. He pointed
out that job growth produces economic vitality as well as
population growth. He further pointed out that states that are
attracting people, that are appealing, and that people perceive
as having a strong future don't lose population, which the
department thinks is quite important.
MR. ROBINSON displayed slide 13 and elaborated further regarding
the number of people moving to and away from Alaska every year.
Drawing attention to the graph, he reported that Alaska has had
seven consecutive years of negative net migration. Before this
period Alaska never had more than three years. Historically,
Alaska has attracted more people than it has driven away.
Alaska has strong migration flows in and out - it has the most
seasonality of all states and it has the largest gross migration
flows of all states. He specified that in 2013 about 52,000
people moved out of Alaska and about 50,000 moved into Alaska.
In 2020, fewer people left Alaska [44,674], he continued. What
has changed the most is that significantly fewer people have
moved to Alaska each year during that time period. Therefore,
it is more of a decline in people coming to Alaska than an
increase of people leaving Alaska.
3:41:54 PM
MR. ROBINSON talked about the commonalities between Alaska and
the other states losing people to migration, as outlined on
slide 14. He said one commonality is heavy dependence on oil
and gas or coal. Wyoming has oil, gas, and coal; West Virginia
has primarily coal; Louisiana has oil and gas; and New Mexico
has oil and gas. He related that another commonality is budget
deficits that are not just temporary shortfalls but larger
imbalances. Illinois has long had legendary budget problems and
its bond ratings are very bad. Wyoming has a state sales tax
and historically has had lots of resource tax money. Wyoming,
like Alaska, has some big changes to make with how to fund state
government. He specified that the third commonality is weak job
growth. Wyoming, West Virginia, Louisiana, Connecticut, and
Kansas have had noticeably weaker job growth than other states,
which is one reason why they have had negative net migration.
Idaho and Utah had the strongest job growth over the five years
pre-COVID-19.
MR. ROBINSON displayed slide 15 and reviewed quotes from the
department's closing paragraphs in the aforementioned article.
He explained that a part of these quotes come from an article
written going into [Alaska's] recession of 2015. At that time,
the department looked at all the states that had recessions over
the years, particularly those states that had had a stagnant
economy, a lingering recession, to see what were the possible
causes. One thing identified then, and important to look at
now, is Alaska's budget situation. He advised that Alaskans
should not despair because Alaska has a lot to offer the
national and world economic markets, such as world-class
fisheries, tourism, mineral wealth, oil and gas, relevance and
importance of the military, and the Arctic. He further advised
that while some of these metrics look a little dark, it should
not be thought that Alaska's long-term economic future is bleak.
The idea that "unusually" some of what will drive Alaska's
economic health is within Alaska's control is important. "Lots
of things happen to us," Mr. Robinson continued. Alaska doesn't
have a lot of say in oil prices, commodities markets, tourism,
or COVID-19. Alaska is going to struggle economically until the
state's structural budget deficit is resolved until the
challenges of the permanent fund, oil taxes, and new types of
taxes like state income and sales tax are resolved. Economies
don't like uncertainty and institutions struggle with
uncertainty, he explained. That is the point the department
made in 2015 and again in this February 2021 issue "Let's pay
attention to that as an economic issue 'unusually' within our
control." He offered to answer questions from the committee.
3:46:11 PM
REPRESENTATIVE SNYDER inquired whether the graph depicting
Alaska's job loss on slide 6 reflects data on people who had to
leave the workforce because they had to care for kids at home.
MR. ROBINSON replied that DLWD doesn't have much information on
why people left the workforce. But, he said, national surveys
are trying to determine what is happening; one new to this
COVID-19 period is called the "Current Population Survey." Some
of the data shows that parents broadly, and women in particular,
have left the labor force. There is concern about whether they
will come back given the closure of the childcare system. This
can't be quantified, he continued, but in looking at the data
and the industries that have lost jobs it is thought that what
can mostly be seen is the impact of COVID-19. It is yet
undetermined whether they will take back their jobs when COVID-
19 is over.
3:48:43 PM
REPRESENTATIVE SCHRAGE addressed slide 14 regarding the issues
that Alaska has in common with other states losing people to
migration. He asked whether any of these other states, or other
countries with these issues, have had success addressing them
currently or historically.
MR. ROBINSON responded that through this period it is a bit too
current to say they have succeeded. Illinois, possibly Wyoming,
had a big vote specific to their budget situation and both are
still working on it and have not resolved it, so they are still
roughly in the same situation as Alaska. The job growth waxes
and wanes, he said, and Alaska has had some historical periods
of strong growth as seen in some of the graphs. "Much of that
is out of our control," he continued, although doing things
right, such as infrastructure, can impact it. He related that
both Wyoming and North Dakota have had worse job numbers than
Alaska over the last five years. In aggregate they were both
growing a little stronger than Alaska was, so they bounced out
of their hard period a little stronger than Alaska has.
3:50:45 PM
CO-CHAIR SPOHNHOLZ said the job losses by industry as depicted
on slide 3 make sense to her. She asked how many of the lost
jobs in local government were a result of COVID-19 or a result
of other kinds of revenue loss.
MR. FRIED offered his belief that most of the local government
job losses were tied to closures of local schools, not the loss
of revenues to local governments, although there may be a lag
for that. For example, he said, the Anchorage School District
has been largely closed during this period but has kept most of
its employees, except for the very large group of substitute
teachers. He knows of this happening in other districts, he
added, and other districts may have lain off part of their
workforce during their closures or while operating remotely.
CO-CHAIR SPOHNHOLZ turned to slide 10 and requested elaboration
in regard to the unemployment rate being described as an
unreliable economic measure.
MR. ROBINSON answered that in the best of times Alaska's
unemployment rate gets smoothed a lot. He explained that there
are decisions to be made in the model, and while the department
gives a lot of encouragement to its federal partners to make
changes, they don't always do so. One reason is because the
unemployment rate has to be roughly consistent methodologically
across states since so much funding is distributed based on the
unemployment rate. He advised that going into this COVID-19
period the Current Population Survey, a household survey, has
had a lot of problems nationally and even more so in Alaska.
The survey is producing numbers that are on their face
problematic, he said, one example being way fewer unemployed
people than the number of people filing for unemployment
insurance benefits. There are some conceptual reasons why that
could be partly true, he continued, but Alaska's unemployment
rate jumped unusually so early on in the COVID-19 period, Alaska
was unusually high, and then it dropped unexplainably and was at
5.8 percent through December [2020]. He said that's way too low
than either the jobs numbers or the claims numbers would
support, and those two data sets are for a number of reasons
just more reliable.
3:54:07 PM
CO-CHAIR SPOHNHOLZ requested further clarification as to why
some people would be unemployed but not filing for unemployment.
MR. ROBINSON replied it's typical that a subset of people who
are unemployed doesn't file for unemployment insurance. One
reason is they think, correctly or incorrectly, that they will
get a job again quickly. Another is because they plan to work
only seasonally. It's a little bit the opposite of what the co-
chair said, he pointed out. One reason it is known that this
data is not especially reliable is because more people are
filing for unemployment insurance than the unemployment rate
model produces as a count of unemployed - like twice as many in
one month. So, he continued, this household survey, and the way
this model is weighted, is not accurately capturing all the
unusual data movements that COVID-19 produced.
CO-CHAIR SPOHNHOLZ asked whether she is correct in understanding
Mr. Robinson to be saying that more people are filing for
unemployment than are actually eligible.
MR. ROBINSON responded no. He explained it's not unusual for
more people to file than are eligible because they're not sure
if they are eligible; so he is not saying there is fraud. Some
changes were made to the unemployment insurance criteria, he
noted; for example, a work search requirement that to get
unemployment insurance benefits a person had to be actively
seeking work. That requirement, he continued, was temporarily
suspended because of COVID-19, schooling from home, and
childcare being closed. People were unemployed and not actively
seeking work because COVID-19 made that impractical or unfair.
So, he said, there were more people filing for unemployment
insurance than conceptually fit the definition of being
unemployed, which has that key element that it isn't enough to
not be working, a person has to also be seeking work to be
counted as unemployed in this model that produces the
unemployment rate.
3:56:40 PM
CO-CHAIR SPOHNHOLZ recounted that the work search requirement
was suspended last year under House Bill 308, a bill advanced by
the committee. She said the committee recognized that people
would need unemployment but wouldn't be able to look for work
because there wouldn't be a job to look for. She pointed out
that it can be difficult to measure unemployment because there
are many people, such as gig workers and contractors, who work
but aren't eligible for unemployment because they don't pay into
the unemployment insurance fund and therefore aren't eligible to
claim unemployment.
MR. ROBINSON specified that they are included in this attempt to
count the number of unemployed that is used to calculate the
unemployment rate, but they are not eligible for unemployment
insurance. He related that during COVID-19 the Pandemic
Unemployment Assistance (PUA) made them eligible, as well as
some other programs to temporarily cover people who weren't
typically covered.
CO-CHAIR SPOHNHOLZ invited the next speaker, Mr. Klouda, to
begin his presentation.
3:58:16 PM
NOLAN KLOUDA, Executive Director, Center for Economic
Development (CED), Business Enterprise Institute, University of
Alaska Anchorage, provided a PowerPoint presentation titled
"COVID-19, Households, and Businesses," dated 2/26/21 [hard copy
included in the committee packet]. He displayed slide 2 and
stated he will be focusing on different aspects of the COVID-19
economy and the impacts on households, the loss of income,
housing and food insecurity, impacts on businesses, impacts of
the Paycheck Protection Program (PPP) and AK CARES grant
program, and impacts on entrepreneurship.
MR. KLOUDA skipped slide 3 and moved to slide 4 titled "Lower
paying sectors hit hardest." He explained that he grouped the
job sectors by the average monthly pay so that the lowest paid
sector is at the bottom of the graph and the highest paid sector
is at the top. He pointed out that the leisure and hospitality
sector is the lowest paid sector and had the most job losses.
This sector includes bars, restaurants, hotels, visitor
services, and services that require people to gather indoors.
He noted that the next hardest hit sector was retail, which is
also relatively low pay. Mr. Klouda specified that this depicts
an important trend, called the "K-shaped recovery," or that the
dynamic of this recession is falling pretty heavily on some
households, especially those that earn lower wages than those
that earn higher wages. This graph, he continued, is a way of
showing how that occurs as far as the sectors that have produced
the greatest job losses.
MR. KLOUDA addressed slide 5. He explained that this dataset is
from the U.S. Census Household Pulse Survey, which has taken a
sample from households in every state and asks how they are
doing in terms of employment, housing, healthcare, and other
attributes. This survey started out being taken weekly and then
every few weeks after that, so there has been a continuous
stream of information going back to May 2020. He reported that
[at this point] almost half of Alaskans in that survey say that
either they or a household member have experienced a loss of
employment income at some point since March 2020. This means
that either they themselves or someone else in their household
has lost their job, or seen a reduction in hours, or some other
type of reduction in pay. Since it is a survey there is a
margin of 1-3 percent, he noted, but this margin isn't enough to
change this percentage substantially.
4:02:43 PM
MR. KLOUDA explained that slide 6 is this same question depicted
in graph form according to household income. He pointed out
that for both Alaska and the U.S., the graph shows that lower
earning households are far more likely to have seen an income
disruption. Over 60 percent of Alaska households with less than
$25,000 in income experienced a disruption compared to just over
20 percent of households with $200,000 or more in income. This
is part of the issue that is seen of the lower earning
households getting much worse economic impacts from COVID-19.
MR. KLOUDA related that Slide 7 shows two points in time in
response to another survey question that asks, "Over the next
four weeks do you expect either yourself or someone in your
household to have a loss of employment income?" He specified
that while the percentage decreased over time from [32.7
percent] in May 2020 to [24.7 percent] in February 2021], it is
still a high number. So people are feeling slightly less
pessimistic about future income loss, he continued, which is
maybe a little bit of a sign of recovery in terms of what people
are saying in these surveys.
MR. KLOUDA discussed slide 8 titled "Food insecurity creeping up
in Alaska." He stated that the Food Bank of Alaska, along with
other relief agencies, have reported increased demand for their
services. This is supported by some of the data for food
insecurity, he continued, in that the number of people who said
there was "sometimes or often not enough to eat in our household
in the last seven days" nearly doubled from 6.5 percent in May
2020 to [12.8] percent in February 2021.
4:05:06 PM
MR. KLOUDA moved to slide 9 and related that 40,000 Alaskans,
roughly 10 percent of the adult respondents, said they are not
current on their rent or mortgage and another 60,000 said they
have "slight" or "no" confidence in their ability to make their
next payment. He stated that during this COVID-19 pandemic,
incomes in the U.S. have increased even though wage earnings
have gone down because transfer payments have compensated for
that. But that doesn't necessarily mean that all households get
the same amount of relief; households where no one lost their
job still received stimulus bill payments. So, it's not
necessarily helping all households equally, he continued,
although the unemployment relief has helped some of those who
were the most impacted.
MR. KLOUDA added that there seems to be a bit of a disconnect
given the housing market in Alaska was very strong in 2020 as
far as houses sold, and how that can co-exist when people say
they aren't secure in their housing situation. There is a lot
to this story that isn't completely known yet, he stated, but
one part of that story is that the segment of the population
that has done well has been able to take advantage of low
interest rates and so a lot of the activity in the housing
market seems to be at the mid and more expensive tiers, the
entry level houses haven't been up as much according to the
information he has obtained from the municipal assessor's office
in Anchorage. It isn't necessarily that more people are
becoming homeowners, he explained, so much as it is houses being
bought and sold among the existing population of homeowners.
MR. KLOUDA displayed slide 10 and reported that about 40 percent
of Alaskans, and about the same number nationally, have been
working remotely during this pandemic. He said prior census
data shows that about 5 percent of the population was regularly
or sometimes working remotely before COVID-19. He predicted
that once things return to normal there would be an increase
from pre-pandemic times in the number of people working from
home. He pointed out on the graph that working remotely is much
more possible for higher income households. A lot more of the
professional, business, and management sectors are able to work
remotely than the customer service or field work sectors. One
exception, he continued, is that it dips for Alaska households
that are making $200,000 or more. This could be accounted for
by the margin of error rate on these types of surveys, he
explained, but it could also be that many of the Alaskans
earning $200,000 or more are skilled trades people and workers
in oil and gas who don't do their work remotely.
4:09:44 PM
MR. KLOUDA turned to slide 11 titled "US business owners were
not optimistic at the outset." He said the source for this
graph is from a survey that came out in April 2020 it raised
many alarm bells and influenced much of the urgency for pandemic
relief and business relief. This survey asked about 6,000 U.S.
business owners by industry "what's your level of confidence
that you can avoid permanent closure if this pandemic crisis
lasts four months?" He reported that only 47 percent of these
business owners said they were pretty confident that they could
avoid permanently closing their doors. However, he pointed out,
only 30 percent of restaurants and bars, 35 percent of
retailers, and 40 percent of personal services such as beauty
and nail shops thought they could make it through four months.
This same survey also showed that the median business had
typically less than two months' worth of cash on hand. Back in
April 2020, he related, people like himself were pretty panicked
about what was going to happen and whether this would be an
extinction level event for businesses.
MR. KLOUDA addressed the question asked on slide 12, "How many
businesses have permanently closed due to COVID-19?" He stated
that while many businesses have closed either temporarily or
permanently and people have been laid off, the question is,
"What is the actual number?" He qualified that there isn't
fantastic data available about when a business closes because
there isn't always a clear flag that a business has closed. A
business might still exist in a legal sense even when it has
ceased to operate, or it might continue to employ one person or
the owner to close things up even after it isn't making any more
sales. He related that economist Robert Fairlie has a dataset
where he tracks this using the Current Population Survey, the
same survey talked about by Mr. Robertson and Mr. Fried that is
used for unemployment information. At the national level, Mr.
Fairlie found that after the pandemic started the number of
active business owners dropped by about 22 percent and then
recovered to about 6-8 percent fewer business owners than before
the pandemic took effect in February. That is a very concerning
number, he said, because behind that is a lot of job losses and
loss to community. However, he pointed out, it isn't as
horrendous as it could have been and that may have something to
do with the relief programs.
MR. KLOUDA explained that the data on slide 13 is from the U.S.
Census Small Business Pulse Survey [of 2/15-21, 2021]. He noted
that this survey of business owners is also being done
frequently. He related that about three-fourths of Alaska
businesses say they have had either a moderate or a large
impact, [21] percent say they haven't had much effect, and [4
percent] say they've had a positive effect from the pandemic.
He further related that a lot of studies have found that most of
the decline in business revenue is due to the pandemic and the
fear of infection more so than due to closures and mandates. An
important point, he said, is that it is much more about the fear
of getting the virus than it is about the mandates themselves.
That's not to say the mandates don't have an impact because they
certainly do, but most of it is due to the pandemic and those
conditions.
4:15:04 PM
MR. KLOUDA stated that slide 14 is an analysis done by CED on
the [percent of businesses/nonprofits receiving Paycheck
Protection Program (PPP) loans]. He said the Small Business
Administration releases detailed data periodically that allows
CED to analyze which parts of the state have received money,
which parts haven't, and what industries the money has gone to.
He noted that while there has been plenty of loan activity since
6/30/2020, he hasn't received any data that lets him parse it
for later time periods. He pointed out that Southcentral
Alaska, Interior Alaska, the Highway and Railbelt area,
Southeast Alaska, Coastal Alaska, and the Gulf Coast seem to get
the most loans. The bar graph represents the loans as a percent
of the number of local businesses in an area, he explained. He
further pointed out that a very small percent of the businesses
in the Yukon-Kuskokwim (YK) Delta, the Arctic, rural Interior,
and Western Alaska had received PPP loans at that point in time.
Those areas actually have fewer businesses per capita, he
continued, but even a smaller percentage of the businesses that
they do have obtained the loans; so there is a rural versus
Highway/Railbelt divide. He reported that the top four of the
boroughs and census areas for these loans were in Southeast
Alaska, which speaks largely to the poor fishing season as well
as a weak visitor season.
MR. KLOUDA specified that slide 15 depicts the percent of
businesses/nonprofits receiving grants from the AK CARES
program. He explained that this federal relief program came to
Alaska from [the 2020 Coronavirus Aid, Relief, and Economic
Security (CARES) Act], and just under $300 million of it was
allocated to grants for businesses and nonprofit organizations.
He explained that CED did the same kind of analysis on the
percent of businesses in each area that received a [grant]. He
reported that Bristol Bay Borough was number one, which was
largely driven by commercial fishermen who were eligible for
this funding. He noted that this program wasn't as concentrated
in the urban areas of Anchorage, Fairbanks, and Juneau; it got
to a lot of the Coastal and Railbelt adjacent areas. Again,
however, the Arctic, Kuskokwim, Western, and Interior rural
Alaska received the lowest proportions.
4:18:06 PM
MR. KLOUDA elaborated on the graphic of job losses by economic
region shown on slide 16. He said he included this graphic to
compare to the regions that received the most of those relief
programs. Southeast Alaska was hit the hardest with employment
loss, he stated, so it makes sense that Southeast Alaska would
be a larger recipient of some of those funds.
MR. KLOUDA spoke to slide 17, titled "Did Alaska get 'its share'
of PPP loans?" As of 6/30/20, he related, something like $1.2
billion came to Alaska through the federal PPP; more money has
come since then, he allowed, but he doesn't know the total
figure that has come to Alaska. He said the question asked of
him is whether Alaska has received a lot or a little compared to
other states or compared to the U.S. as a whole. By CED's
estimates, he related, Alaska did almost exactly the same as the
U.S. 14 percent - in terms of the total number of loans as a
percent of the total number of businesses and nonprofits in
Alaska. He further related that the average loan amount in
Alaska [$111,705] was a little bit higher than the U.S. average
[$106,746]; and the total loan amount on a per capita basis was
also a little bit higher [$1,692 for Alaska and $1,594 for
U.S.]. Overall, he summarized, Alaska did average compared to
other states.
MR. KLOUDA explained that the graph on slide 18 shows the weekly
new business starts in Alaska based on paperwork filed with the
Internal Revenue Service (IRS) from January 2020 to February
2021. Something seen during most recessions is that the number
of people starting businesses tends to increase, he said. It's
countercyclical to the economy overall and is largely a reaction
to a poor labor market, some portion of those who are unemployed
decide to create their own job. Nationally the number of people
starting businesses has gone up very considerably in 2020, he
continued, but in Alaska it is a little bit more ambiguous and
has trended both up and down. The important point here is that
the new businesses getting started have a lot of potential of
being future job creators, he specified. Work done by CED a few
years ago showed that most of the net private sector employment
growth in Alaska is due to new businesses being started more so
than to existing businesses expanding, he said in conclusion.
4:21:59 PM
REPRESENTATIVE SCHRAGE asked whether the loan amount comparisons
between Alaska and the rest of the U.S. depicted on slide 17 are
adjusted for the higher cost of living in Alaska and the effect
that might have on residents.
MR. KLOUDA replied that it is purely the total dollar amount
divided by the number of people in Alaska and the U.S. The loan
amount was slightly higher, he stated, which in itself may
reflect that the cost of business is a bit higher because the
loan amount was somewhat based on operating costs, especially
payroll, which might translate into a bit higher loan amount and
that might translate into a higher amount per capita.
REPRESENTATIVE SCHRAGE offered his understanding that there may
be an indirect adjustment in the loan dollars received as a
result of higher operating costs in Alaska, but there is not a
direct adjustment. He further understood that more of a delta
might be seen between Alaska and the U.S. on average if it were
looked at with cost of living directly factored in.
MR. KLOUDA responded correct, no direct adjustment made, but it
probably does indirectly reflect those factors.
REPRESENTATIVE SCHRAGE, in regard to slide 18, asked how long
the lag period tends to be between when a new business starts up
or a license issued, and the increased availability of jobs is
actually seen.
MR. KLOUDA answered that it varies quite a bit given some would
be owner/operator businesses and some would be businesses
planning to scale up to hundreds of employees in the future.
For those businesses that end up employing people, he said, it
often ends up being a period of a year or two before the first
employee. Typically, the first five years or so is the time
period when businesses will see very fast growth in the number
of people they employ.
4:25:15 PM
REPRESENTATIVE SNYDER thanked Mr. Klouda for addressing food
insecurity as related to the pandemic. She stated that the
numbers on slide 8 differ a bit from the numbers reported
elsewhere. The discrepancies are important to note, she said,
given [the state's] emergency declaration is expired, and
impacts are anticipated to the [federal] Supplemental Nutrition
Assistance Program (SNAP). She calculated that the 13 percent
depicted on slide 8 would equate to about 95,000 people in
Alaska. She related that according to Feeding America, one the
nation's largest hunger organizations, the number is closer to
125,000 or 17 percent, a difference of about 30,000. She
explained she is flagging this difference for future discussions
about impacts and potential responses. She invited Mr. Klouda
to respond.
MR. KLOUDA pointed out that a question could be asked, or food
insecurity defined in a lot of different ways in a survey, and
each one is valid in its own different way. There is a spectrum
of need, he continued, that is hard to capture in the type of
survey data he is presenting.
4:27:13 PM
CO-CHAIR SPOHNHOLZ stated that the food insecurity numbers
shared by Mr. Klouda and Representative Snyder are concerning.
She related that the Food Bank of Alaska has seen about a 43
percent increase in need for services this year, which is very
concerning. She recalled Mr. Klouda's figure of 40,000 people
not current on their rent or mortgage and 60,000 who are not
confident in their ability to make their next payment. She
pointed out that about $300 million in rental and utility
assistance relief is available to Alaskans, which includes funds
that went to the Municipality of Anchorage, Alaska Housing
Financing Corporation (AHFC), and tribal organizations across
the state. Applications are being coordinated centrally, she
explained, and to qualify an applicant must be 80 percent or
lower of median area income and have been impacted by COVID-19.
She directed people to the website alaskahousingrelief.org for
determining their eligibility. She related that AHFC believes
that everybody who applies will receive some funds, and eligible
recipients can get up to 12 months in relief with an option to
extend up to three more months after that.
CO-CHAIR SPOHNHOLZ invited the next speaker, Mr. Guettabi, to
provide his presentation.
4:29:42 PM
MOUHCINE GUETTABI, PhD, Associate Professor of Economics,
Institute of Social and Economic Research (ISER), University of
Alaska Anchorage (UAA), provided a PowerPoint presentation
titled "COVID-19 and the Alaska economy," dated 2/26/21 [hard
copy included in the committee packet]. He displayed slide 2
and explained he would focus on his June 2020 forecast that
tries to chart the path for Alaska for the next couple of years.
He said he would also discuss things that are potentially worth
keeping in mind as committee members think about big policy
questions over the next few months.
DR. GUETTABI drew attention to slide 3 and said clicking on the
words written in blue would take members to his detailed
forecast that has lots of information he won't be able to get to
today. He noted he would not address all 41 slides in his
presentation so that there would be time for questions.
DR. GUETTABI moved to slide 4 and highlighted that his forecast
is an employment based monthly forecast by sector. He said the
forecast relied on a host of datasets created over the last
year/year-and-a-half that included spending, foot traffic, and
survey data, as well as assumptions about the number of tourists
in 2021, what would happen to oil prices, and the scale of
federal aid. Making forecasts in the midst of a pandemic is
challenging and has value, he stated, but the forecast has many
assumptions in a world that is rapidly changing.
4:32:20 PM
DR. GUETTABI said slide 5 outlines where he sees Alaska going.
Alaska was in a low growth environment pre-COVID-19, he
specified, and during Alaska's big recession from 2015-2018 some
11,000 jobs were lost. Alaska then had fairly modest growth in
2019. He related that his forecast for 2020 pre-pandemic was
calling for 0.7 percent growth, which is fairly modest. The
Department of Labor and Workforce Development (DLWD) was calling
for about 0.4 percent growth. That was the environment in which
Alaska walked into the pandemic, he said. He is fairly
confident that Alaska will see growth in 2021 and 2022, he
continued, but it is important to note that Alaska will be
starting from a very, very low level of employment. This means
that under even fairly rosy assumptions he doesn't see Alaska
coming back to pre-pandemic levels at the end of 2022, rather
Alaska will be somewhere close to 95 percent of pre-pandemic
levels by the end of 2022. Those pre-pandemic levels were
already fairly low because of that 2015-2018 recession, he
added. That paints a picture of the weak labor market that
Alaska has had to deal with. He urged committee members to
remember that the path for the recovery depends largely on: 1)
the epidemiological curve, meaning the vaccination rate and what
happens with the virus, and 2) the policy front, meaning how big
the federal package ends up being and whether the state decides
to inject money into the economy, help communities, and help
businesses.
DR. GUETTABI spoke to slide 6. He said his June 2020 forecast
anticipated that Alaska would end 2020 with about 7.5 percent
lower employment than in 2019, and the most recent DLWD numbers
show Alaska to be 7.5-8.0 percent lower than the previous year.
He reiterated that he thinks there will be growth in 2021 and
2022, but that it's going to be fairly low growth. He cautioned
that some sectors are going to look like they are growing really
fast, like leisure and hospitality, but said it's because they
are coming from a really low base. He advised using year-over-
year numbers, meaning compare March to March, in order to get a
sense of where things are. He warned that if month-to-month is
used, the growth rates are going to look fantastic and give a
misleading picture of what is going on.
4:35:56 PM
DR. GUETTABI turned to slide 7 and urged committee members to
remember that it is as bad as it is despite the significant
amount of federal aid that has been injected into Alaska's
economy. He related that the data on slide 7 is from the U.S.
Bureau of Economic Analysis and shows that personal income
actually increased between the first and second quarters of
2020, with personal income being the sum of [personal income,
transfer receipts, and property income]. He pointed out that on
a macro or aggregate basis the amount of transfers injected
dwarfed the amount of losses from earnings. But, he cautioned,
just because there is more money in the system now than before
does not mean that there aren't pockets of the economy, sectors,
regions, individuals, households that are struggling. It's
important to remember, he continued, that absent this aid things
would have been considerably worse. He stated that this
"doesn't say there's too much money in the system, it says we
should not remove money from the system too quickly because this
has allowed us to maintain some semblance of stability and we
should try and ideally do as much as possible to stabilize
economic activity."
DR. GUETTABI brought attention to slide 8 and noted it is [the
dollar change in personal income and select components in Alaska
for 2020] for the first to second quarter and the difference
between the third quarter and the second quarter. He explained
the graph shows that the expiration of many of the federal
programs resulted in transfer receipts when comparing the third
and second quarter to decline; then net earnings started going
up because of some reopening and some rehiring, but the increase
in earnings did not offset the decline in transfer receipts.
DR. GUETTABI advised committee members to think about two things
when looking at a slide like slide 8. First, he said, at a very
macro level there is a lot of money. People lucky enough to
keep their jobs have much higher savings rates than in the past,
most of the expenditures have moved away from services toward
goods. Hopefully, when most people have been vaccinated and the
economy reopened, there will be pent-up demand and opportunity
to spend money. Second, he continued, there still is a need for
considerable amount of aid because the increase in earnings is
fairly modest, many people are still unemployed, and the labor
market is weak. There are few economic catalysts, meaning that
in looking across sectors it's very hard to identify the source
of economic growth without assistance because Alaska's engines
of growth have been badly damaged and are contingent on external
forces that the state can't exactly control.
4:39:56 PM
DR. GUETTABI said the graph on slide 9 compares employment by
sector between Alaska and the rest of the U.S. Alaska, he
stressed, is much more similar to the rest of the country than
it is given credit for, meaning Alaska's economy from an
employment perspective is much more diversified, but revenues
are a different story. Alaska has some differences that are
important, he continued, but from an employment perspective the
economy has changed quite a bit and resembles the "average"
economy in the U.S.
DR. GUETTABI explained that slide 10 takes the numbers from
slide 9 and shows where Alaska has a higher concentration of
jobs when compared to the rest of the U.S. He said Alaska has
six times as many jobs in mining and oil and gas than the rest
of the U.S. As well, Alaska has considerably more jobs in
fishing. He noted that this is about structure of the Alaska
economy and stated that economic structure is important to think
about when forecasting and giving thought to a catalyst for
coming out of the recession and what the sectors are of the
future.
DR. GUETTABI explained that the graph on slide 11 depicts wage
and salary employment [in 2002, 2010, and 2019]; it ignores
anyone who is self-employed or who doesn't receive a W-2. He
said jobs were good between 2002 and 2010, but that he thinks of
the time period from 2010 to 2019 as a lost decade in terms of
growth because Alaska only gained about 6,000 jobs after
accounting for the losses due to the state's oil recession.
4:42:56 PM
DR. GUETTABI continued to slide 12, a decomposition [of
employment by sector in 2002, 2010, and 2019]. He said the
decomposition is important to understand before starting to
think about the pandemic. First, he stated, most people think
of Alaska as an oil state, which it is; but oil jobs directly do
not dominate. Oil and gas is connected to many other sectors in
the economy, but the vast majority of jobs are in healthcare,
retail, leisure and hospitality, and in local government.
Second, he continued, when looking at the year 2019 it can be
seen that most of the growth over the last 10 years or so came
from healthcare and leisure and hospitality, and most of the
other sectors were either flat or negative.
DR. GUETTABI addressed slide 13 depicting growth rate by sector
during 2002-2010 and during 2010-2019. He stated that slide 13
is an ugly slide, but intentionally so. He pointed out that
between 2010 and 2019 there are a lot of negatives, and where
there are positives, they are fairly small. That tells that the
economy was struggling, he said, which is important background
when thinking about tools that should be implemented to fix the
economy or to ensure that "Alaska 2.0" is strong and can attract
business and can attract talent. He noted that slide 13
concludes the background information.
DR. GUETTABI specified that slide 14 lists the big assumptions
that were made to produce the forecast that was released in June
[2020]. Regarding the first assumption [that the federal
government will continue to provide financial assistance], he
noted that at that time there were discussions about whether
there would be a second federal assistance program, which there
was and now there is talk about a third. Regarding the second
assumption, he said he used the Department of Revenue's oil
price forecast [that showed oil prices will remain low but
stable for the next two years]. He related that oil prices have
been trending up over the last few weeks, so as of today oil
prices are a bit higher than what he had assumed them to be.
However, he advised, even though oil prices have been ticking
up, jobs have not been coming back along with them. Regarding
the third and perhaps most important assumption, Dr. Guettabi
said he assumed there would be no big secondary closures in
which the economy comes to a halt. Regarding his fourth
assumption that there would be normalization, or near
normalization, of travel in 2021, he said there is now a
headwind because currently the tourism season is in jeopardy
given the potential cancelation of cruises. He explained that
these underlying assumptions comprise this economic model that
has historical relationships and also has within it the shocks.
To the extent that things have changed since the forecast, which
they have, since he was not anticipating that Alaska would miss
out on a second tourism season, those would be headwinds that
would drive down the forecast or be considered a downside risk.
4:47:13 PM
DR. GUETTABI spoke to slide 15 regarding the percentage change
in total nonfarm employment year over year using December data
from the U.S. Bureau of Labor Statistics for the years 1960-
2020. He noted the black lines are the other U.S. states and
the orange line is Alaska. He drew attention to the year 2020
at the far right side of the graph and pointed out that this is
a nationwide phenomenon; Alaska is not unique in struggling with
employment losses as a result of the pandemic. Employment in
Alaska and the rest of the U.S., he said, dropped in a hockey
stick shaped decline, but Alaska wasn't the worst hit state.
DR. GUETTABI moved to slide 16 and expounded further on how
Alaska compares to the other states. He said the magenta bar
represents Alaska in this graph, which uses the December data to
depict employment loss [in each state between 2019 and 2020].
Relative to the previous years, he reported, Alaska's employment
data in December was 6.5 percent below last year's December
data. This is slightly different than the Alaska Department of
Labor and Workforce Development data, he noted, but this is
harmonized with the rest of the country and still makes the
point that some states have lost more jobs, and some have lost
fewer jobs. He explained that this would look slightly
different if June data was used because Alaska is much more
seasonal, which is what really complicates this recovery.
DR. GUETTABI showed slide 17 and elaborated on how seasonality
complicates Alaska's recovery. He said the graph, which uses
2019 data, shows Alaska's seasonality in relation to the rest of
the U.S. The faint grey lines represent the other states, he
explained; the orange line represents Alaska and is employment
in every month relative to January. The orange line shows that
Alaska's employment absolutely balloons over the summer, he
pointed out, with employment in June being 15 percent higher
than January. Most states don't get anywhere close to that, he
continued, so that's one source of concern for Alaska businesses
and for Alaska employment, and why it's potentially dangerous if
some of these businesses end up missing out on what is almost 29
months of business.
DR. GUETTABI turned to slide 18 and compared the actual and the
forecasted employment by sector in 2020. He noted that when the
forecast was released, half of 2020 was real data and so he
forecasted the second half of 2020. Given the information that
was had at the time, his overall forecast comes fairly close to
what was seen in 2020. He said he was concerned about his local
government numbers, and while they held up well, he doesn't know
if that will continue. Additionally, his numbers for oil and
gas were optimistic, but jobs just kept being lost. He pointed
out that healthcare saw a big drop but is now close to pre-
pandemic levels. Healthcare is the only sector where he can see
a recovery, he continued. Everything else is still on shaky
ground even though construction has done okay thus far.
4:51:23 PM
DR. GUETTABI reviewed his employment forecast on slide 19 for
2021 and 2022, which is depicted in percent growth rates by
sector. He explained that the category labeled "All" represents
the Alaska economy statewide as a whole, and he sees 2 percent
growth next year contingent on his aforementioned assumptions.
He said he has yet to update the numbers because it is unknown
what the tourism season is going to look like. If it ends up
being as bad as it's currently looking, then his forecast is
probably too optimistic and will need to be scaled back. He
drew attention to retail and leisure and hospitality, the two
sectors he shows leading in terms of growth rate. He explained
that this isn't because suddenly things are going to be
fantastic, but rather because the base of employment is so
incredibly low. Therefore they are going to be seeing big
growth rates, but they aren't going to be anywhere close to pre-
pandemic levels even if things play out as he anticipates them
to look.
DR. GUETTABI discussed his wage and salary forecast depicted on
slide 20. He said Alaska has a bump in total wages and salaries
during the summer that is seen in basically every sector's
forecast. In his opinion, he continued, this bump is going to
be much more muted, meaning normalization of employment may
start to be seen in the non-summer months. He cautioned that
there are big questions about the summer bump and how robust it
will be on the back end of this, given there are big question
marks about appetite for travel, number of businesses that have
survived, and can money be captured from tourists.
DR. GUETTABI continued to slide 21. He noted that his forecast
for the leisure and hospitality sector doesn't anticipate
another bad season of tourism, yet the forecast is for a fairly
muted summer employment bump. His forecast anticipates an
improvement, he explained, but not as big of a bump as in
previous years because under the best of circumstances Alaska
isn't going to get back to those record levels of tourists.
Even if Alaska had gotten a good season, he continued, it's
unlikely that every single person that would have traveled would
have come and would have spent in the same way. He further
explained that even though there are people who are financially
healthy, the financial health of the consumer isn't fully
understood because of the mortgage moratoriums and programs that
are making a lot of the data very hard to interpret and, when
there are surveys, they are based on very small numbers.
4:54:46 PM
DR. GUETTABI noted that the improvement in air travel shown on
slide 22 is for the same day of week, same month, relative to
the previous year. As of January, Alaska was hovering at about
40 percent of last year's levels, he reported. While clearly
much better than where Alaska was in April, it's still much
lower than the numbers to which Alaska is accustomed. He said
he is showing this because one of the hopes is that even with a
delayed or with a canceled cruise season, maybe people will
change modes of transportation, but leisure travel isn't going
to be at the levels to which Alaska is accustomed.
DR. GUETTABI drew attention to the original summary of leisure
and hospitality detailed on slide 23. He said there are big
question marks, and in developing the forecast he tried his best
to be transparent about where are the land mines, where are the
headwinds, where are the tailwinds, and to what is the forecast
sensitive. He stated he is a regional economist by training and
always tells people that this is a statewide forecast. He
specified that: no two industries have been affected in the
same manner; yes, every industry has been affected; and no two
parts of the state have been affected in the same way. Tourism-
dependent communities are losing out on bed taxes and sales
taxes. The amount and type of aid that different communities
are going to need is going to be different, he advised.
Different sectors are feeling this to a different extent, and
that variation is important. Healthcare is essentially back, he
continued, but leisure and hospitality will not be back to its
pre-pandemic level for years.
DR. GUETTABI said slide 24 shows that the healthcare sector has
bounced back fairly and is looking like it will be close to pre-
pandemic levels in the next few months, as his forecast had
anticipated. He stated that he does not anticipate very fast
growth out of this sector, but it is a bright spot in terms of
employment. The economy has a complicated relationship with
healthcare, he explained, because it is not a basic sector and
doesn't sell anything to other states.
DR. GUETTABI skipped slide 25 and addressed slide 26 regarding
different paths for different sectors. He reiterated that the
type or the amount of aid that different places need is going to
be different. He related that much of the conversation over the
last few months has centered on targeting and whether the
targeting should be done by income, by region, or by need.
Those are important and difficult questions, he said. He
offered his opinion that targeting is expediency of getting
dollars in the hands that need them versus efficiency or making
sure of using the scarce dollars properly. He stated that it
was never a V shaped recovery for Alaska, nor for the U.S. At
best, he predicted, it will be a "Nike swoosh" of a gradual
recovery with continuous momentum.
4:58:59 PM
DR. GUETTABI skipped slide 27 and went on to slide 28 regarding
policy and the different horizons that need to be considered.
He said the questions outlined on the slide are the ones he
thinks will be the most important ones. He explained that
slides 28, 29, and 30 show different ways of trying to stabilize
the economy. He said he thinks the economy is going to need
stabilization and assistance, but the form of assistance is a
question mark that legislators will need to figure out.
4:59:53 PM
REPRESENTATIVE KAUFMAN commented that the solutions seem to be
about aid, but earlier in the presentation he heard that there
are the COVID-19 impacts and the seasonality problem that is
also impacted by that. He stated that in an economy there are
wealth originators, the things that create the wealth that
trickles down. Regarding the slide that shows oil does not
dominate the economy and there are other jobs, he asserted that
oil is key in injecting capital into the economy. Many people
are paying for goods and services with resource derived
paychecks that enable them to have healthcare and to live in
Alaska, he noted. He asked what Dr. Guettabi sees within the
seasonality problem and Alaska's resources to reduce the
seasonality of jobs and have more people with year-round
resource development or farming jobs that produce or originate
prosperity.
DR. GUETTABI replied that he agrees the oil and gas sector
contributes to the economy through other things aside from jobs.
In terms of changing the Alaska economy or making it less
dependent on seasonality, he advised that that requires some
structural changes. Alaska's biggest problem is leakage, he
stated, meaning a lot of value gets generated in Alaska but a
lot of it leaves Alaska, whether through oil and gas, fishing,
non-resident employment, or supply chains that are in other
states. So that is a big structural question. In the meantime,
he continued, when he talks about aid, what he doesn't want to
see happen is the Alaska economy to be considerably weaker on
the back end of this pandemic. For example, aid is about
mitigating business failure. He would like to see as many
businesses make it through the pandemic so that when tourists
come back and when the oil and gas industry starts hiring again,
people have places to spend money and Alaska has a robust
economy that can attract labor and attract capital. He said he
thinks he and Representative Kaufman agree, but he is concerned
about the amount of damage that can be done if businesses are
left to fail or parts of the state feel the brunt of these
losses because a thriving economy is wanted on the backend of
this pandemic and right now there is a lot of weakness. When
looking at the data, he related, it is really hard to see where
the organic growth comes from.
REPRESENTATIVE KAUFMAN remarked that doing all of the above
would be managing the transition, managing the change. Alaska
has had a stagnant economy for years, he said. He posited that
if the impact created by COVID-19 is managed in the near-term
and then if in the mid-term investment was attracted by opening
up opportunities, then that would help accelerate because the
capital will be attracted and the mere attraction of that will
bring a positive economic impact.
DR. GUETTABI responded that it is about time horizons and it is
correct that there are the immediate concerns and then making
Alaska as attractive as possible should be a goal in order to
have that organic growth post-pandemic.
5:05:32 PM
REPRESENTATIVE SCHRAGE recalled Dr. Guettabi referencing the
decreased confidence in the economy and the tendency for people
to put more of their money into savings. He asked what role do
economic stability and business confidence play in getting some
of that money being put into savings back into the Alaska
economy and flowing.
DR. GUETTABI answered that he did an analysis a few years ago on
the effects of economic uncertainty, which can be crippling to
economic activity. He explained that when people don't know
whether they will have a job in six months, they put individual-
level investments on pause. Business investments are also put
on pause. Anybody thinking about moving to Alaska or investing
in Alaska will question that decision. He said he doesn't have
the numbers in front of him, but in his paper, he tried to
quantify the effect of uncertainty and he can say that
uncertainty results in millions of dollars of losses through
these missed opportunities because businesses are less likely to
hire, and individuals are less likely to spend money. He
advised that the sooner there is fiscal stability the sooner it
is known what the world looks like in the future, and the sooner
that unleashes capital at the individual level and at the firm
level. Minimizing uncertainty really pays off, he continued,
because every economic player cares about it and doesn't like
it. Doing things to minimize uncertainty means fixing the
budget and knowing what is being done to potentially assist the
economy or recovery. The faster that is done and the more
transparent the better the economy will be for it. He offered
to provide members with his paper in which he comes up with
numbers to quantify the effect of economic uncertainty.
REPRESENTATIVE SCHRAGE said he would love to see the paper. He
asked whether Dr. Guettabi has recommendations on whether there
is anything particular to the pandemic that legislators can do
this year to address some of the uncertainty and business
confidence. He further asked whether a bigger factor with
business certainty or uncertainty is more healthcare and control
of the virus.
DR. GUETTABI replied it's important. He posed an example of a
business that is at the margin trying to decide whether to close
its doors. He advised that clarity about whether there will be
assistance and how much and how the assistance will be
distributed will certainly make a difference. In terms of
confidence from a health perspective, he said the safer Alaska
can make it for people to come to the state the more likely
people are to choose Alaska. He pointed out that all the
beautiful places around the world are now marketing themselves
as the safest place on the planet in order to draw passengers.
He added that clarity in terms of aid or assistance, and
doubling down on safety when thinking about the summer season,
are investments that have fairly high return on investment.
5:11:17 PM
CO-CHAIR SPOHNHOLZ thanked the presenters. She noted that
committee members are trying to understand the impacts of COVID-
19 on Alaska's economy, where to go from here, and what
responses the legislature needs to undertake this year to help
Alaska's economy get back on step.
5:12:30 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DoL Presentation, 2.26.21.pdf |
HL&C 2/26/2021 3:15:00 PM |
|
| ISER Presentation, 2.26.21 .pdf |
HL&C 2/26/2021 3:15:00 PM |
|
| CED Presentation, 2.26.21.pdf |
HL&C 2/26/2021 3:15:00 PM |