Legislature(2021 - 2022)SENATE FINANCE 532
03/31/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska's Economy | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 31, 2021
9:03 a.m.
9:03:04 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:03 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson (via teleconference)
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
Senator Natasha von Imhof
ALSO PRESENT
Dan Robinson, Chief of Research and Analysis, Department of
Labor and Workforce Development.
PRESENT VIA TELECONFERENCE
Mouchine Guettabi, Associate Professor of Economics,
Institute of Social & Economic Research, University of
Alaska.
SUMMARY
^PRESENTATION: ALASKA'S ECONOMY
9:03:24 AM
Co-Chair Stedman relayed that the committee would broadly
discuss the issue of COVID-19 and its effects on the
economy.
9:04:21 AM
MOUCHINE GUETTABI, ASSOCIATE PROFESSOR OF ECONOMICS,
INSTITUTE OF SOCIAL & ECONOMIC RESEARCH, UNIVERSITY OF
ALASKA (via teleconference), discussed the presentation
"COVID-19 and the Alaska economy" (copy on file).
Mr. Guettabi stated he would discuss broad economic effects
of the COVID-19 pandemic.
Mr. Guettabi looked at slide 2, "Outline":
What do we know about the current state of the
economy?
Employment
Personal Income
Gross Domestic Product
What do we know about the Federal Aid and its
impact(s)?
Direct Aid to households by round
Spending
How many jobs has PPP saved?
9:05:44 AM
Mr. Guettabi spoke to slide 3, "Summary":
The pandemic related job losses are still
significant. In February 2021, there were 22,400
fewer jobs than in February 2020.
The job losses vary by region, income group, sector,
and even within sector. In my forecast, I detail my
analysis on the sector specific effects of the
pandemic.
While the job losses have been significant, personal
income has actually increased in 2020. This is
largely due to the significant transfers from the
Federal government. Personal income was 1.4 billion
dollars higher than in 2019.
Gross Domestic Product decreased by 2.6 billion
dollars or 4.9% between 2019 and 2020.
Mr. Guettabi noted that slide 3 summarized some findings
before the presentation went into greater detail in
forthcoming slides. He summarized that the labor market was
considerably weaker than it was one year previously. He
emphasized the second bullet point, and that there was
great variation in "economic pain" between groups. He noted
that the slide showed links in blue that would lead to
detailed economic forecasts.
Mr. Guettabi emphasized that personal income in 2020 was
higher in every state in the country because federal
transfers dwarfed losses observed in the labor market. He
noted that gross domestic product (GDP) declines were in
every sector.
Mr. Guettabi referenced slide 4, "Summary":
It is near-impossible to isolate the effects of the
individual transfers and assistance programs.
We do, however, have findings from research on the
effect of the stimulus payments, and on the Payment
Protection Program.
There are many aspects of the third round of
stimulus that have yet to enter the Alaska economy.
Mr. Guettabi had heard from a previous committee meeting
that there was interest in economic effects of specific
programs. He qualified that even those with access to
granular data had problems with isolating the effects of
individual transfers and assistance programs implemented in
the previous year. He thought most of the funding from the
third round of stimulus payments had not made its way into
the economy.
9:10:24 AM
Mr. Guettabi turned to slide 5, "Percentage change in
employment by sector in Alaska," which showed a series of
fourteen graphs showing changes in employment by sector
relative to the same month the previous year. He summarized
that the Covid-related recession had wreaked havoc on every
sector of the economy. He highlighted that the 'Leisure and
Hospitality' graph showed significant job shedding in that
sector. He noted that the oil and gas sector had also shed
a considerable number of jobs. He cited an almost 4,000-job
decrease in oil and gas jobs from the same time the
previous year. The only sector that saw improvement and
approaching pre-Covid levels was 'Educational and Health
Services,' which he attributed mostly to healthcare.
Mr. Guettabi continued to address slide 5. He expressed
that in some sectors, in may seem that the declines were
getting smaller. He thought it was important to note that
Alaska's economy was very seasonal, and during the summer
there were typically 15 percent more jobs. He noted that
job losses were larger over the summer, and then looked
smaller after the summer season. He thought job losses
would balloon again in sectors that were sensitive to
tourism. He explained that when looking at just employment,
it was hard to see signs of recovery in the labor market.
Senator Wilson asked if Mr. Guettabi could explain the
difference between government, state government, and
federal government services as shown on the slide.
Mr. Guettabi affirmed that the 'Government' was the sum of
federal, state, and local governments. He explained that he
combined the groups to show how governments were behaving
as a group.
9:14:41 AM
Mr. Guettabi considered slide 6, "Regional employment,"
which showed a series of six graphs showing the percentage
change in employment by region. The slide used information
from the Department of Labor and Workforce Development
(DLWD). He noted that there was variation in job declines
in different areas. He pointed out that the apparent
decline in job loss in Southeast was disingenuous because
it merely reflected a change in season. He reiterated that
job losses would grow again if another tourism season was
missed due to the pandemic.
Mr. Guettabi noted that even within region, there was
significant variation. He used the example of the North
Slope and the Northwest Arctic Borough, the former of which
had fared much worse. The numbers were aggregate but
reflected what industries existed in the communities and
how much exposure the industries had to the shock of
declines in spending, closures, and decline of oil prices.
He noted that the labor market was not showing signs of
recovery but there were differences in sectors reflected in
the numbers.
Mr. Guettabi displayed slide 7, "By borough," which showed
a bar graph entitled 'Percent unemployment change relative
to previous year using September data.' He explained that
the purpose of the graph was to show variation in areas. He
thought the slide illustrated that no two places were
experiencing the recession the same way. He mentioned
Denali and Skagway, and the lack of tourism that had caused
significant drops in employment. He cited that as of the
previous September, Alaska was about 11 percent below
previous year's employment levels. He continued that about
half of the boroughs were doing worse than the state, and
about 9 or 10 were doing a little better than the state.
Co-Chair Stedman noted that the Ketchikan Gateway Borough
had about the same amount of cruise ship traffic as
Skagway, yet had a bigger population and more diversified
economy, so there was an observable difference of 24
percent compared to 60 percent unemployment change,
respectively. Juneau had a similar amount of cruise ship
traffic but had an even larger economy than Ketchikan, and
there was only a 16 percent reduction.
9:19:03 AM
Mr. Guettabi highlighted slide 8, "Initial claims," which
showed a bar graph. He explained that the slide pivoted to
statistics in order to show the vulnerability of the Alaska
economy to the COVID-19 recession. The data was based on
new unemployment claims filed. He pointed out the very
large increase near the end of March 2020, when there were
almost 15,000 claims. The number of new claims filed was
dropping, but the number of claims was still at an elevated
level. He directed attention to the bottom right of the
graph, which showed current claims at about 3,300 initial
claims being filed. He summarized that the state had about
four times the number of claims filed than before the
pandemic. He thought the state had left the peak of the
recession but there was still pain in the economy.
Mr. Guettabi thought that since there were new claims being
filed, it was a reflection of people being let go or people
newly filing for the unemployment claims. He highlighted
two vertical lines that showed the first and second rounds
of federal stimulus payments.
Senator Wilson asked if Mr. Guettabi knew the reason behind
the peaks on the graphs. He asked if the data was from
quarterly reports and if companies were being more cautious
during certain time periods shown on the chart.
Mr. Guettabi stated that the data was from weekly reports.
He noted that there had been difficulty in processing all
the claims, and there was a little seasonality reflected in
the graph. He mentioned there were quite a few factors that
explained the peaks such as federal boosts in unemployment
insurance payments and waives of layoffs. He mentioned the
seasonality of the economy.
9:23:15 AM
Mr. Guettabi looked at slide 9, "Continuing claims," which
showed a bar graph. He qualified that the graph did not
account for new claims being filed, but rather people
continuing to receive unemployment insurance payments. he
noted that the graph had a similar pattern to that on the
previous slide. He noted there were about twice as many
claims shown as prior to the pandemic. He considered what
catalyst would result in the state getting back to pre-
pandemic levels. He thought that most of the economic
drivers were struggling and considered the question of
where the hiring would come from in order to get back to
pre-pandemic levels.
Mr. Guettabi addressed slide 10, "Aid and job search":
Research from the Federal reserve shows that the $600
UI benefit supplement in the CARES Act had little or
no effect on the willingness of unemployed people to
search for work or accept job offers.
Mr. Guettabi asserted that there had been some concern that
the economy was being negatively affected by the generous
unemployment insurance payments, which were thought to have
disincentivized people from seeking employment. He
explained that there was quite of bit of research to the
contrary and pointed to a study from the Federal Reserve
that showed that there was not really a negative effect of
the boosted unemployment insurance payments on willingness
to seek employment. He clarified that in an aggregate
sense, the effect was not shown, but it did not mean there
were not places that were struggling to find employees.
Senator Wilson asked if the information on slide 10 was
from a nationwide study that was not Alaska-specific or
industry-specific that contemplated whether the increased
benefits had any effect on people's willingness to accept
or search for work.
Mr. Guettabi answered in the affirmative. He affirmed that
the information came from a national-level study using data
from all states that was not sector-specific or Alaska-
specific.
9:26:56 AM
Mr. Guettabi advanced to slide 11, "Personal Income":
Personal income includes wages, benefits, proprietor
income, dividends, interest, rent, and transfer
payments like Social Security and veteran's benefits.
Mr. Guettabi noted that the slide discussed personal income
for Alaska as estimated by the Bureau of Economic Analysis.
He qualified that the graph on the slide, 'Personal Income
in Alaska in 2019 and 2020,' included information as
defined at the top of the slide. He noted that the losses
in the labor market shown on previous slides was happening
at the same time. He added up that the calculation included
federal transfers as well as everything listed at the top
of the slide. He clarified that the observation was not an
Alaska-specific quirk and had been observed in every state
because federal transfers (in an aggregate sense) were
larger than the losses observed in the labor market through
wage declines. He qualified that the summary did not
conclude that everyone was doing well, it meant that in an
aggregate there was more money in the system than pre-
pandemic, which he thought was not very intuitive.
Mr. Guettabi looked at slide 12, "Personal Income:
decomposition," which showed a bar graph depicting the
dollar change in personal income and selected components in
Alaska between 2019 and 2020.
Mr. Guettabi pointed out that the teal bar on the left
showed the sum of the three other bars and signified the
overall increase in personal income. He noted that the
maroon bar on the right signified transfers and dwarfed the
decline seen in wages. He clarified that the graph did not
mean "all is good," but rather there was more money in the
system before. He clarified that the money may or may not
be going towards areas that needed it the most, and
questions about targeting might arise from such a slide.
Mr. Guettabi showed slide 13, "Personal income increased in
every state":
In 2020, the increase in transfer receipts was the
leading contributor to personal income growth in all
states and the District of Columbia. The percent
change in personal income across all states ranged
from 8.4 percent in Arizona and Montana to 2.4
percent in Wyoming.
Alaska's percentage change increase in personal
income of 3.1% between 2019 and 2020 was the third
lowest in the country.
Mr. Guettabi noted that slide 13 summarized the two
previous slides. He cited that personal income growth in
Alaska was positive but was one of the lowest in the
country.
9:30:56 AM
Mr. Guettabi referenced slide 14:
Gross Domestic Product (GDP) is the total value of all
goods and services produced by economic activity in an
economy. GDP is equal to the total amount of sales
from Alaska businesses, minus the total non-wage input
costs.
Mr. Guettabi spoke to the bar graph on slide 14, which gave
a sense of the total value of goods and services produced
in a state. The graph showed numbers by quarter for 2019
and 2020. He thought the graph clearly showed that the
decline in GDP occurred largely in the second quarter,
which saw the biggest effect of the pandemic and GDP
dropped from $54 billion to a little over $45 billion. In
the third and fourth quarter there was a bit of an
increase, but the state was still running about 5 percent
below 2019 GDP levels, which was a reflection of the value
of goods and services at an aggregate sectoral level. He
reminded that the data included lower oil prices, declines
in food services, and other losses. He emphasized that
personal income reflected the federal transfers, while the
value of goods and services produced in the state did not.
Senator Wilson asked any of the drop in the GDP could be
attributed to the shift from paid childcare or school to
unpaid family caregivers.
Mr. Guettabi affirmed that the decline in GDP was a
reflection of all the monetary transactions in the economy,
which would include payment of childcare workers.
Senator Wilson asked what Mr. Guettabi projected going
forward.
Mr. Guettabi stated that his employment forecast
anticipated employment growth in 2021 at 2.2 percent to 2.3
percent. He did not predict GDP specifically. National
numbers were showing GDP somewhere between 7 and 10 percent
higher than the previous year. He cautioned that the
percentage growths would be large due to starting at a low
rate. He thought a GDP and employment rebound was
inevitable but questioned when they would get to pre-
pandemic levels. He did not see the GDP or employment
levels returning to pre-pandemic levels until after 2022.
9:35:41 AM
Co-Chair Bishop commented that there were other forces at
work on the GDP that were outside the control of the
pandemic. He referenced construction mining jobs that were
being held up by federal court rulings. He asked if Mr.
Guettabi would agree.
Mr. Guettabi thought anything that would have a negative
effect on the economy would be reflected in the GDP. He
recalled that the economy had not been growing very fast
pre-COVID-19, and there had been a recession from 2015 to
2018, and there was one year of positive growth in 2019. He
agreed with Co-Chair Bishop that anything that was bringing
the economy down would affect the GDP. He referenced
disagreements between Saudi Arabia and Russia and driving
oil futures in negative territory, which were certainly
reflected in GDP.
Mr. Guettabi turned to slide 15, "Percent Change in Real
Gross Domestic Product in Alaska 2017-2020," which showed a
bar graph. He thought the slide summarized how the state
was doing before COVID-19. He clarified that the graph
showed percentage change in real dollars, which accounted
for inflation. The teal bar showed the GDP declined by .9
percent during 2016 and 2017. The orange line showed that
GDP grew .2 percent during 2017 and 2018. He explained that
typically it was possible to see GDP change a little
earlier than employment. He pointed out the fairly big
downward trend after the onset of the pandemic.
9:38:47 AM
Mr. Guettabi considered slide 16, "GDP takeaways":
Real GDP decreased in all 50 states and the District
of Columbia in 2020. The percent change in real GDP
ranged from -0.1 percent in Utah to -8.0 percent in
Hawaii.
Alaska's GDP declined by 2.66 billions dollars from
54.44 to 51.77 billion dollars.
Alaska's GDP decline was the 9th most pronounced.
Mr. Guettabi clarified that most of the things Alaska was
experiencing were also happening in all other states. He
qualified that GDP declined in every state in the country,
and personal income increased in every state. Alaska had
the ninth most pronounced decline in GDP between 2019 and
2020.
Mr. Guettabi displayed slide 17, "Pandemic relief to
households," which showed a table. He had summarized some
numbers based on a question he had heard from the committee
the previous Friday regarding federal aid, who was
eligible, and how much the state received. The last column
showed an estimate of how much a family of four would have
received contingent upon full eligibility. He qualified
that the fifth column showed the approximate amount
received by Alaskans, which was his own calculation by
relying on numbers from the Internal Revenue Service for
the first round of payments. There was almost $600 million
received in the state. He included the Permanent Fund
Dividend, which had been paid out in the middle of the
timeline. If a household happened to be eligible for all of
the available aid and dividends, it would add up to
approximately $14,000.
Mr. Guettabi pointed out that for the last round of federal
stimulus, payments started to be received on March 12. He
did not know how many Alaskans had received the last round
of payments.
9:42:13 AM
Mr. Guettabi highlighted slide 18, "Spending," which showed
a line graph. He noted that during the pandemic, there had
been development of data sources not previously accessible.
He cited one data source of tracking spending by household,
which was anonymized credit and debit card spending in
Alaska zip codes. A team of researchers had collaborated
with credit card companies to gather the data. The data
dashboard considered how spending by household had changed.
The graph showed percentage changes relative to January
2020.
Mr. Guettabi pointed out a clear drop in spending right
around March, which gradually improved. He noted that there
was a fairly significant jump in household spending that
coincided with the first distribution of federal stimulus
payments. There was not as pronounced a jump for the second
distribution. He thought it was important to note that even
with all the money received by households, spending was
only just getting to pre-pandemic levels. He summarized
that there had been a year of below normal spending, which
was a reflection of the fact that not all the money being
received was going back into the economy. Federal savings
rates were at an all-time high. He recalled that there had
been public concern about being in shops and restaurants,
which was reflected in the spending. He noted that the data
was available in total for perusal at the link on the
slide.
9:45:34 AM
Senator Wilson assumed people were saving money in banks
and asked what the trend meant for future spending and if
the trend meant there would be a quicker "bounce-back."
Mr. Guettabi thought there was evidence that savings were
higher, personal income was higher, and there had been
receipt of considerable dollars from the federal
government. He cited evidence for pent up demand at the
federal level. He thought the money would eventually make
it into the economy, although it was not yet known how the
money would be allocated. The previous year had seen
spending trend towards goods and away from services. He
thought the service industry would be the recipient of much
of the funds once COVID-19 was over. He considered that the
high savings rate coupled with the fact that most
households (that had been able to keep employment) were in
good financial shape, was good news. He acknowledged that
many households were struggling and that the unemployed
were in a very difficult position.
Mr. Guettabi thought Senator Wilson had made a good point
and that when things reopened, there were resources to
potentially give a big bounce to the service sector in
particular.
Mr. Guettabi looked at slide 19, "Small Business Revenues,"
which showed a line graph. He noted that most of the
research showed that business revenues did not show a
benefit from the stimulus funds as much as overall
spending. He thought it was not surprising given how
patterns had shifted. He thought as people started shifting
back to more normal spending patterns, there should be a
recovery in business revenues. He pondered how many
businesses had folded as a result of the decline in
revenues, which would partially determine the pace of
recovery. Less businesses would put a damper on the speed
and type of recovery.
9:49:27 AM
Mr. Guettabi addressed slide 20, " Do we have evidence
these payments made a difference?":
Analysis of the first stimulus payments found a
sharp and immediate response as payments started
hitting bank accounts. Within the first 10 days,
households spent an average of 29 cents from every
dollar received. The bulk of this spending was on
food, rent, and bills. When providing a detailed
breakdown of how they used their checks, individuals
report having spent or planning to spend only around
40 percent of the total transfer on average.
Opportunity Insights research found that Stimulus
payments increased spending substantially,
especially among low-income households. But they did
not lead to large gains for the businesses most
affected by the crisis or to increases in
employment.
Mr. Guettabi thought the slide answered some questions that
had been raised. The first bullet had used anonymous
checking and savings account data that was not Alaska-
specific. He thought it was important to understand how
people had spent stimulus money, the data was very
granular. It was found that on average, people were
spending 29 cents of every dollar of stimulus money in the
first ten days after receipt. The data was used to analyze
the first stimulus payment. The bulk of the spending was on
food, rent, and bills. He pointed out that not all
households were experiencing the recession in the same way,
which meant that lower income households were much more
likely to spend the stimulus money because of fewer cash
reserves.
Mr. Guettabi advanced to slide 21, "Survey findings," which
showed a chart that showed how people had used the stimulus
funds. He thought the slide clarified a lot about how
people were experiencing the recession. The data was from
the Household Pulse Survey sourced from the United States
Census Bureau. The research was an important experimental
program that asked households how they were doing on a
weekly basis. He drew attention to the dark blue bar, which
signified people that had used the stimulus funds to mostly
pay for expenses. He observed that as income went up, a
larger portion of the funds went into savings. For low-
income households with no cash reserves, the stimulus funds
came in and went out to the economy immediately.
9:53:56 AM
Mr. Guettabi looked at slide 22, "A quick reminder on the
effects of the PFD":
Kueng (2018) finds that consumption increases by
11cents for each dollar of PFD received in October,
5 cents in November, and another 7 cents in
December. Overall, this points to an increase of
between 22 and 24 cents for every PFD dollar in the
three months post distribution.
Knapp, Berman, and Guettabi (2016) find that a 100
million increase in the aggregate size of the PFD is
associated with the creation 725 jobs in the short
run.
Bibler, Guettabi, and Reimer (2019) find that for
every 100 million dollars in the total PFD
distribution, there are approximately 475 jobs
created. On the other hand, they find that women who
are already employed tend to decrease the number of
hours worked in the three months following the
distribution.
Mr. Guettabi noted that two of the papers listed were from
himself and a few colleagues, and the first paper listed
was by a researcher at Northwestern University. He noted
that the decrease in number of hours worked by women was
more concentrated amongst women with young children, and
especially lower-income women.
9:56:59 AM
Mr. Guettabi spoke to slide 23, "What about PPP? No perfect
answer":
The first round of PPP Loan applicants had to
indicate a number of jobs at their organization that
would be retained as a result of the PPP loan.
Alaska applicants stated they would retain 114,000
jobs in the state during the active loan period.
This is best thought of as the number of jobs
supported by the loans and not the ones that would
have disappeared in the absence of the loans.
The equivalent number at the national level is over
51million jobs.
While it is difficult to identify the exact effect,
recent research here, here, and here shows that the
actual number of jobs saved is smaller than the 51
million number. It ranges from 1.2 million to 13.6
million jobs.
Mr. Guettabi wanted to give a broad assessment of how the
economy had been helped by the Payment Protection Plan
(PPP) Loan Program. He thought clearly a significant amount
of money had entered the economy through the PPP plan and
pondered how many jobs were retained as a result. He
considered jobs supported by PPP. Some of the more recent
academic research showed that the jobs truly saved by PPP
were smaller in number than initially reported. He
clarified that he was not saying PPP did not help
businesses. He summarized that even studies with granular
data were challenged to determine the effect of some of the
large programs. It had been argued that PPP had not been
well targeted. He continued that at a national level, most
of the smaller findings stemmed from the fact that some of
the PPP money went to businesses that would have retained
employees anyway.
10:00:13 AM
Mr. Guettabi referenced slide 24, "A quick note on the
child tax credit":
First, it allows 17-year-old children to qualify for
the credit.
Second, it increases the credit to $3,000 per child
($3,600per child under age 6) for many families.
Third, it makes the credit fully refundable and
removes the $2,500 earnings floor.
Fourth, it requires half of the credit to be paid in
advance by having the IRS send periodic payments to
families from July 2021 to December 2021.In 2018,
there were 90,490 tax returns with child tax
credits.
Mr. Guettabi thought the child tax credit program was
important and that it would make a difference for lower
income households. He thought the most important change
since 2019 was the fact that the child tax credit had
become fully refundable and was no longer capped. The Biden
Administration was trying to get the Internal Revenue
Service to give advance payments. The plan was for eligible
households to receive monthly payments between July and
December.
Co-Chair Stedman asked about the Supplemental Nutrition
Assistance Program (SNAP) benefits increase and wondered if
Mr. Guettabi had a comment on the effectiveness.
Mr. Guettabi relayed that SNAP payments went directly to
the most vulnerable members of the population. He thought
it was important that from an aggregate perspective, money
that went to low-income households went directly into the
economy. He thought SNAP payments were very well targeted
and that the payments were making a big difference. From an
aggregate perspective, the money was spent rather than
saved and made a difference in the economy. He thought the
state's recovery was "K-shaped," which meant higher income
households were doing well, and lower income households (as
a greater proportion of workers form the hospitality
sector) were not faring as well. He thought the SNAP funds
clearly were making a difference and would be missed if
they did not make it into the state's economy.
10:04:28 AM
Senator Wilson asked about personal higher income and asked
if it could be a factor in the hold-harmless provision in
the state.
Mr. Guettabi affirmed that child tax credits would increase
personal income. He continued that transfer payments were a
big portion of personal income and were the sole reason
that personal income had gone up. He clarified that the
child tax credit payments were temporary and were set to
expire in December. Additionally, the payments were a
little better targeted to lower income levels than other
payments. He thought even though personal income was
higher, the economy at large was still struggling. He
thought anything that reduced the amount of money in
households should not be done in the immediate term. He
struggled with the idea of potentially reducing money to
households, particularly the ones suffering from the state
of the economy. He reminded that lower income households
were putting money back in the economy.
10:06:47 AM
Mr. Guettabi turned to slide 25, "Where does all of this
leave us?"
Labor market activity is still weak even if Personal
income was higher in 2020 than in 2019. The effects
of the most recent Federal distributions are yet to
enter the Alaska economy.
Based on my forecast here, I do not anticipate a
return to pre-pandemic employment levels until after
2022.
Targeted Aid makes the most sense given the
variation in economic pain across income groups,
regions, and sectors.
Mr. Guettabi thought the state of the economy was confusing
and reiterated that there was not much improvement in the
labor market. He mentioned curtailed spending patterns. He
emphasized that when talking about increased personal
income, there were still pockets of the economy that were
struggling. He thought that aid should be targeted to
portions of the economy that were struggling.
Co-Chair Stedman thanked Mr. Guettabi for his testimony.
Co-Chair Bishop thanked Mr. Guettabi for the information
that was presented.
10:09:21 AM
DAN ROBINSON, CHIEF OF RESEARCH AND ANALYSIS, DEPARTMENT OF
LABOR AND WORKFORCE DEVELOPMENT, discussed the presentation
"Current Trends in Alaska's Employment, Wages, and
Population" (copy on file). He stated he had eight
substantive slides and wanted to give a clear picture of
what was happening with data sets for employment, wages,
and population. He was happy to provide more information
that might be requested by the committee. He conveyed that
the main function of his job was to produce the data, then
analyze it and look for insights.
Mr. Robinson looked at slide 2, "Alaska wage and salary
employment by month, 2018-2021," which showed a line graph.
The graph did not include self-employment or the military.
He noted that the graph's lines for 2018 and 2019 were
almost on top of each other. There was a little employment
growth in 2019. He mentioned the state-specific recession
from 2015 to 2018. He pointed out that the state lost 14
percent of jobs, which was an historic drop in employment.
Mr. Robinson thought Mr. Guettabi had made a good point in
that there was no clear sign of recovery, and the biggest
reason was the state was moving through its normal seasonal
job market pattern. He commented that Alaska had the most
seasonal job market in the country. All the state's
seasonal industry was in the summer, including commercial
fishing, tourism, and construction.
Mr. Robinson noted that the state was about 20,000 jobs
below the level of one year previously. He thought the
composition of the jobs was important, and 4,000 of the
lost jobs were in oil and gas. He cited that 7,000 of the
jobs were in leisure and hospitality, and that there was a
big difference in pay between the jobs in oil and gas.
10:13:48 AM
Mr. Robinson spoke to slide 3, "Employment by economic
region, over-the-year percent change, 2018-2021," which
showed a line graph depicting employment change in six
economic regions in the state. He asked the audience to
consider the economic drivers in each sector. He mentioned
things that brought money into the state including the
federal government (including military), oil and gas,
commercial fishing, tourism, other mining, and
miscellaneous other things such as air cargo in Anchorage.
He pointed out that employment in Southeast had dropped
more than in other areas, because cruise ship traffic
mattered more and it was a poor fishing season. He
contrasted with the Southwest Region, where fishing was
better and there was far less dependence on summer tourism.
Mr. Robinson noted that oil and gas jobs were far below the
levels from a year previously, and showed no sign of a
bounce, which he thought was unusual. He cited that 30
percent of the oil and gas jobs were held by non-residents,
which made a difference in how much money was staying in
the state.
Mr. Robinson referenced slide 4, "Employment for Alaska and
U.S., over-the-year percent change, 2018-2021," which
showed a line graph. He noted that initially the employment
changes in Alaska reflected the same degree of change as
the rest of the United States. He explained that since, the
U.S. economy had recovered a bit more. He thought things in
Alaska would almost surely get worse in contrast to the
U.S. because of the near certainty there would be no cruise
ship season.
Mr. Robinson turned to slide 5, "Alaska wages by quarter,
2019-2020," which showed a bar graph. He noted that he had
specifically not zoomed in on the graph in order to observe
how much of the state's economy stayed roughly in place. He
pointed out a meaningful decrease in wages and noted that
the data came from employers.
10:18:56 AM
Mr. Robinson considered slide 6, "But, wage losses were
more than offset by big increases in government "transfer
receipts, which showed a bar graph. He thought it was
better to call the economy's effect a pandemic rather than
a recession. He emphasized that earnings from employment
declined by $500 million was dwarfed by the increase in
transfer payments to the economy. He made the point that
the PFD was in the 'transfer receipts' category in the data
from the Bureau of Economic Analysis, which meant it was
monies from the government to households that was not for
work performed.
Senator Wilson asked if Mr. Robinson was indicating that
there was too much COVID-19 funding, or if the payments
targeted an area that did not need help.
Mr. Robinson explained that broadly, because of the
Coronavirus Aid, Relief, and Economic Security (CARES) Act,
the aggregate loss of the economy was more than compensated
from the federal payments. He thought the objective was to
prevent recessionary forces such as loss of confidence or
the housing market. He expressed that he was making no
value judgement about whether the funds were enough, too
much, or a good policy call. He commented that in the
aggregate the economy had not suffered. He thought it was
mind-blowing that per-capita personal income could increase
with the level of job loss being experienced.
Mr. Robinson pondered who received the additional funds and
acknowledged that some individuals were really suffering.
He made the point that people of different income levels
had been affected by the pandemic differently.
10:22:08 AM
Mr. Robinson displayed slide 7, "Alaska's long-term
population history," which showed a line graph. He noted
the characteristic booms and busts. He pointed out the
pipeline construction in the 1970s and the oil boom in the
1980s. He reminded that Alaska's population didn't start
post-World War II. He cited that in 1943, two-thirds of the
state population was military. He commented that Alaska was
a young state, and that in 1890, ninety percent of the
population was non-white. He commented on the high male to
female ratio. He reminded that Alaska's history was rich
and did not begin statehood or WWII. He thought Alaska was
experiencing some things that young states experienced,
such as infrastructure challenges and figuring out how to
pay for state government.
Mr. Robinson highlighted slide 8, "Eight consecutive years
of negative net migration," which showed a bar graph. He
thought the trend of negative net migration was important
to point out. He identified there was four components of
change to population: birth, death, in-migration, and out-
migration. He stated that historically Alaska's population
change had been driven by net migration. Before the current
period, there had not been a period of more than four
consecutive years of negative net migration. The population
had peaked at about 741,000 in 2016 and was currently down
to 729,000. In terms of net population loss, the number was
not large; but he thought the trend said something about
the desirability of living in the state.
Senator Wilson asked if the economic recovery would be
enough to slow down the negative migration trend.
Mr. Robinson suspected that economic recovery would not be
enough to slow the trend of out-migration. He pointed out
that the negative migration trend pre-dated the COVID-19
pandemic. He mentioned the oil and gas downturn, which he
thought would continue to affect the state's desirability.
He mentioned the state governments structural deficit, the
Permanent Fund, and the oil and gas tax regime.
10:26:26 AM
Co-Chair Bishop commented on the stock market crash in
2008, and an increase in Alaska's population. He thought
people came to the state seeking a better path forward. He
thought Alaska wages were no longer a big draw, because it
was possible to make as much or more in the Lower 48 while
enjoying a lower cost of living. He thought it was "a
wash."
Mr. Robinson thought Co-Chair Bishop had made a good point.
He considered the state's relative economic health and
commented that Alaska had fared comparatively well during
the great recession. He recounted that the state did not
have the manufacturing job losses or housing chaos seen in
other states.
Co-Chair Bishop thought the legislature had been
responsible for robust capital budgets that had insulated
the state from some of the negative changes happening in
the country.
Mr. Robinson thought the capital budget was interesting and
was a little like some current federal payments. He
acknowledged that there had been lots of money spent.
Because the state was spending so much on capital projects,
there had been a distinct economic benefit to the state.
Co-Chair Stedman stated that the capital spending had been
an intentional choice by the committee when the state had
robust savings in order to counteract the recession. He
recounted that the choices had been in direct opposition
and philosophy from the sitting governor at the time. He
lamented the state's reduced cash position.
Mr. Robinson remarked that the amount that was being spent
on capital budgets was very large in context. He noted that
the economic data made it difficult to identify the causes
of things.
10:30:28 AM
Co-Chair Stedman commented that the state had a significant
number of comments that the increased capital spending was
going to overheat the economy. He thought that history
would show that the decisions made at the committee table
had been accurate. He commented that the current committee
was the most experienced in the history of the state, and
members were collectively trying to steer the state's
economy in a better direction.
Co-Chair Bishop asked if Mr. Robinson could supply the
committee with a multiplier on capital dollars to
construction work. He also asked about the multiplier
effect of the PFD transfer.
Mr. Robinson deferred to the question to Mr. Guettabi and
informed that the department did not do much work with
multipliers or economic impact modelling. He explained that
it was tough to model multipliers and was easy to skew the
numbers for advocacy reasons. He mentioned the objective
nature of ISER as an institution, similar to that of the
Legislative Finance Division.
Co-Chair Stedman suggested sending an inquiry to the
University of Alaska.
Co-Chair Bishop recalled more conservative numbers being
used, which he preferred.
Senator Wielechowski asked if there was more detail on the
chart on slide 8, such as socioeconomic status.
Mr. Robinson affirmed that the following slide would
address more detail.
10:33:37 AM
Mr. Robinson looked at slide 9, "Lots of people move to and
away from AK every year," which showed a bar graph. He
mentioned that his office had written a couple of articles
which he would be happy to forward to the committee. He
affirmed that there was a decrease in people coming to
Alaska in addition to the out-migration. He emphasized that
eight consecutive years of negative net migration was not
the sign of a healthy economy, which he thought was a
consequence more than a cause. He suggested that while it
was not possible to change the state's climate, it was
possible to address elements such as stability, certainty,
budget, and other things to do with state government. He
referenced Co-Chair Stedman's comments and stated it was
unusual that a state had as much influence over key parts
of the economy as Alaska did.
Senator Wielechowski asked what conclusions could be drawn
from the graph. He asked what policy decisions could
counteract the trend of negative net migration. He wondered
what could be done for more healthy economy. He thought the
out-migration seemed to correlate closely to the passage of
SB 21 and giving away huge amounts of the state's oil
resource to the industry while getting nothing in return.
Mr. Robinson thought connecting policy changes to changes
in the economy was always difficult and he opined that
politicians always received both too much credit and too
much blame for what happened by large economic forces. He
thought stability and certainty could counteract the trend.
He emphasized that businesses, households, the University,
and the ferry system depended upon stability.
10:37:29 AM
Senator Wilson mentioned a big change in the transfer from
paid labor to unpaid family labor and asked what metrics
the state would use to measure the change.
Mr. Robinson commented that there had been a trend of women
falling out of the labor force, partly because of the need
to home-school children during the pandemic. He mused that
there was some concern that the matter would not change
after the pandemic. He noted that there was very good data
on the number of jobs by industry, so it would be possible
to tell if there were fewer childcare workers getting a
paycheck. He thought the change would be smaller than
expected. He thought most kids in childcare pre-pandemic
would go back to childcare.
Co-Chair Stedman thanked Mr. Robinson for his testimony and
expressed that the department had been helpful over the
years by putting a focal point on labor and presenting
alternative viewpoints. He asserted that Mr. Robinson and
his team were integral to the decision-making at the
committee table. He thought the committee would be
requesting more assistance over the forthcoming months as
the state and allocated billions of dollars in federal
funds.
Co-Chair Stedman relayed that the meetings scheduled for
Thursday and Friday would be cancelled. He affirmed that
the next committee meeting would be held the following
Tuesday.
The schedule for the following week would be released later
in the day.
ADJOURNMENT
10:41:09 AM
The meeting was adjourned at 10:41 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 033121 L&WD Senate Finance.pdf |
SFIN 3/31/2021 9:00:00 AM |
Alaska's Economy |
| 033121 ISER Presentation SFIN_March_31(MG).pdf |
SFIN 3/31/2021 9:00:00 AM |
Alaska's Economy |