Legislature(2017 - 2018)BELTZ 105 (TSBldg)
01/18/2017 09:00 AM Senate LABOR & COMMERCE
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| Audio | Topic |
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| Start | |
| Presentation by the Department of Labor & Workforce Alaska: Current Trends in the Alaska 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
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 18, 2017
9:01 a.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Shelley Hughes, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
Senator Berta Gardner
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Colleen Sullivan-Leonard
COMMITTEE CALENDAR
PRESENTATION by the DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT
PRESENTATION: CURRENT TRENDS in the ALASKA ECONOMY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN ROBINSON, Chief
Research & Analysis Section
Division of Administrative Services
Department of Labor & Workforce Alaska
Juneau, Alaska
POSITION STATEMENT: Delivered a PowerPoint presentation on the
Current Trends in the Alaska Economy.
ACTION NARRATIVE
9:01:40 AM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 9:01 a.m. Present at the call to
order were Senators Stevens, Hughes, Meyer, Gardner and Chair
Costello.
^Presentation by the Department of Labor & Workforce Alaska:
Current Trends in the Alaska Economy
Presentation by the Department of Labor & Workforce Alaska:
Current Trends in the Alaska Economy
9:02:24 AM
CHAIR COSTELLO announced the business before the committee is a
presentation by the Department of Labor & Workforce Development
(DOLWD) titled "Current Trends in Alaska's Economy." She
described the Labor and Commerce Committee as the legislature's
committee on the economy. It has responsibilities that range
from energy and job training to health insurance,
infrastructure, consumer protection and technology. To that end,
the committee will start this session with two weeks of hearings
on the condition of the state's economy.
She welcomed Commissioner Drygas and highlighted that DOLWD
estimates that the state lost 6,800 jobs in 2016 and forecasts
an additional decline in 2017. This is reflected in the number
of homes for sale and small businesses that are closing.
However, bright spots include growth industries such as health
care and tourism, companies like Alaska Airlines and Odom
Corporation, increased military spending to station F-35 fighter
jets in Fairbanks and new oil discoveries on the North Slope.
CHAIR COSTELLO advised that during the next two weeks the
committee would hear from policy experts, industry and
communities to help sort through the data, the trends and policy
options available to the legislature. She invited all Alaskans
to join in looking at how to best move Alaska's economy forward.
The committee's new Facebook page will provide a venue to
participate. She welcomed Mr. Robinson.
9:06:50 AM
DAN ROBINSON, Chief, Research & Analysis Section, Division of
Administrative Services, Department of Labor & Workforce Alaska,
opened the presentation explaining that his section produces
employment, wage, unemployment rate, and population numbers that
provide a unique perspective. "We have an idea how strong they
are, how precise they are, when conclusions should be drawn from
them and when they shouldn't." He drew an analogy between this
work and that of a meteorologist who tells you what the weather
is.
MR. ROBINSON displayed a graph of Alaska's employment growth in
in the last decade and noted that the 2 percent decline in 2016
translates to the loss of about 6,800 jobs, which is the highest
single year job loss since the 1980s. The forecast for 2017 is
in the same range. He pointed out that the growth [since 2013]
wasn't very strong and that the .4 percent loss in 2009 was mild
compared to other states. "We did not see the kind of job loss
or other economic distress that most other states did."
Turning to 2016 industry details, he recounted that the oil and
gas industry lost 2,800 jobs, a 20 percent decline. The average
pay for those jobs is $120,000 a year, so that represents a loss
of $3.5 billion. Professional and business services lost 1,600
jobs or 5.3 percent. Many of these jobs are tied directly to the
oil and gas industry and the capital budget. Construction, which
is tied to both oil and gas and the capital budget, lost 1,500
jobs or 8.5 percent. State government lost 1,300 jobs or 5.0
percent. Health care continued to gain in 2016 adding 900 jobs,
or 2.6 percent, but it didn't grow as much as it has in past
years. The federal government also added 300 jobs, or 2.0
percent, which is an improvement over recent years.
MR. ROBINSON displayed a bar graph of statewide employment
changes since 1970 and stated that Alaska earned its boom and
bust reputation in the 1970s and 1980s. Employment reached a
high point in the mid 1970s with the construction of the
pipeline followed by job loss once it was complete, but the
outlook wasn't dark. In the 1980s there was strong growth
heading into the recession followed by two years of job loss and
trauma. He noted that the declines in those years were far less
than the current period. He said Alaska was almost a model of
stability from 1991 until the current contraction started in
2015. Pointing to the job loss figures in 2016 and the forecast
losses in 2017, he explained that the Research and Analysis
Section looks forward, not to peg the numbers but to look for
things that are driving the growth or lack of growth.
He said that more job loss is predicted in oil and gas in 2017,
but at about half the rate as 2016. Early data also shows there
will be reduced losses in construction and professional and
business services. However, the downstream effects of oil and
gas and state government declines indicate larger losses in the
retail trade, restaurants and banks. Health care is the only
sector that is forecasted to grow in 2017, but not much.
9:14:51 AM
MR. ROBINSON explained that the Research and Analysis Section
identifies a recession as three consecutive quarters of job
loss. He displayed a chart from the U.S. Bureau of Labor
Statistics and National Bureau of Economic Research showing six
national recessions since the 1970s. He pointed out the national
job loss at the end of the 2000 period was about 4.5 percent
while the job loss in Alaska was less than .5 percent. By
comparison, Alaska has had just three significant recessions in
that time, one in the 1970s, the 1980s, and in 2009.
9:17:13 AM
CHAIR COSTELLO noted that Representative Colleen Sullivan-
Leonard had joined the committee.
MR. ROBINSON reviewed the duration of the three Alaska
recessions. In the 1970s the recession lasted eight quarters,
from the 3rd quarter of 1976 to the 2nd quarter of 1978. In the
1980s the recession lasted nine quarters, from the 1st quarter
of 1986 to the 1st quarter of 1988. The last recession lasted
just three quarters, from the 2nd quarter of 2009 to the 4th
quarter of 2009. Alaska started losing jobs in the 4th quarter
of 2015 so the current recession has been ongoing for six
quarters. Following this basic pattern, there will likely be job
growth sometime in 2018.
Addressing the depth of the recession, he said more than 15,000
jobs were lost in the 1970s and the losses were similarly deep
in the 1980s. The economy was smaller then, so the change would
be even bigger on a percent basis. In 2009, job losses were
modest.
9:21:01 AM
MR. ROBINSON said this recession is different than the 1980s in
several respects. The population is older now and has roots, so
people are less likely to pick up and leave. Another difference
is that the pre-recession economy was nowhere as hot as the
1970s and 1980s, especially the construction and banking
sectors. Alaska also has significantly larger savings and oil
production is declining. The way things are similar to the 1980s
is that the state is still very dependent on oil and gas and the
federal government, including the military. Alaska will feel it
if something happens to either of these. He said, "I can't think
of another state that would be as dependent on a few things."
9:24:13 AM
MR. ROBINSON displayed a line graph of the population trends
from 1970 to 2015 and pointed out that population losses in both
the 1970s and 1980s came after the job losses and didn't drop as
far as the employment lines, because people don't move right
away when they lose their jobs. This was seen when the pulp
mills closed in Southeast. People tried to hang on. From the
1990s forward, the population and employment lines are similar.
The 2009 numbers reflect population gains because the economy in
Alaska was stronger than the national economy. "We lost jobs in
2009 but we gained people." Through 2016 there hasn't been
significant population loss, but that may be still to come.
9:26:15 AM
MR. ROBINSON discussed a recent press release titled "Natural
Increase Fueled Small Population Gain for Alaska in 2016." The
increase was about one-third of 1 percent. The Matanuska-Susitna
Borough grew the most, adding 2,645, and the City and Borough of
Juneau lost the most, losing 398 people. In general, net
migration is something to watch because it's a reflection of
whether it's good to be here or if opportunities are better
elsewhere, he said. In the current period, there are four years
in a row of net losses to migration. He said the numbers aren't
large, but it's definitely worth watching.
He displayed a graph showing the net number of people who have
come and gone from Alaska in the 2010 to 2015 time-period,
pointing out that the only group that is consistently gaining is
20-year-old people. Alaska has things to offer young people and
this has been the case for a long time. In the decade before
this there were also gains of young children and Alaska
consistently gained more young children and 20-, 30- and early
40-year-olds than it lost. During that time there has also been
a consistent net loss of people who are 50 and older and those
who are college age. He discounted the notion that losing
college-age people is a brain drain saying it's more complicated
than that because a lot of 20-year-old people are also moving to
Alaska.
Displaying a chart showing population numbers from 1970 to 2016,
he said the point is to show that population doesn't change
quickly. Even the periods of population loss are fairly short-
term and mild. In the 1980s, for example, the worst single-year
loss was 15,000 people. There is speculation that losses will
reach 100,000 in this current period, but that would be far
outside the norm. "It could happen, but we don't believe that it
will happen."
9:31:47 AM
MR. ROBINSON displayed a pie chart showing the sources of the
$41.5 billion of Alaska personal income in 2015. The largest
piece, 67 percent, comes from earnings. Most of this is wage and
salary, but it also includes self-employment income. Dividends,
interest, and rent make up 17 percent and transfer receipts 16
percent. Transfer receipts are defined as money for which people
have done no work. This includes the permanent fund dividend,
Medicaid, Medicare, Social Security and unemployment insurance.
Transfer receipts from the federal insurance programs are below
the national average due to fewer seniors, but the PFD brings
the total back to the national average.
The trend in personal income from 2010 to the current period is
generally upward, showing no sign of trouble yet. That is
important, he said, because there is a very large decline in
gross domestic product (GDP) over that same period. The 20
percent decline from $62 billion to $50 billion over the 2012 to
2016 period is large, but the economy hasn't shrunk that much.
The value of GDP for Alaska tends to be volatile specifically
because of oil, he said. "In 2012 the mining category was about
one-third of our GDP." He said few if any states have such
dependence on a single piece of their GDP.
9:35:42 AM
MR. ROBINSON reviewed the following takeaways:
· Alaska is in the midst of moderate job loss on a scale of
mild, moderate, severe.
· Alaska's population through 2016 remains relatively stable,
although there has been four straight years of net losses
to migration.
· Personal income has dipped, but not dramatically.
· The value of what's produced in the state (GDP) has dropped
significantly. He noted that the end of the GDP graph shows
a modest uptick that corresponds with the modest increase
of oil prices.
He said he didn't discuss housing but could report that there is
no sign yet of major trouble in the housing market. By contrast,
there were 2,000 foreclosures per quarter at the peak of the
recession in the 1980s. In the most recent quarter there have
been just 200 foreclosures. But this doesn't mean that it
doesn't deserve attention, he said. Houses are staying on the
market longer and prices aren't increasing, but there aren't
major signs of weakness.
MR. ROBINSON offered to answer questions.
9:37:33 AM
CHAIR COSTELLO said she read the report on economic trends and
appreciates the good work that was done to produce the data and
the report. She then asked Mr. Robinson to comment on the
seeming disparity between the report that said that Alaskans
have less disposable income than they have had and his statement
that there is no big sign of trouble in the housing market. She
asked if she was being pessimistic while he was optimistic
because there are more homes for sale in her neighborhood than
in years past and she's aware of people who fear that their
child won't return to Alaska after college because of the lack
of economic opportunity.
MR. ROBINSON said the personal income measure is the broadest
possible measure of income, and it includes transfer payments.
It's captured if somebody is collecting unemployment insurance,
Medicare, Medicaid or Social Security. You would see losses if
you were to look specifically at wages. There is good wage data
through the 2nd quarter of 2016, and there is a distinct
downturn. He touched on that when he talked about the losses in
oil and gas jobs. "Wages have declined and that's part of what
explains the projected losses in retail, trade and banking."
Lending activity is the closest indicator of impending trouble
with housing, and that has decreased. While it seems as though
there are a lot of houses on the market, the recent data does
not reflect a large increase in people leaving Alaska or houses
on the market. He acknowledged that houses are staying on the
market longer and the data lags. "It's possible that even now,
what you're seeing is something that we'll see down the road in
the data." In the 1980s things changed very quickly but that's
not the case right now. We've seen this coming, partly because
of the budget and partly because of oil prices, and we're still
heading into something, he said. The depth of the recession is
unclear, but so far it's slow and fairly measured.
CHAIR COSTELLO referred to the earnings piece of the personal
income chart and asked him to comment on the value of
entrepreneurs and whether legislators are doing enough to help
small business growth.
MR. ROBINSON pointed out that earnings includes both wages and
salary and self-employment income. [Total earnings] is about $28
billion and the entrepreneurial piece is about $3.5 billion. He
didn't know if enough is being done to help small business but
it's important because it's an incubation for wage and salary
employment. Bill Gates, for example, is an entrepreneur and he's
also the employer of thousands of wage and salary employees.
CHAIR COSTELLO reminded listeners of the Senate Labor and
Commerce Committee Facebook page and encouraged everyone to
submit any questions they may have.
9:45:10 AM
SENATOR MEYER asked Mr. Robinson if he's an economist.
MR. ROBINSON replied he is an economist, but looks upon what he
does as a data producer more than an academic economist.
SENATOR MEYER mentioned Alaska's three-legged economic stool and
the 300 federal jobs added in 2016 and asked what type of jobs
those were.
MR. ROBINSON replied the declines in Forest Service jobs have
stopped and there is normal population-based progression, but
it's more a factor of federal money to Alaska than jobs. Alaska
receives more federal money than almost any other state. The
military is a large factor, particularly in Fairbanks.
SENATOR MEYER asked if he had factored in a "Trump effect." He
asked if keeping jobs in America and being tough on immigration
might result in more migration from Alaska to the states where
the jobs are created.
MR. ROBINSON said it would be speculative at this point, but
Alaska does get a lot of international migration so there is
potential for a small effect, particularly short term.
SENATOR MEYER asked if the lack of oil production makes the
outlook bleaker compared to the 1980s when production was close
to two million barrels/day.
MR. ROBINSON replied he would not use that term, but the data
does show that dependence on that piece of the economy has
diminished. He added that it's difficult to force diversity, but
it's already happening because of production decline.
SENATOR MEYER asked if the good-paying oil jobs are being
replaced with retail jobs.
MR. ROBINSON said it's not a this-for-that exchange just as
timber jobs really weren't replaced by jobs in tourism. It's
that one sector went away, and another grew. The economy is more
mature now so there are more service sector jobs, including
health care, but retail jobs depend on the things that bring
money into the state then circulate and create the other jobs.
That's why it's important to keep an eye on the drivers. It's
what Alaska produces that the world markets want that creates
the other jobs.
9:51:41 AM
SENATOR GARDNER asked what impact out-of-state workers have and
if there has been growth or a reduction in recent years.
MR. ROBINSON said the 1970s had high employment growth that
didn't translate to nearly as high population growth, meaning
there were a lot of non-resident workers. The department tracks
information about non-resident workers through permanent fund
dividend eligibility, and the recent trend has been slightly up.
SENATOR GARDNER asked if the 20-year-old population is coming
from out-of-state adventure seekers or if it's young Alaskans
returning after completing school in other states.
MR. ROBINSON replied it's a mix of new and returning.
SENATOR GARDNER asked if he thinks that timely and decisive
action by the legislature to develop a fiscal plan could have
changed the trajectory of the slide into recession.
9:54:24 AM
MR. ROBINSON said it can't be quantified with any precision, but
there is no question that uncertainty has an economic cost. When
there's a lack of confidence in the economy and big problems
being wrestled with, it's hard to see normal growth resuming.
That was true for the U.S. economy during the housing crisis.
When things are unsettled businesses don't invest and people
don't leave to seek a better job.
9:55:31 AM
SENATOR STEVENS commented that everything you said seems to
apply to urban Alaska, but he isn't so sure it applies to
villages and the moderate sized communities in rural Alaska. He
also asked about the impact of altering the permanent fund
dividend based on geographic location. The PFD seems to be
important in Anchorage and important but not crucial in the
communities he represents, but crucial for people living in the
villages. He asked Mr. Robinson to reflect on those two issues.
MR. ROBINSON agreed it's important to keep in mind that the
larger population areas are the drivers of the state macro
indicators, not rural areas that have very high unemployment
rates or areas that have a single-driver economy such as fishing
or tourism. He agreed with the second point about the critical
importance of the PFD in rural Alaska. "The lower income you are
the larger factor the PFD is on you and your local economy." He
said a pie chart for just rural Alaska would show a far larger
percentage of personal income comes from transfer receipts than
other sources.
CHAIR COSTELLO commented that Alaska is difficult to
characterize in one pie chart.
SENATOR HUGHES commented that President-elect Trump is talking
about increasing transportation infrastructure and she feels
it's important that Alaska show an appetite for that. She asked
if the data the Research and Analysis Section produces is passed
along to the federal government and if the start date of the
recession has been pinpointed.
MR. ROBINSON explained that it's a cooperative federal/state
data collection system. The state receives funding from the U.S.
Bureau of Labor Statistics to generate unemployment rates and
job numbers. Some data is produced based on the permanent fund
dividend and that is state specific. The department also works
closely with the U.S. Census Bureau to ensure that population
numbers are counted correctly. To the second question, he said
the U.S. Bureau of Economic Research only dates national
recessions, but the wide-spread economic distress we're seeing
now is the broad definition of a recession. "We've dated that
beginning at the 4th quarter of 2015 so we're fairly deep into
the measurement period," he said.
10:02:19 AM
SENATOR HUGHES referred to the industry details slide and asked
if 1,300 state jobs were actually lost in 2016 or if the numbers
refer to positions. She offered her understanding that less than
100 people actually lost their job, the rest were positions that
weren't filled when people retired or moved away. "I'm wondering
whether you've teased that out and for any of the other
industries in the private sector. Are those literally people
who've lost their jobs?"
MR. ROBINSON replied the data refers to people in a month who
actually receive a paycheck. Economically, these are called jobs
and there were on average that many fewer state government jobs
in 2016 than the year before.
SENATOR HUGHES asked if he had any data showing that new dollars
are coming into the state.
MR. ROBINSON said he touched on that when he discussed basic
sectors. What brings money into the state is of primary
importance and secondarily it is the ability to broadly
circulate that money. He cited examples of the increase in the
1990s in the retail and health care sectors.
SENATOR HUGHES commented that tourism truly is a bright spot
because it brings new money into the state whereas health care
is bringing money in but also taking more money out of Alaskans'
pockets to create those new jobs. "That seems to be stirring it
within the state, which doesn't seem quite as healthy to me,"
she said.
10:06:11 AM
SENATOR GARDNER requested that he and other presenters number
the pages so it's easier to refer to for questions.
SENATOR MEYER asked if he agrees that the state coffers benefit
very little from tourism.
MR. ROBINSON replied it's difficult to answer because the state
means the state economy to him and his staff. They focus on
wages and jobs and then try to forecast what is happening with
those metrics. For example, the cruise ship passenger numbers
seem to be growing and that does create a certain number of
retail jobs in the areas that get that business.
CHAIR COSTELLO recalled that the tourism industry brings in $129
million through local and state revenue and the return to the
state is 1:35. She described tourism as an unsung hero of
Alaska's economy.
SENATOR MEYER asked his opinion on initiating a state income tax
because it seems that it would hurt the economy even more. He
added that he favors a sales tax because it is consumption
based.
10:11:01 AM
MR. ROBINSON replied anything that extracts money from the
economy will have an effect, but it's important to keep in mind
the extent to which the money is respent. Unemployment
insurance, for example, tends to be respent to a large extent.
CHAIR COSTELLO asked what impact an income tax has on consumer
confidence.
MR. ROBINSON said he doubts that can be precisely measured, but
the uncertainty associated with the budget deficit is a far
larger factor than the uncertainty of a potential tax.
CHAIR COSTELLO clarified that she is asking if we can expect the
economy to grow if we tax people's income.
MR. ROBINSON replied, "What the government does with that money
matters for the macro economy."
CHAIR COSTELLO referenced the industry details slide and asked
how many private sector and public sector jobs were lost in
2016.
MR. ROBINSON replied state government through 2016 was the only
public sector that lost jobs, [down 1,300 jobs or 5 percent].
The private sector losses were substantially larger,
particularly in oil and gas. The losses in professional and
business services was about the same as the losses in state
government.
CHAIR COSTELLO noted that the economic trends report talks about
the private sector being hit the hardest and that now government
jobs are being lost because of budget reductions.
10:16:53 AM
SENATOR HUGHES asked if the senior population is seen as a net
economic benefit to the state.
MR. ROBINSON replied their income, which largely comes from
federal sources, is definitely a benefit to the state.
SENATOR MEYER asked if anyone has evaluated the value of oil tax
credits to the economy of the state. "That would be helpful
information to us as to whether we continue this program, or we
get rid of it."
10:20:10 AM
MR. ROBINSON replied their evaluation of that would be limited
to identifying job growth or decline and then looking at whether
the companies are new or not to see what that potentially says
about the future. Whether the cost of the credit outweighs the
benefit to the economy would be difficult to evaluate and not
something they do.
SENATOR MEYER asked if anyone is attempting to look at that
question.
MR. ROBINSON suggested he pose the question to the Institute for
Social and Economic Research (ISER) or Norther Economics.
10:21:18 AM
CHAIR COSTELLO thanked Mr. Robinson for coming before the
committee.
SENATOR STEVENS commented that a great take away is that the
last 20 years have not been boom and bust.
10:22:29 AM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 10:22 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2017.01.18 - DOL&WD L&C Presentation.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |
| 2017.01.18 - DOL&WD 2017 Employment Forecast.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |
| 2016.12.02 - DOL&WD Press Release 2016 Jobs #s.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |
| 2016.12.16 - DOL&WD Press Release - November Unemployment.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |
| 2017.01.17 L&C - Hearing Press Clippings - Challenges.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |
| 2017.01.17 L&C - Hearing Press Clippings - Growth.pdf |
SL&C 1/18/2017 9:00:00 AM |
Labor & Commerce Hearings on the Economy |