economy

On August 21st, Mouhcine Guettabi, Associate Professor of Economics at ISER, and Jonathan King, an Anchorage private business consultant, were interviewed by Lori Townsend on Alaska Insight*, Alaska Public Media’s weekly public affairs program.  That program discussed how the COVID-19 pandemic is affecting the Alaska economy.  Dr. Guettabi opened the discussion by explaining that employment in Alaska will probably not fully recover by 2022.  Even if a vaccine is developed that ends the business closures and re-opens tourism by summer 2021, Dr. Guettabi projects that employment in the Alaska economy in 2022 will still be 5% below pre-pandemic levels.

ISER Professor Mouhcine Guettabi forecasts modest economic growth for the Alaska economy for 2021 and 2022.  However, he expects that this modest growth will not be enough for Alaska to fully recover from the COVID-19 pandemic shock.  Professor Guettabi projects that the economy in 2022 will still be 5% below the pre-pandemic level.  The forecast appears in a report entitled Alaska’s Economy and the pandemic, which was prepared for the Alaska Department of Commerce, Community and Economic Development (DCCED.)  The projection that Alaska’s economy will not fully recover by 2022 is consistent with similar Federal Reserve forecasts for the US economy.

ISER faculty are working to inform the Municipality of Anchorage's COVID-19 efforts through a partnership between ISER, the UAA Division of Population Health Sciences, and the UAA College of Arts and Sciences. The group is involved in three distinct projects. First, Dr. Cueva, Dr. DeFeo, and Dr. Berry contributed to a series of publications focusing on specific areas in which the pandemic has impacted Anchorage and its residents, with recommendations for monitoring further impacts and potential responses/interventions. Of the published papers, Dr. Cueva and Dr. DeFeo took the lead on Education; considering the pandemic’s effect on early childhood, K12, and postsecondary systems, they noted the impacts of school and facility closures on students and communities, and provided recommendations to limit negative outcomes and plan for the future. Dr. Berry authored a paper on the economic impact of the hunker down order.

Economists, both nationally and in Alaska, are frequently asked to assess the economic costs of the steps taken to limit the spread of COVID-19.  The economic impacts are huge; the US is experiencing rates of unemployment not seen since the 1930s in the Great Depression.  But the benefits of saving lives by reducing deaths due to COVID-10 area also very large.  In a recent a working paper, “The Impacts of the ‘Hunker Down’ order in Anchorage,” Assistant Professor Kevin Berry used the concept of the economic value of a statistical life to undertake an approximate comparison of the economic costs (in lost income) and economic benefits (in saved lives) of the Municipal response to the coronavirus outbreak.  His work combines epidemiological modeling of how COVID-19 could have spread without the Hunker Down order with the value of a “statistical life”.  The results suggest that the economic benefits of saving human lives to date has far exceeded the economic costs in lost income.

In March 2020, as the first warm rays of sun hit Orca Inlet, Cordova started to emerge from a ferry-less winter. The Alaska Marine Highway System (AMHS) is used by 30 communities for reliable and affordable year-round transportation. But, following the passage of the FY 2020 budget, the Alaska Legislature cut funding for the AMHS by $44 million dollars, a 31% reduction from previous fiscal years.  As a result, according to the Alaska Municipal League, many coastal communities, including Cordova (Figure 1), spent six to eight months with no ferry service during the 2019/2020 winter. Additional funding for the AMHS is included in the FY21 state budget, but Cordova will likely have to wait until July 2020 for the first ferry of the year. By that time, Cordova will have been without ferry service for 9.5 months.

Two UAA staff recently presented information to the Alaska Legislature about the impact of the COVID-19 restrictions on the Alaska economy.  Mouhcine Guettabi (ISER) and Nolan Klouda (UAA’s Business Enterprise Institute) made presentations to the House Labor and Commerce Committee on April 24, 2020.  Video and audio from that hearing can be found online.

The coronavirus crisis has dramatically affected economic and social behavior in Alaska. Getting immediate measures of the impact on economic activity is limited by the inherent lags built into the collection of data on economic variables such as employment and sales. Dr. Mouhcine Guettabi turned to some near-real-time electronic data to get a more immediate sense of how activity has been impacted.

Dr. Mouhcine Guettabi has completed an initial estimate of the possible impact of the COVID-19 business closures on the Alaska economy. To develop those estimates, he focused upon the impacts on the three most directly affected industries: leisure and hospitality, retail, and transportation. He estimated that the direct and indirect effects from reduced activity in those three sectors would be about 48,000 jobs and would reduce state GDP by almost $2 billion in the second quarter of 2020, If the closures are sustained, an additional $2 billion could be lost. Professor Guettabi's estimates may not capture the impacts of many smaller losses spread throughout the economy and do not include possible impacts on the economy from the recent collapse of oil prices. They also do not include the possible offsetting impact of federal COVID-19 aid to Alaska.

Faculty members Dr. Mouhcine Guettabi and Dr. Kevin Berry answer questions about the COVID-19 pandemic in the latest releases of Ask a UAA Expert. Dr. Guettabi answers questions related to the State economic consequences while Dr. Berry addresses pandemic economics. Check out the videos!