Waiting for Ilummination - Alaska Permanent Capital Management

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Waiting for Ilummination

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The dark time of year is upon us. Today there is just under eight hours of daylight in Juneau, just over seven hours in Anchorage, the Mat-Su, the Kenai, Bethel, and Bristol Bay, just over six in Fairbanks, a bit over five in Kotzebue and less than two in Utqiagvik where by the end of the week the sun won’t rise again until January 22nd.  These are also challenging times not just for those of us who enjoy a balance between light and dark, but for Alaska’s people and their economies. Things are going to get worse for a bit longer yet, but then they’re going to get better. In the past week we’ve seen signs indicative of both the worse and the better. In this post I’m going to try and tackle both.

Alaska’s economic recovery has stalled out with total consumer spending approximate 14 percent below January 2020 levels. The months of June, July and August saw very small improvements in consumer spending after the large gains seen in May, but since September consumer spending has been flat and perhaps even a bit down overall. The September timeframe coincides with the end of Alaska’s summer season, the end of many federal supports for the economy, and an increase in viral activity in Alaska.

Figure 1. Percent Change in All Consumer Spending in Alaska, 2020

Small businesses have been particularly hard hit with total small business revenue down 34 percent overall, with especially hard hit leisure and hospitality revenues down 55 percent. Remember, these estimates are down from January 2020 numbers. The estimated losses if compared to typical summer highs would be even larger. I happened to take a stroll through one of Anchorage’s malls the other day. I estimate at least 1/3 of the spaces were unoccupied and I know these spaces housed businesses just a year ago.

Figure 2. Percent Change in Small Business Revenue in Alaska, 2020

An economic rebound isn’t coming until Alaskans (and people around the world) feel like they can participate in the public activities such as travel, dining, theater, concerts, without fear of contracting COVID-19. What we saw this summer when government public health measures expired was that economic activity didn’t rebound. This event signaled to economists that consumer fear is holding back the economy. This viewpoint is one that I share with Kevin Berry from ISER who is one of Alaska’s next generation of economists. The safety we’re all seeking isn’t on the horizon just yet. In fact, the next couple months are likely to be the toughest of the pandemic. State data show that it took just over 200 days to generate the first 10,000 COVID cases and less than a month to generate the next 10,000.  This past week the Department of Health and Social Services Weekly COVID Case Update noted the following:

An updated model epidemic curve predicts Alaska’s cases will continue to accelerate over the next week and are expected to double again within the next 25 days or sooner, with a daily growth rate near 3%.

Thus, the turn isn’t imminent, but I strongly believe the evidence suggests that by the time the sun rises again in Utqiagvik that we’ll be able to see another light on the horizon indicating a path towards the end of the pandemic as well. Here is what is informing my thinking:

  • On November 9th Pfizer and BioNTech announced that early data from their vaccine indicated a 90 percent efficacy in reducing viral infection. Mid-stage data is due out from the two companies later this month with the possibility of FDA approval by December 31st. This vaccine requires two doses and ultra-cold storage (-112 degrees F) which will limit distribution early on. It is not part of the U.S. Government’s Operation Warp Speed.
  • Moderna announced today (!) the results of its early-stage vaccine trials and the news is good; 94.5 percent efficacy at the first stage analysis. The company enrolled 30,000 volunteers for this test and on November 12th the trial hit the numbers of COVID illness in its volunteer population required to statistically valid the vaccine’s efficacy. They turned around the analysis in less than a week and issued good news in that the vaccine will be refrigerator stable for 30-days. It is part of the U.S. Government’s Operation Warp Speed.
  • The Johnson & Johnson and AstraZeneca/Oxford vaccines are both expecting to release results by year end. Neither of these vaccines require ultra-cold storage and the Johnson & Johnson vaccine is a single-dose variant.
  • All the vaccine manufacturers have started making hundreds of millions of doses each in the hopes that their vaccine will work. The general US population will likely see the opportunity to get vaccinated around May give or take a month. We won’t likely have a choice as to which vaccine we get as individuals will most likely be given whatever is available.
  • Also, on November 9th, the FDA approved Eli Lilly’s monoclonal antibody treatment under an emergency use authorization. The drug is manufactured antibodies to COVID which are best administered early in the course of the disease to those whose disease is currently mild/moderate but who are thought to have a high chance of progressing to more severe disease. The drug is administered via a single injection. Supplies will be severely limited early on with just one million doses manufactured by year’s end. More manufacturing supply will come online in Q1 2021.

There are hard days ahead economically and socially. There are also many better days ahead economically and socially. The next 60-90 days will be very challenging, but as the light returns to Alaska, we’re also going to have the path illuminated to an easier 2021.

Jonathan’s Takeaway: Alaska’s COVID case counts are increasing at roughly 3 percent per day indicating stressed economic, social, and health systems ahead. The economy will not recover until the risk COVID represents is tamed. We can feel the taming starting to take shape, but it’s a bit like touching an elephant in the dark.  We’ll start to be able to see the shape of the taming by mid-winter and late spring will bring significantly better days. Hang on, whatever it takes.

Jonathan King is a consulting economist and Certified Professional Coach. His firm, Halcyon Consulting, is dedicated to helping clients reach their goals through accountability, integrity, and personal growth. Jonathan has 24 years of social science consulting experience including 17 years in Alaska. The comments in this blog do not necessarily represent the view of employers and clients past or present and are Jonathan’s alone. Suggested blog topics, constructive feedback, and comments are desired at askjonathan@apcm.net.

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