Economic Experts: Financial Fallout from COVID-19 Remains to be Seen
An update from Mayor Ethan Berkowitz, Bill Popp, and Mouhcine Guettabi
Mayor Ethan Berkowitz, ISER Economist Mouhcine Guettabi, and Anchorage Economic Development Corporation (AEDC) President and CEO Bill Popp provided an economic update on Wednesday aimed at addressing business concerns as Alaska slowly begins to reopen.
Berkowitz opened the briefing with an overview of the state of the city regarding COVID-19, saying that our hospitals are not overwhelmed and still have additional capacity and the state is expecting a large shipment of PPE to bolster public safety.
He announced that the Anchorage Assembly approved a $1 million Stabilization Fund for small businesses in the Municipality of Anchorage (MOA). The Stabilization Fund will provide $10,000 to 100 Anchorage small businesses and nonprofits. For a business or nonprofit to qualify, it must meet criteria regarding employee numbers and annual revenue and cannot have received federal COVID-19 related funding. Additionally, businesses that cater to 18+ categories of commerce, such as alcohol or marijuana retailers, are not eligible.
The Assembly also approved a $1 million fund that will provide money to help MOA residents who, because of COVID-19, are struggling to make rent payments. These funds can be accessed through calling 211, Berkowitz said.
The mayor was emphatic that he and his advisors are doing their best to prepare for the next few weeks and months, but that the only thing anyone really knows is that changes are coming and there’s no returning to a pre-COVID-19 state. “Nostalgia is not a plan,” he said. “We have to do things differently.” He and others during the briefing referred to Anchorage 2.0 and Alaska 2.0, noting that Anchorage and the rest of the state will need to operate differently in the near and distant future not only to recover from the COVID-19 crisis but also to be more resilient against future economic trials.
“[We need] to take this opportunity to try and rethink and innovate ways [that] the state can partner with private industry, minimize leakage issues, [and] retain more value from Alaska’s resources,” said Guettabi. “This perfect storm has exposed our vulnerability. We should be thinking about supply chains, investments that maximize value for the state economy in the long run.”
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In the short term, what exactly will happen in the next few weeks and months is impossible to say. “Unfortunately we don’t have a whole lot of data to go off of right now,” Guettabi said. “As economists we rely a lot on data and right now it’s scary because we don’t have a lot of real-time information.”
What we do know is that in six weeks 70,000 people have filed for unemployment throughout the state; the Mat-Su and MOA areas represent about 62 percent of the total, or 30,000 to 40,000 people. It’s a bleak number, but Guettabi points out that we don’t know how many of those job losses are permanent and how many are temporary. “If businesses are able to keep people on the payroll and stay open then many temporary layoffs will not turn into permanent separations,” he said.
He said that every business sector in Anchorage is feeling pressure from COVID-19 fallout. Some are undergoing significant drops in revenue; others have seen a slight uptick in business, but that doesn’t remove the uncertainty of the longevity of their partners and vendors or the challenges of securing PPE and operating clean workspaces. As a whole, the state’s economy is dealing with “closures, uncertainty, and disrupted spending patterns.”
Popp’s remarks highlighted how those challenges are affecting the Anchorage business community using data from AEDC’s most recent business survey, which concluded in mid-April.
According to that survey, one-third of Anchorage businesses have laid off or furloughed staff and while 70 percent of respondents reported revenue losses of 50 percent or lower and 30 percent reported revenue losses of 50 percent or higher; 45 percent anticipate that revenue will continue to decrease for the remainder of 2020. Meanwhile, 16 percent of the businesses surveyed report they are at risk of closing permanently, and another 22 percent are unsure, but think it’s possible. “There is a fairly significant amount of uncertainty in the business community,” Popp said.
The Paycheck Protection Program (PPP) has positively impacted the outlook for some Anchorage businesses, Popp reported, as fewer companies anticipated closing after the PPP was launched. He said, “It’s going to be a very hard year for a number of lines of businesses,” but funding programs like the PPP and Anchorage’s new Stabilization Fund are making a difference. “The approval of the $1 million grant program is a small but important additional step toward helping our Anchorage businesses move forward.”
Guettabi says the best thing the state can do is support businesses and individuals to get through this crisis “and get funds on the street while at the same time ensuring that we are containing the virus and doing everything we can from a public health perspective.” While keeping people at home is straining the economy, he said multiple waves of COVID-19 would cause even more damage in purely economic terms. “It’s still considerably better to experience contraction right now, get things in order from a public health perspective and open safely, than to quickly open and bear the damage for multiple years.”
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One factor that contributes to successful business operations is the ability to adapt to new situations; rare is the organization that flourishes without changing at all. This year, as we are all acutely aware by now, will go down in history for many, many things including the wide range of methods implemented by businesses as they adapted to the new landscape presented to them by COVID-19.