Challenges for Hawaii's Post-COVID Workforce - Hawaii Workforce Development Council

Challenges for Hawaii’s
Post-COVID Workforce
 a webinar presentation prepared for
 Hawaii Workforce
 Development Council
 by Paul H. Brewbaker, Ph.D., CBE
 TZ Economics, Kailua, Hawaii
 August 12, 2021

 Copyright 2021
 Paul H. Brewbaker, Ph.D., CBE

Topical interests from the Workforce Development Council

▪ Projection for Hawaii’s economy and workforce for 2022 and beyond
 1. Workforce by industries
 2. Supply chain shortages (semi-conductors, wood, construction supplies, etc.)
 3. Digital impacts
 4. Labor force projections
▪ Long-run impact of COVID
▪ What employers should expect
▪ Alternative industries to hospitality [pass]
▪ Interest rates [Appendix]
▪ Recession (and other risks ) [latent throughout]

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 1

Reality challenge: nobody remembers Hawaii’s 2018-19 recession

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 2

Sapped by US$ appreciation in 2010s, Hawaii real GDP growth vanished
 2018-2019, then was pounded by COVID-19; the plan now: less tourism
 Constant, 2012 chain-weighted dollars: billion (left), trillion (right) 21
 COVID-19
 2.3%
 U.S. 20
 90 Aloha Airlines (right scale)
 shutdown
 U.S.
 19
 85 Hawaii
 U.S. recessions stagnation
 shaded gray 18
 80
 Hawaii
 stagnation 17
 Hawaii
 75
 16
 Hawaii
 (left scale)
 70
 15

 2006 2008 2010 2012 2014 2016 2018 2020 2022

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Source: U.S. Bureau of Economic Analysis (https://apps.bea.gov/iTable/index_nipa.cfm and https://www.bea.gov/data/gdp/gdp-state); regression of natural log of U.S. real GDP 2009Q2-2019Q4 by TZ Economics depicted 3
 with 2 standard error bandwidth (99 percent confidence interval), ( . . )= 1.246015 + 0.005716 where t is a time index in quarters; depicted U.S. time series is U.S. real GDP minus Hawaii real GDP.

Not just some esoteric “GDP theory:” Hawaii employment stagnated
 during these 2010s intervals (or, in 2011, a precursor): “Down is Up”
 Oahu
 Monthly, thous., s.a. (logs) (right scale) 460
 Tohoku
 210 seismic
 440
 event

 200 Employment 420
 stagnation
 Oahu
 190 400
 Neighbor Isles
 180 (left scale) N. Isles 380
 Stagnation
 Aloha Airlines

 170
 shutdown 360

 U.S. recessions
 shaded gray 340
 160 COVID-19

 320
 150
 2006 2008 2010 2012 2014 2016 2018 2020 2022

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Source: Hawaii DLIR (https://www.hirenethawaii.com/admin/gsipub/htmlarea/uploads/LFR_LAUS_LF.xls), seasonal adjustment through 2019 using X-13 ARIMA filter by TZE; total non-agricultural wage and salary jobs 4
 dropped by 160,000 between December 2019 and April 2020. Jobs in June 2021 were still 100,000 below the year-end 2019 benchmark.

Alternative measures of Hawaii labor underutilization, 4-quarter trailing;
 COVID-19 impacts on unemployment and underemployment now easing
 Percent of labor force

 20
 U.S. recessions shaded gray
 Employment 18.5 (U-6)
 stagnation
 U-6
 16

 12 11.9 (U-5)
 10.8 (U-4)
 U-5 10.3 (U-3)
 U-4 8.6 (U-2)
 8
 7.5 (U-1)
 U-3
 U-1
 4
 U-2

 0
 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

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Source: U.S. Bureau of Labor Statistics (monthly) Alternative Measures of Labor Underutilization for States (https://www.bls.gov/lau/stalt.htm and https://www.bls.gov/lau/stalt-archived.htm).

Alternative definitions of labor underutilization for Hawaii and the U.S.

 • U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force

 • U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force

 • U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the
 headline unemployment rate)

 • U-4, total unemployed plus discouraged workers, as a percent of the civilian labor force plus
 discouraged workers

 • U-5, total unemployed, plus discouraged workers, plus all other marginally attached workers, as a
 percent of the civilian labor force plus all marginally attached workers

 • U-6, total unemployed, plus all marginally attached workers, plus total employed part time for
 economic reasons, as a percent of the civilian labor force plus all marginally attached workers

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Source: U.S. Bureau of Labor Statistics (monthly) Alternative Measures of Labor Underutilization for States (https://www.bls.gov/lau/stalt.htm).

Hawaii payroll employment dynamics, April-March ending in 2016-2020, and April-June 2021 (2016 = 1.0)
 1.1 1.1

 1.0 1.0
 0.971 Construction 0.993 Health
 0.9 0.937 Wholesale 0.9 0.937 Professional, bus. serv.
 0.825 Retail 0.932 Financial
 0.8 0.8 0.816 Education
 0.778 Manufacturing
 0.723 Information
 0.7 0.7

 0.6 0.6

 0.5 0.5

 0.4 0.4

 0.3 0.3
 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

 1.1 1.1
 1.017 Federal
 1.0 1.0
 0.985 County
 0.9 0.9 0.907 State
 0.839 Transportation 0.794 Other private services
 0.8 0.8
 0.776 Food services
 0.7 0.669 Accommodation 0.7

 0.6 0.613 Arts, ent., recr. 0.6

 0.5 0.5

 0.4 0.4
 0.399 Accommodation
 0.3 0.3
 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

Sources: Hawaii DLIR, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/); Total jobs index: 1.000 (2016), 1.009 (2017), 1.013 (2018), 1.014 (2019) 0.814 (2020), 0.873 (2021) Copyright 2021
 Paul H. Brewbaker, Ph.D., CBE

Benchmarking real GDP to end-2019, drop in Hawaii value-added most
 extreme in travel, tourism, entertainment, and recreation—plus ag
 Hawaii real GDP by industry indexes (2019Q4 = 100)
 125 Agriculture

 Military

 100 All other industries
 Retail + wholesale

 Agriculture
 75 Transportation

 Arts, ent. recr.

 50
 Accommodation, food services

 25

 0
 2018:Q1 2019:Q1 2020:Q1 2021:Q1

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Source: BEA, U.S. Department of Commerce (https://www.bea.gov/data/gdp/gdp-state); quarterly real data through 2021Q1 indexed to 2019Q4 = 100.

Normalized U.S. labor force participation rates by age: large post-Covid
 rebound in younger cohorts, persistently lower rates in older cohorts
 Standard deviations
 COVID-19

 2

 1 Young
 Shredders 16-19
 20-24
 0
 25-54
 -1 55+

 -2 Old
 Duffers
 -3
 U.S. recession shaded
 -4

 2015 2016 2017 2018 2019 2020 2021 2022 2023

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Source: Current population survey (household survey), U.S. Bureau of Labor Statistics, retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/LNS11300012) (July 2, 2021)

Younger workers since the 1980s face larger opportunity cost for not
 acquiring higher education than in past; workforce participation lower
 Percent of population in each age group
 25-54
 81.7%
 80

 70 20-24 70.8

 60
 16-19
 50

 40
 38.4
 35.4
 55+
 30

 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

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Source: Current population survey (household survey), U.S. Bureau of Labor Statistics, retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/LNS11300012) (July 2, 2021)

U.S. Beveridge Curve: higher unemployment means fewer jobs open;
 post-pandemic mismatch  more openings for given unemployment
 Million job openings May
 2021

 8

 6 April 2020 – May 2021

 2010s
 July 2010 – March 2020
 April January 2002 – June 2010
 4
 2020
 2000s

 2

 0
 0 2 4 6 8 10 12 14 Unemployment rate (%)

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Sources: U.S. Bureau of Labor Statistics, Job Openings: Total Nonfarm [JTSJOL], Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; (https://fred.stlouisfed.org/series/JTSJOL, 11
 https://fred.stlouisfed.org/series/UNRATE), July 10, 2021.

Inflation fear-mongering

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Supply chain disruptions in semiconductors and motor vehicles
 partly a result of idiosyncrasies in evolution of both industries

 ▪ Chip industry focus on design: about one-third of manufacturing brands have no in-house
 fabrication (“Fabless Integrated Circuit” sales), depend on “Fabs” for thei production
 ▪ Foundry market concentration: Taiwan Foundry has over half of global foundry capacity; top 5
 companies control ¾ of global capacity—more reliance on increasingly concentrated Fab market
 ▪ Large share of industry set up for ≥ 16-28 nanometer production; cutting edge is now 5-7 nm
 ▪ More focus on propriety chip design, less on commodity business—lag in transition for autos;
 “dynamic where there’s been less focus on auto production technologies, more…on cutting edge.”
 ▪ Trump Trade War plus Chinese and EU mercantilism (industrial policy) supply constraints
 ▪ Pandemic raised demand for consumer technologies (laptops), restaurants moving to Cloud, etc.,
 pushing auto sector further out in the queue at low period for their sales; plus: transport costs

 Also: pre-Covid U.S. auto and light truck sales had declined in late-2010s (see slide 21):
 ► 17.9 million in December 2016
 ► 16.9 million in December 2019
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Source: Comments of Shawn DuBravac, Ph.D., CFA, Chief Economist, IPC, and President, Avrio Institute, from a panel discussion, Auto Market Update sponsored by the National Association for Business Economics, 13
 June 24, 2021 (https://www.youtube.com/watch?v=rfQB2o5GzGg&t=379s).

Worldwide semiconductor sales experienced Sudden Stop like rest of
 global economy in March-April 2020 before mounting recovery

 Billion U.S. dollars, monthly, s.a. (log scale)
 4.75

 4.50
 COVID-19
 4.25
 U.S. recession shaded
 4.00

 3.75

 3.50
 April
 3.25

 3.00
 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3 20Q4 21Q1 21Q2 21Q3
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Source: World Semiconductor Trade Statistics Historical Billings Report (https://www.wsts.org/esraCMS/extension/media/f/BBH/5116/bbhist-35.xls), seasonal adjustment by TZ Economics.

Expansion of Trump Administration steel and aluminum tariffs, etc.
 precipitated pre-Covid contraction in worldwide semiconductor sales

 Billion U.S. dollars, monthly, s.a. (log scale) Trump Last
 Trade slide
 War
 4
 Lehman
 Brothers

 3
 COVID-19

 U.S. recessions shaded

 2

 2006 2008 2010 2012 2014 2016 2018 2020 2022
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Source: World Semiconductor Trade Statistics Historical Billings Report (https://www.wsts.org/esraCMS/extension/media/f/BBH/5116/bbhist-35.xls), seasonal adjustment by TZ Economics.

Shuttered then rebooted factories, supply chain disruptions, factor
 constraints, strong recovery, raised producer prices, building costs

 Index, monthly, s.a. (1982 = 100) (log scale)

 Lumber
 400
 Trump Iron and Steel
 Trade COVID-19
 War
 300

 200

 U.S. recession shaded

 2015 2016 2017 2018 2019 2020 2021 2022

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Sources: U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Lumber and Wood Products: Lumber [WPS081Metals and Metal Products: Iron and Steel [WPU101], data through June 2021, retrieved from 16
 FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/WPS081, https://fred.stlouisfed.org/series/WPU101), August 7, 2021.

Lumber futures contracts prices fell ⅔ in last 3 months as Covid supply
 chain disruptions began to be resolved: transitory inflation factor

 Weekly, dollars/thousand board feet (log scale)
 $1686
 1,600
 COVID-19

 1,200
 U.S. recession shaded
 1,000
 Trump Trade War (China)*
 800
 Plus: yield spread
 compression
 600
 $460 $525
 (8-11-21)
 400

 $264

 200
 2016 2017 2018 2019 2020 2021
*White House releases a statement that it would impose tariffs on $50 billion of goods from China shortly after announcing the final list of covered imports on June
15, 2018; Peterson Institute for International Economics (https://www.piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide). Slide copyright 2021

Source: Chicago Mercantile Exchange, Random Length Lumber Futures, via Yahoo Finance (https://finance.yahoo.com/quote/LBS%3DF/history?p=LBS%3DF), weekly closing prices through August 6, 2021 and daily quote 17
 August 11, 2021

U.S., Hawaii inflation through 2020: FOMC committed to PCE inflation
 averaging 2 percent, implies headline CPI inflation ≥ 2.5 percent
 “With inflation running persistently below this [2 percent] longer run goal, the
 Percent
 8 change in CPI-U, year-over-year [FOMC] will aim to achieve inflation moderately above 2 percent for some
 time so that inflation averages 2 percent over time and longer-term inflation
 expectations remain well anchored at 2 percent” (November 5, 2020)

 6
 U.S. recessions shaded COVID-19

 4
 Honolulu
 2.5%
 2

 0
 9/11
 U.S. urban average
 -2
 Lehman
 Brothers

 1995 2000 2005 2010 2015 2020 2025
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Sources: Federal Reserve Board (https://www.federalreserve.gov/newsevents/pressreleases/monetary20201105a.htm), U.S. Bureau of Labor Statistics (https://data.bls.gov/cgi-bin/surveymost?r9), data through 2021Q1; 18
 quarterly interpolations or averages calculated by TZ Economics.

Inflation sharply reflected binding supply chain constraints in 2021Q2,
 disruptions from pandemic and recent recovery: transitory inflation
 Percent change (year-over-year)
 5.4% (July)
 5
 U.S. average COVID-19 4.6% (July)
 4

 3

 2

 1

 0
 Urban Hawaii U.S. recession shaded
 -1

 -2
 2017 2018 2019 2020 2021
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Source: U.S. Bureau of Labor Statistics (https://data.bls.gov/cgi-bin/surveymost?r9, https://www.bls.gov/news.release/cpi.nr0.htm), to facilitate comparison semiannual inflation rates for 2017 and most of 2018 are included 19
 with the newer year-over-year inflation estimates for Urban Hawaii inflation at bi-monthly frequencies, both data sets reported through July 2021.

Contributions to U.S. real GDP growth: consumption-led recession,
 reversal 2020Q3, ARPA consumption growth of 7-8% p.a. 2021Q1-Q2

 Contributions to percent change in real U.S. GDP +33.8%

 30 C
 COVID-19

 20
 +6.3% +6.5%
 10 ∆ +4.5%
 ∆ 
 0 ∆ −NX
 −5.1% −∆ 
 -10

 -20 −C

 -30
 −31.2%
 -40
 2018Q1 2019Q1 2020Q1 2021Q1

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 20
Source: Bureau of Economic Analysis, U.S. Department of Commerce (https://www.bea.gov/data/gdp/gross-domestic-product), actual data through second quarter 2021.

Both demand and supply factors disrupted auto and light truck sales:
 deep Covid sales drop, production hiatus, relief package sales spike

 Million units at annual rates, s.a. (log scale)
 ARPA
 18 17.9

 16 16.9
 Cash for
 Clunkers

 14
 COVID-19

 12
 Tohoku
 seismic
 event
 10

 U.S. recessions shaded

 8
 2006 2008 2010 2012 2014 2016 2018 2020 2022

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Source: U.S. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos and Light Trucks [ALTSALES], retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/ALTSALES)

One surprise after the initial Covid shock: surge in U.S. real GDP growth
 from residential investment, homebuilding increase (plus renovations)

 Contribution to percent change in real U.S. Gross Domestic Product

 2.0
 COVID-19

 1.5

 1.0

 0.5

 0.0

 -0.5

 -1.0

 -1.5

 -2.0
 2016Q1 2017Q1 2018Q1 2019Q1 2020Q1 2021Q1

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Source: Bureau of Economic Analysis, U.S. Department of Commerce (https://www.bea.gov/data/gdp/gross-domestic-product), actual data through second quarter 2021.

Implicit inflation expectations: difference (nominal − real) Treas. yields:
 LR inflation expectations ≤ % leave room for symmetric reflation

 Term structure of inflation expectations (percent)*
 30-year

 2 ∗ = 2

 1
 “When it gets a little warmer, it
 miraculously goes away”
 5-year DJ Trump
 0

 COVID recession
 “Following periods when inflation has been running
 persistently below 2 percent, appropriate monetary
 -1 policy will likely aim to achieve inflation moderately
 above 2 percent for some time” FRB (August 2020)

 2008 2010 2012 2014 2016 2018 2020 2022
 *Nominal U.S. Treasury yields minus TIPS yields at same maturities
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Source: Board of Governors of the Federal Reserve System (https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15), monthly implied inflation expectations through June 2021 and Statement on Longer-Run 23
 Goals and Monetary Policy Strategy (August 2020) https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-
 strategy.htm)

U.S. economic forecasts (and monetary union) provide insight into
 likely price inflation scenarios this year and next, even for Hawaii

 Median forecast 2021 2022
 percent changes 2021 2022 Lowest 5 Highest 5 Lowest 5 Highest 5 n

 Q4/Q4
 Core PCE deflator 2.2 2.1 1.6 3.2 1.7 2.6 45
 PCE deflator 2.6 2.2 2.2 3.6 1.7 3.3 43
 GDP implicit price deflator 2.7 2.3 2.1 3.3 1.7 3.0 45
 CPI-U 2.8 2.3 1.7 3.7 1.6 3.2 45
 Real U.S. GDP 6.7 2.8 4.1 8.1 2.2 4.8 46

 Annual average
 Real U.S. GDP 6.5 4.4 5.0 7.3 2.9 5.6 49

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Source: National Association for Business Economics (May 24, 2021), “NABE Panelists Boost Forecast for GDP Growth in 2021; Expect Current Inflation to Moderate by Year-End” (public summary available at 24
 https://www.nabe.com/NABE/Surveys/Outlook_Surveys/May-2021-Outlook-Survey-Summary.aspx).

Work-From-Home (WFH) and labor force changes

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FRB Atlanta (May 2020) survey results: “the share of working days
 spent at home is expected to triple after the COVID-19 crisis ends”

 Pre-Crisis Work From Home Post-Crisis Work From Home

 5
 days 5 days
 3.4 10.3

 Never 90.3% Never 73.0%
 2-4
 2-4 days
 days
 9.9
 3.4

 1 d.
 1 day
 2.9
 6.9

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Source: Federal Reserve Bank of Atlanta Macroblog (May 28, 2020), “Firms Expect Working from Home to Triple,” FRB Atlanta Survey of Business Uncertainty. 26
 (https://www.frbatlanta.org/blogs/macroblog/2020/05/28/firms-expect-working-from-home-to-triple)

January 2021 NABE member survey of firms: Did your company
 implement new work from home policies due to the health crisis?

 All employees Most employees Some employees
 35.5% 30.1% 19.4%

 No employees n.a.
 10.8% 4.6%

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Source: National Association for Business Economics (https://nabe.com/NABE/Surveys/Business_Conditions_Surveys/January_2021_Business_Conditions_Survey_Summary.aspx); survey question asked of 27
 respondents January 4-12, 2021 was, “Did your company implement new work from home policies due to the health crisis?”

Survey of firms: “Compared to expectations before Covid (in 2019)
 how has working from home turned out?” (Four survey waves, 2020)

 Hugely better 19.0%

 Substantially better 21.2

 Better 20.8

 About the same 26.2

 Worse 6.9

 Substantially worse 3.1

 Hugely worse 2.7

 0 5 10 15 20 25 Percent

 n = 2,500 (May, July, September/October 2020), 5,000 (August)

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Source: Nicholas Bloom on working from home: will it persist? (https://www.youtube.com/watch?v=N8_rvy-hqUs), Princeton Bendheim Center for Finance, working paper by Jose Maria Barrero, Nicholas Bloom, and 28
 Stephen J. Davis (January 2021), “Why Working From Home Will Stick,” posted at https://nbloom.people.stanford.edu/sites/g/files/sbiybj4746/f/wfh_will_stick_v5.pdf.

U.S. workers who teleworked or worked at home for pay specifically
 because of COVID-19, excluding those who did pre-pandemic*

 Percent of workers by educational attainment

 70 68.9

 60
 Advanced degree
 53.5
 50

 40 College graduate
 37.4
 30 Total (25 and older) 29.5
 25.1
 22.7
 20 Some college
 15.3 14.4
 High school graduate
 10 8.8
 5.2 Less than high school
 4.1
 0 1.9
 2020.05 2020.07 2020.09 2020.11 2021.01 2021.03 2021.05 2021.07

 *Or those whose telework was unrelated to the pandemic.
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Source: U.S. Bureau of Labor Statistics (monthly) through June 2021; supplemental data measuring the effects of the coronavirus (COVID-19) pandemic on the labor market (https://www.bls.gov/cps/effects-of-the- 29
 coronavirus-covid-19-pandemic.htm and https://www.bls.gov/web/empsit/covid19-table1.xlsx).

Census household pulse data* show 1/5 of respondents live in Hawaii
 households in which at least one adult teleworked because of Covid

 50%

 40%
 Winter
 Break

 30%
 Spring
 Break

 20%

 Substituted some or all in-person work
 10%
 Teleworked because of coronavirus

 0%
 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21

 *Surveys before April 2021 define “Percentage of adults living in households where at least one adult has substituted some or all of their typical in-person work for telework because of the
 coronavirus pandemic,” thereafter “Percentage of adults living in households where at least one adult has teleworked because of the coronavirus pandemic in the last 7 days”
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Source: U.S. Bureau of the Census, Household Pulse Survey (https://www.census.gov/programs-surveys/household-pulse-survey.html)

July 2021 NABE® Business Conditions survey (firms): 66% higher
 sales, 3% lower sales; 53% < 100 employees, 35% > 1,000 employees

 Fully remote 13% Not enough applicants 14%

 Inadequate matches 17%
 Flexible/hybrid 61%
 No shortages 37%
Pre-COVID arrangement 21%
 Don't know/NA 24%

 Don't know/NA 5% Other 8%

 0% 20% 40% 60% 0% 10% 20% 30% 40%

 Post-Covid Work From Home? Worker shortages?
 Q. Are work-from-home policies in your company going to remain Q. Is your company experiencing shortages of workers?
 in place after COVID? If so to what degree? If so, what are the reasons?

 n = 92 n = 92
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Source: National Association for Business Economics (NABE®) member survey (July 2021) (https://nabe.com/NABE/Surveys/Business_Conditions_Surveys/July-2021-Business-Conditions-Survey-Summary.aspx).

Related WFH impacts of Covid: increased investment in IT equipment
 and software; remote work, fiscal stimuli, private savings/investment

 Quarterly annualized growth rates (%)

 20 20.3
 18.4

 12.3
 10

 6.5

 2.6
 0

 Covid
 recession

 -10
 2015 2016 2017 2018 2019 2020 2021

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Source: U.S. Bureau of Economic Analysis, Private fixed investment in information processing equipment and software [A679RC1Q027SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; 32
 https://fred.stlouisfed.org/series/A679RC1Q027SBEA, August 9, 2021.

Monthly U.S. private non-ag business applications for federal EIN:
 post-Covid entrepreneurship impulse: “Take this job and shove it”
 Thousand monthly new business applications for a federal EIN, s.a. (log scale)

 500

 400
 COVID-19
 U.S. recessions shaded

 300

 200

 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
 *Applications for an Employer Identification Number (EIN), except for applications for tax liens, estates, trusts, certain financial filings, applications outside of the 50 states and DC
 or with no state-county geocodes, applications with certain NAICS codes in sector 11 (agriculture, forestry, fishing and hunting) or 92 (public administration) that have low
 transition rates, and applications in certain industries (e.g. private households, civic and social organizations). Slide copyright 2021

Sources: U.S. Census Bureau, Business Applications: Total for All NAICS in the United States [BABATOTALSAUS], retrieved from FRED, Federal Reserve Bank of St. Louis; 33
 https://fred.stlouisfed.org/series/BABATOTALSAUS, August 11, 2021, seasonally-adjusted data through July 2021.

Jump in output/hour of workers in nonfarm business sector (labor
 productivity) during recession vs. afterwards unique to Covid event

Quarterly percent change from one year earlier Annual percent change

 6
 U.S. recessions shaded
 5 2
 Internet COVID-19
 4 Internet
 COVID-19
 1
 3 CBO Potential

 2
 0
 1
 Fakebook Fakebook
 0 −1

−1

−2 −2
 1985 1990 1995 2000 2005 2010 2015 2020 1985 1990 1995 2000 2005 2010 2015 2020

 Labor output per hour Total factor productivity

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Source: U.S. Bureau of Labor Statistics, Nonfarm Business Sector: Real Output Per Hour of All Persons, University of Groningen and University of California, Davis, Total Factor Productivity at Constant National Prices 34
 for United States, retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/OPHNFB, https://fred.stlouisfed.org/series/RTFPNAUSA632NRUG), August 9-10, 2021,
 Congressional Budget Office (May 19, 2020) Interim Economic Projections for 2020 and 2021 (https://www.cbo.gov/publication/56351#data).

Comments of BLS Commissioner William Beach on which of new data
 sets “drove a lot of interest and traffic; what really seemed to take off?”

 ▪ I’m beginning to think that this pandemic…has accelerated structural change in the economy. …You can
 sense it in the distributed platform as a way of working—telework. Automation, global value chains had
 already…wreaked havoc with the workplace but I think the workplace is changing faster today than at any time
 since the industrial revolution.
 ▪ The questions we put out had two sides to them. One side measure the pandemic. …The other side of that
 was to take a look at the way that the workplace itself was restructuring. So, we’ve gone from 36 percent at
 telework in the payroll employment to about 14 percent and it’s leveling off. Well, if it stays at 14 percent that’s
 a very serious, high percentage.
 ▪ We did surveys on workplace safety, on sick leave, all of that’s changing too as the workplace changes. So, I
 think the research question coming out of this at least for the Labor Department will be to say:
 ▪ How has the structure of the workplace changed?
 ▪ How has the structure of labor relations changed?
 because of the pandemic.
 ▪ We’re not going to go back to normal because the changes already are noticeably permanent in certain
 areas. That’s what our surveys…are beginning to shed light on this, I don’t what to call it, maybe it’s The New
 Economy. And on this point 86 percent now of payroll employment is in the services-providing sector…and
 that really accelerated in the last five years. So, that’s another indication that we’ve got some permanent
 changes going on.
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Source: Comments of William Beach, Commissioner, U.S. Bureau of Labor Statistics, National Association for Business Economics 2021 Economic Measurement Seminar (August 9-11, 2021), 31:41 of panel discussion 35
 on Maintaining the Quality and Integrity of U.S. Government Data (August 9, 2021).

Summary: patterns of Hawaii macroeconomic dynamics in 2010s

▪ 2010s U.S. economic expansion @ 10⅔ years its longest ever (June 2009 – February 2020)
 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions).
▪ In real GDP (https://www.bea.gov/data/gdp/gdp-state), Hawaii had four recessions, 2007-2020, or
 two intervals of idiosyncratic macroeconomic stagnation between the two U.S. recessions,
 December 2007 – June 2009 (Great Recession) and February 2020 – April 2020 (Covid).
 1. Annualized U.S. real GDP growth 2009-2019: 2.3 percent p.a.
 2. Annualized Hawaii real GDP growth 2009-2019: 1.8 percent p.a.
▪ Adjusted for Regional Price Parity (https://www.bea.gov/data/income-saving/real-personal-
 income-states-and-metropolitan-areas), relative Hawaii real per capita personal income declined:
 1. 90 percent of the U.S. average (2009) (trough of Great Recession)
 2. 85 percent of the U.S. average (2019) (pre-Covid peak of U.S. expansion)
▪ Challenge facing Hawaii: The Roaring 20s or The Boring 20s? (both an improvement?)

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Challenge to 2020s workforce development strategy: Less Is Not More

 ▪ Covid Recession slammed weakened, stumbling, lagging Hawaii economy
 • Four intervals of Hawaii employment, real GDP loss, not two, 2007-2021
 • Covid economic transmission channel: travel & tourism (health channel: returning residents)*
 • Structure of small open economy specializing in export
 ▪ Demographic change, post-pandemic hysteresis (temporary changes turn out to be permanent)
 • Boomer retirement accelerating—labor force participation ratcheting downward
 • Remote work quantum leap: new rules of the game?
 • Mismatches in post-Covid recovery (e.g. Retail or last mile fulfillment? Menu or QR code?)
 • Absolute Hawaii population decline from net resident out-migration (Appendix)
 ▪ Official HTA policy of less tourism implies lower exports, lower output, less employment, reduced
 household income (Appendix)

*Hawaii Department of Health COVID-19 Disease Clusters in Hawaii (https://health.hawaii.gov/coronavirusdisease2019/covid-19-disease-clusters-in-hawaii/) “Weekly COVID-19
 Cluster Report” (August 5, 2021) (https://health.hawaii.gov/coronavirusdisease2019/files/2021/08/Hawaii_COVID-19_BiWeekly_Cluster_Report_5-August-2021_FINAL.pdf).
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Pau

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