S2E2 Interview with Maine State Economist Amanda Rector

Maine Policy Matters

In this second episode of Maine Policy Matters Season 2, Eric Miller interviews Amanda Rector, the Maine state economist since 2011. Rector describes what it was like to be the state economist during the pandemic, how things turned out compared to how she originally thought they would turn out, the effects from the federal response to the pandemic, changes in the workplace, and makes predictions for the future.

Maine State Economist Amanda Rector Transcript

Miller: Welcome to your main Policy Matters podcast from the Margaret Chase Smith Policy Center at the University of Maine. I am Eric Miller, Research Associate at the Center.

Today we have with us Amanda Rector, State economist since 2011. In her role as state economist, she analyzes Maine's economic and demographic conditions to help inform policy decisions.

Rector is a member of the state of Maine Revenue Forecasting Committee and serves as the Governor's Liaison to the US Census Bureau.

Amanda Rector has published an essay in the Maine Policy Review entitled, “(Un)precedented: Reflecting on the Early Lessons of the COVID-19 Pandemic”, which you can find of reading of right here on the Maine Policy Matters podcast. Her essay details her personal experience with the pandemic and her journey from unprecedented to precedented times.

She explains how research has given us a historical reference point for the pandemic, saying we will be talking with Rector about her thoughts on what has changed since those first days of the pandemic.

[Background music]

Miller: Firstly, thanks so much for joining us today.

Rector: It's my pleasure.

Miller: To start with an easy one, can you describe for us a bit what it was like to be the state economist in those early days of the pandemic?

Rector: Well, I suddenly became a lot more popular. It's funny how a pandemic and recession will make economists suddenly people that everybody wants to talk to. You know, I think that one of the things in the early days, everyone was scrambling to get a sense of what was happening and scrambling to get data. And so, in some senses, there was this sort of drinking from the firehose effect of just everybody trying to grab onto any piece of information they possibly could.

So, I felt like I was spending hour upon hour just reading things that were in some cases completely foreign to me. I had not done a lot of reading about pandemics in the past - not in my usual wheelhouse.

And then I started just - I think one of the advantages to Maine is that because it's that, it's that sort of big, small town feel. Everybody is willing to just pick up the phone and talk. And so I spent a lot of time just getting on the phone saying, “Hey, you know? What are you seeing? What's happening in your field? Are you seeing things going on in your businesses? What are you worried about? What are you concerned is going to happen that you're not going to be able to come back from or recover from?

And you know, it was really challenging to try to wrap my arms around everything that was going on in a fashion that I could then condense that and share helpful information with the folks who are making policy decisions.

Miller: Yeah, I can't even imagine. I can't say that I heard too much from a state economist prior to the pandemic myself and I have a masters in economics, so it really has been interesting to observe how the ground has shifted in so many ways over the past two years.

What surprised you over the past two years now that we're in a different part of the pandemic, did any of what you predicted in your piece come true, or what did we get right? We need to work out.

Rector: You know, I think we thought it was going to be a lot worse than it really was in economic terms, particularly at the very beginning.

And if you look back at some of the predictions that were coming from very qualified forecasters, there was a lot of doom and gloom that was coming out. And I think that the thing that we didn't and what prevented those really dreadful outcomes was the federal response.

We simply had no way of knowing that the federal response was going to be as rapid and as extensive as it was. And so that really provided enough cushion to prevent those outcomes that were being tossed around early on where you know revenues declining by just tremendous numbers and it didn't happen.

And in fact, if you look at our revenue picture now, we have revenues that are well above and beyond even what you know, our most recent forecasts were we've seen just a lot of revenue growth.

We certainly we don't have explanations for all of it. You know a lot of it is still unprecedented in a different way now, I guess, because it's, you know, looking at this and saying, gosh, we don't really know where all this is coming from.

But I think some of it was a matter of the federal supports that came out. If you look at what happened for personal income, for example, personal current transfer receipts, which are the funds that come from a government entity, either to or on behalf of an individual and it includes things like Social

Security, Medicare, Medicaid, unemployment insurance, other income maintenance benefits, veterans benefits, a whole slew of different things.

Those become a really important component of personal income during a couple of quarters.

In particular, the quarters where stimulus checks went out when the enhanced unemployment benefits were flowing, and then when the child tax credit payments were going out during the second half of 2021.

And so that enabled people to continue to engage in the economy at a level that wasn't really anticipated. We haven't really seen that kind of a response before and so that was able to keep people paying their bills, going up shopping.

Maybe in some cases ordering online because they couldn't actually go out. But able to engage with the economy in a way that If they hadn't had those supports, we wouldn't have seen those purchases continue and it would have been a very different situation for revenues in turn.

Miller: When you mentioned the speed of the federal response, my mind immediately goes to the 2008 and the federal response was a little bit slower. They'll shift your targeted in a much different way than the CARES Act that came out at the beginning, which I'm interested in how the policymakers learn from that and realize the scope of the pandemic and what that means economically, as well as from a personal health context.

Rector: Right. I think there were there were a lot of feelings that the response following the Great Recession wasn't enough and there were a lot of concern is that we, the federal government, needed to move more rapidly this time around.

And of course, now we'll learn from this one and hopefully we won't face another global pandemic anytime soon, but certainly in terms of what the response might be next time. Learning what worked, what didn't work. Uhm, and where things need to be tweaked further?

Miller: Right. Every experience is definitely a learning experience. Yeah, as a research Economic Research practitioner myself, I have a little bit of a technical question I'm interested in asking you if you indulge me. Now it's been a couple of years we have data from the more traditional economic giants that like the Census Bureau that release data. How does the unconventional and creative data sources that you piece together match up with what they've released now, like the Census Bureau, such as, you know, calling up businesses, et cetera.

Rector: Yeah, you know, some of some of what we heard absolutely panned out. I mean, when I talked to folks who were in the leisure and hospitality industry, they said we can't do anything because it is literally our business model is face to face interactions and we cannot do face to face interactions.

We knew that they were going to be hard hit and they absolutely were and that has been a piece of the economy that has been somewhat slower to come back although certainly as we're in the summer tourism season now, they're hopefully doing better than they had been.

I think you know I think that some of the pieces that we looked at there were there were some data sources that I was looking at from Opportunity Insights. They had a website, tracktherecovery.org was their website and we relied on that because it was reasonably well vetted, but they put together a bunch of different sources on things like small business openings and consumer spending and employment. And they were much more timely than a lot of the official sources they had some on employment where they were looking at employment levels by income rank essentially so high wage, middle wage, low wage workers and what were the employment. One of the things that we were seeing there was this K shaped recovery where the higher wage jobs were coming back faster than the low wage jobs and that seemed to pan out in the official data as well. If you looked at the sectors that were lagging behind in the recovery, they tended to be lower wage sectors. So leisure and hospitality, which I mentioned, some parts of health care and social assistance including long term care and social assistance - child cares in particular - and state and local government particularly, sort of the public education piece of it.

So that was one piece that we had an indication that that that was happening before we got the official data on that one.

And another one that actually tracked really well was the time spent outside the home.

Miller: Those walks those walks were big.

Rector: One of the earliest data sources that was actual data that I got was vehicle miles traveled from the Department of Transportation, which you would not think of as a traditional economic indicator, but if you think about the nature of the recession, like, people physically couldn't go anywhere and so we saw vehicle miles traveled drop because of course people weren’t driving to work anymore and they weren't driving to restaurants or to go shopping and or to schools.

And that matched up very well with some of the early declines in employment and then the declines in sort of time spent outside the home, which was one from the track, the recovery website that I mentioned that was I think they were using cell phone data to figure out where people were traveling to using, you know, pings off of cell phone towers and stuff, and that they broke that down by times set up outside the home for different purposes, like going to a workplace and the workplace numbers as everybody shifted to remote work, or a lot of people, shifted to remote work.

We saw that remain subdued, even though things like time outside for recreation went up considerably higher than they had been.

So, there were certainly there were some sources that gave us early indications of what the official data sources might be trending towards later on.

Miller: It's so interesting and fun to reflect how parsing different levels and really digging into the nitty gritty can yield things like the differing recoveries or reactions in different blue collar, white collar, and what type of industry.

It's really interesting and important for responding to and learning from the pandemic and any sort of economic disruption.

Rector: Absolutely.

Miller: So, we are recording this shortly after the June consumer price report came out and, speaking of government speed and degree of response, some would argue because of the 2008 was slower and obviously did not have the as much of a direct U.S. citizen level response in help.

The recovery was quite slow and obviously the pandemic response was fast and quite a bit of money went to U.S. citizens. So, which is led to very different recoveries.

So, there was a 1.3% increase for the month of June and a total of a 9.1% increase of the last 12 months.

Can you reflect on the current economic picture or how much of this inflation is beyond our control in the state of Maine? And how much is from the stimulus packages and what role do supply chain issues play at this current moment?

Rector: Inflation has been one of the hot topics of the past few months. I would say that here in the state of Maine, our control over the national inflation numbers is basically non-existent.

I mean, we are a very, very small portion of the overall national economy.

I think Maine makes up .3% of the US GDP, something like that. So, what we do here has pretty small impacts in terms of the national inflation there. There's been some research and some studies done trying to figure out sort of how much of an effect the national stimulus had on inflation.

It, you know, it seems like it may have contributed, but the more important factor is going back to what we talked about at the beginning. If it hadn't happened, things would have been just so much worse from so many different levels, everything from, you know, supporting state revenues to people being able to continue to support businesses that they are patronizing or being able to pay their rent, being able to buy groceries, I mean, those federal programs had actual calculable results, reducing poverty levels, for example. So, there were a lot of impacts that came out of those beyond, you know, the potential negative consequence of having higher inflation.

I think a lot of what happened with inflation and honestly, nobody really knows for sure.

Inflation, if anything, I think economists have discovered that we have less of an idea of what causes inflation than we did previously. So, certainly there, the supply chain piece of it I think was a very big part, particularly early on essentially prices were going up because you couldn't get the stuff that you needed, got bogged down for a number of different reasons. Part of it was certainly related to COVID and closures due to COVID workforce shortages.

Because of COVID there were some issues around, you know, we really learned just how globally integrated our economy is during the pandemic. Part of it is that the cost of shipping containers went up so much and if you have pain so much more to move stuff that price gets translated through the price of the actual thing that is being transported and that you're buying.

So, there were factors related not just to the shortage of the stuff, but the movement of the stuff.

There was a lot of demand that happened at the same time.

And then there are things that are completely unrelated to all of that. More recently, energy prices have been playing a big role in the increases in inflation as food prices have as well as shelter.

For a few different reasons. I mean, the Russian invasion of Ukraine played a big factor in those rising energy prices, although they've been rising even prior to that.

But it has really added a whole extra level of volatility and increases and that's playing into the food price increases as well. And then shelter, you know, if you look at the housing market in Maine, we saw real estate become extremely desirable as a lot of people wanted to be here and we just haven't had a lot of supply. If you look at when do people decide to, you know, when do businesses decide to make the investment in building a bunch of new housing stock?

Well, it's when you're expecting a lot of new household formations and either it's because you have a lot of young people who are moving out of their parents' homes and into their own homes or you have a lot of migration into an area and Maine hadn't had a lot of that before the pandemic. And so, we haven't had a lot of new homes being built for a long period of time. So limited housing stock and a lot of demand and prices went through the roof and that's been happening in a lot of the country.

It's not just in Maine, but those are certainly if you look at the contributing factors to inflation, those are really essentials.

Those aren't things that we have a lot of discretion over we all need to have shelter, we need to have food and we need to be able to have you know a mode of transportation and heating our homes and electricity and all of those things that go into energy prices.

So, we're at the whims of inflation right now. Really, I think the, you know, the good news is that we did see energy prices come down a little bit in the past few weeks.

Gas prices in particular have started to tick down a little bit. And the Federal Reserve is acting very aggressively to raise interest rates in the hopes of cooling inflation. And that, of course, plays into cooling demand, particularly for things like housing, doesn't do anything to alleviate the affordability issues.

But it does perhaps put a little bit of a damper on how much that has been growing recently, but it also the psychology of it is almost equally as important because it gets into people's minds that this is a temporary situation, there is action being done to bring it under control and so people don't become locked into the mindset of we're going to have prices just higher and higher and higher.

Which then in turn tends to make prices go higher and higher and higher.

Miller: Right, yeah. Something that is encouraging about the lower energy prices and seeing at the pump myself a small but real decrease is that I guess it gets into that economic theory of increasing velocity of the dollar and that's the fears of hyperinflation, which is really, really catastrophic. And speaking of global integration, today, I think it came out that the euro and the dollar are of the same value, which hasn't happened in a long time. And so there are these macroeconomic trends manifesting all around the world, and so it's from an economic perspective, interesting to observe and curious how it will all play out.

Rector: A fascinating time to be an economist.

Miller: In your essay, you mentioned that the notes on your whiteboard were up for so long before you went back to your office that you could still see their traces. How has your workplace and the way you conduct research change since moving to remote work? Then back to in person working, has returning to normal been possible?

Rector: You know, I'm still actually primarily working remotely, and I think that for the type of work that I do and long term, I'll be in more of a hybrid situation, which for the type of work that I do, makes a lot of sense. A lot of what I'm doing is sort of me and a computer and an Excel spreadsheet.

And I do not need the distractions of being in the office when I am trying to do that. At the same time, there are certainly times when it's really helpful to be in person, in the office, meeting face to face with people and collaborate.

And getting back to that is definitely nice.

I think that it's been really interesting. I do a lot of presentations for different groups, and I have had a mix of in-person and remote presentations and I think there are a lot of advantages to having that flexibility now.

It used to be that everything was in person and there are a lot of things that actually are better suited to an online format. Maybe you want to have a lot of breakout groups, and boy, it's a heck of a lot easier to do those when you can just click a button and send people into little groups instead of having to physically move people into small group discussions. And it means, you know, particularly for a shorter presentation, it means that instead of spending an hour driving there, parking, getting in, getting set up.

And then we're reversing that whole process for a 20-minute presentation.

It's just a matter of logging in, doing the 20 minutes and then moving on to the next thing.

But there are also certainly some advantages to the in-person presentations. I like being able to sort of read the room as I'm giving a presentation. I get a much better sense if I'm actually there.

Are people following? Did I lose everybody somewhere down the line and they're just staring blankly at me? Is it after lunch and they're all snoozing now? I can't tell that I'm doing a presentation online whether that's the case, but I like the fact that it seems going forward there's going to be more of this flexibility in how work gets done and how meetings take place and how presentations are done that sort of best suits the format to what the type of work or event or presentation is.

And I think that one of the things that we did a lot more of during the peak pandemic period was the collaborations and just trying to figure out, ‘oh, hey, you know, I don't have any data on this. Can I talk to some people or gosh, you know?

I'm working on this stuff and it's kind of related to that. Maybe we should talk about this together and see if we can figure out some way to work together on this.’ I think there's a lot more collaboration.

I think people became more used to sort of all hands on deck during the pandemic, and having the ability to be comfortable with reaching out to other people and asking for help or asking for a chance to collaborate, I think is maybe one of the other silver linings to come out of this as we're realizing that you can get a lot of really interesting insights if you're working with people that you don't normally work with.

Miller: Totally - it's really amazing that we had all this technology before and then we were all forced to figure it out. And really interesting things that have come out of it is obviously allowed us to do this, which we could have done before, but I mean it just seems like everyone realized, oh all right, we are going to adjust and we'll take what we like moving forward and then once, you know, the pandemic has changed and has become more severe, sometimes less severe other times, and in the lulls, you can kind of be creative in how in person you want to be, which has been really nice for those that are more vulnerable than that.

So, to kind of cap things off, I won't hold you this, but we have to do predictions because you're an economist, even though you're trained to be how precarious the nature of that business is. Will we ever see $3 gasoline or $6 lobster again?

Rector: Uh, gazing into the crystal ball. You know the thing you learn about being an economist is that your predictions are pretty much always going to be wrong. It's just a matter of minimizing how wrong they are. Uh, you know, I think in in terms of inflation, I do think that we're on a course for inflation.

I don't know if it's peaked this month or if it's going to peak next month, but I think we're at the point now where we should start seeing inflation come down in the coming months and return to more normal levels.

I think it's going to be high for a while still, but I don't think it's going to be as high as it is right now. I think the fact that the Fed is acting so aggressively is going to curb the inflationary pressures.

You know, there's also the people are muttering about the next recession and are we in one or are we going to be in one.

Miller: The perennial question.

Rector: Uh, yeah, I know. If I'm not talking about a recession, it just doesn't feel like a normal year, you know. But I think that it's sort of an interesting shift. Normally we're thinking about the next recession and states generally don't have a lot of resources and we're thinking about, well, what is the Fed going to do? How can the federal government both, in terms of fiscal policy and monetary policy, help states whether whatever the recession might look like.

States are actually in better shape than the feds right now, I think, because we still have money flowing out from the American Rescue Plan Act, and in Maine, it's going out through the Maine Jobs and Recovery Plan, and that's a not insubstantial chunk of change.

You know, it was it was a billion dollars, all told so we still have, we have hundreds of millions of dollars, that is still flowing out wrote over a period of a year plus. Which is timed I think really well in terms of helping to support economic activity now at the point when we're sort of thinking, oh gosh, are things going to be slowing down and the federal government doesn't have a lot of resources right now to do things if there is another recession and the state Budget Stabilization Fund is in really good shape and I think that provides us with a lot of cushion if there is something that happens to be able to continue to provide programs and services without having to do the mad scramble to cut things right off the bat the way often happens in a recession.

So, I think it feels very strange to be in this position, you know, at a state level facing down potentially the next downturn, whatever shape it might take, but having reasonably good resources as we're looking ahead to that.

Miller: Very nice.

Thank you so much for entertaining the prediction question.

Is there any exciting research or anything we haven't particularly asked a question that you would like to toss out there as we close out?

Rector: I think one thing that I would mention, you know, I talked a little bit about the real estate market and how interested people were in moving to Maine and I would just say, you know, we did see a really strong migration into Maine during the pandemic. 7th in the nation for our migration rate in 2021, and when we just recently got the final breakdown of 2021 population estimates, we got age and race and ethnicity. We actually saw our median age decline.

Miller: Wow.

Rector: And that's the first time in decades that that has happened, and we were the only state that saw that happen. So, we did in fact see migration of younger populations into the state, which is really important in terms of providing future workforce as more of the baby boomers head into their traditional retirement years we've been struggling, wondering where the workforce is going to come from in the future and this really provided some positive signs that we will in fact have some available workforce down the line.

Miller: That's an excellent note to end on.

Thank you so much for joining us today. We really appreciate it, Amanda.

Rector: It was my pleasure. Thank you for having me.

Miller: You just heard Maine State Economist Amanda Rector’s thoughts on lessons learned during the COVID-19 pandemic and what the future might hold.

You can read her published work on this topic in Vol. 30, Issue Number 2 of the Maine Policy Review. The editorial team for Maine Policy Review is made up of Joyce Rumery, Linda Silka, and Barbara Harrity. Jonathan Rubin directs the Policy Center at the University of Maine. A thank you to Jayson Heim and Kathryn Swacha, scriptwriters for Maine Policy Matters, and to Daniel Soucier, our Production Consultant.

In two weeks, we will have a reading by Gail Dana-Sacco of her essay, “Indigenous Voices Charting a Course Beyond the Bicentennial” to celebrate Indigenous Peoples’ Day.

We would like to thank you for listening to Maine Policy Matters from the Margaret Chase Smith Policy Center at the University of Maine. You can find us online by searching Maine Policy Matters on your web browser. If you enjoyed this episode, please follow us on your preferred social media platform to stay updated on new episode releases.

I am Eric Miller–thanks for listening and please join us next time on Maine Policy Matters.