October 17, 2025 • 34 mins
Earlier this year, we traveled along with San Francisco Fed President Mary Daly on a trip to Alaska. You may remember the episodes we did with Mary at the time, as well as business and other leaders in the state. But we also had the chance to sit in with Mary while she talked with her contacts on the ground. On this special episode, you'll hear some of those discussions and get a sense of exactly what happens when a regional Fed president goes out and learns from the community. You'll hear from officials at the Port of Anchorage dealing with the new trade landscape, a company that makes steel tubing for the oil industry coming to grips with tariffs, and from managers involved at the airport, to get a sense of how the Alaskan economy works and the distinct pressures they're facing right now.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news seconds of why.
Speaker 2 (00:08):
The question is not if thou count interest rights, The
question is by how much.
Speaker 3 (00:13):
The answer to your question, John, is a quarter percentage
point cut as expected, but Fed officials also see two
more cuts this year, in October and December.
Speaker 4 (00:22):
It's Wednesday, September seventeenth. The Federal Open Market Committee has
just wrapped up their most recent meeting in Washington, DC,
and after two days of analyzing and debating and forecasting,
the Committee voted to cut interest rates by twenty five
basis points.
Speaker 5 (00:37):
I remain squarely focused on achieving our dual mandate goals
of maximum employment and stable prices for the benefit of
the American people. While the unemployment rate remains low, it
has edged up, job gains have slowed.
Speaker 1 (00:50):
Yeah, it's the first time the Fed has cut an
over a year move coming after months of debate, And
on the one hand, the labor market is slowing, But
on the other hand, we're still trying to figure what
the impact of the tariffs is on prices, and consumer
spending is still going strong.
Speaker 4 (01:05):
Right, you could make a convincing case for deeper cuts,
but you could also make a case for even raising
benchmark rates at this point, and we don't tend to
get a lot of these types of FED meetings where
the outcome is, you know, so debatable. So we have
to ask, how did the Central Bank actually make the
decision to cut to do that. Let's back up six
(01:27):
weeks to the beginning of August and head north. In fact,
we are going three thousand miles north.
Speaker 6 (01:39):
I added to my collection of flies for fly fishing yesterday.
Speaker 4 (01:44):
Oh, I am slightly obsessed with fishing, Lores.
Speaker 3 (01:47):
I don't even fish.
Speaker 6 (01:48):
I don't know I like to fish.
Speaker 4 (01:49):
That's Mary Daily, president of the Federal Reserve Bank of
San Francisco.
Speaker 6 (01:53):
So here's why I get these flies. I go to
places all over that have fly fishing, and then I
buy a fly that's specific to their area to remind you.
It's sort of geeky, but it reminds me that everybody fishes,
but that you have to have a local knowledge to fish.
Speaker 4 (02:10):
Well, yeah, you have to have like the fly that's
in season for that particular location.
Speaker 6 (02:14):
It kind of is why you go to the places
to visit to learn more about the economy. You sort
of have to You can understand it, but you don't
know it until you have the locality, so you don't
do it.
Speaker 4 (02:23):
Daily oversees the twelfth District of the FED. It's the
largest of the districts and includes the nine most western
US states, plus the most northern, the Last Frontier, the
Great Land, the Sour Dough State. I am talking about Alaska, obviously.
Speaker 1 (02:39):
In early August, Mary Daily visited Anchorage, the largest city
and biggest port in Alaska. It was actually your third
visit to the state this year. And she's on a mission.
Speaker 4 (02:48):
Of sorts, an expedition.
Speaker 1 (02:50):
Sure, she's on a northern expedition to try to find
answers to the questions that everyone in all FED officials,
everyone else are trying to constantly puzzle out. Right now,
what is going on with the US economy? Where's it headed.
Speaker 6 (03:02):
I've heard that everywhere we've gone that this city's under
so much pressure and it's hard to what's your diagnosis
about how this happened?
Speaker 4 (03:09):
So what was she seeing and how did it actually
inform the Fed's decision to cut rates A month later,
on the special edition of the All Thoughts podcast, we
are going to follow along as Daily tours her district,
speaking to local business leaders like a factory that makes
parts for the oil industry, and the airport and the
port itself to try to get a closer look at
(03:30):
the giant logistics hub that is the city of Anchorage.
Speaker 1 (03:44):
You know, every town in the world, I think probably
likes to describe its residents is quote scrappy unquote, But
this really is like the first place I've been where
I think that might actually be true. People in Alaska
really do seem scrappy.
Speaker 4 (03:57):
They have to be to get along up here. We
are on the edge of this vast wilderness. In fact,
one thing we learned is that people up here love
to compare the size of their state to how many
texases it would fit.
Speaker 1 (04:10):
In which, to be fair, Texans love to do that.
Speaker 7 (04:13):
Stuff as well.
Speaker 4 (04:14):
Yeah, the answer is two and a half. By the way,
Alaska is the size of two and a half texases. Okay,
so everyone knows Alaska is big, but until you visit,
it's hard to really appreciate just how big. The only
way to get from Anchorage, which is the largest city,
to Juneo, which is the capital, is a two hour
plane ride. And if you want to haul supplies from
(04:36):
a place like Fairbanks, which is in the interior to
the oil fields on the north slope. That is a
ten hour drive on what is mostly a dirt road
with one gas station on the way.
Speaker 1 (04:49):
It's really isolated. There's not even a railroad that takes
you to the Lower forty eight or even to Canada,
and there are mountains that basically cut off huge sections
of the state from each other.
Speaker 4 (04:58):
But as we learn during our visit, Alaska is still
dealing with all the same issues that the rest of
the US faces, so things like inflation, unemployment, tariffs, housing shortages,
logistical snarls.
Speaker 1 (05:11):
That's why Mary is here to try to get a
handle on the broader US economy by looking at a
place that, at least right now is sort of ground
zero for a lot of these trends.
Speaker 6 (05:20):
Is to collect information. So we collect information not only
on the wide array of data that are available, and
then we have history and models, we have all of
those things, and then we have conversations.
Speaker 1 (05:32):
Today, Mary is the guest of honor at the Anchorage
Economic Development Corporation's annual gathering. The Denigna Convention Center downtown
is overflowing with more than fifteen hundred local business owners, politicians,
civic leaders, they're here to mingle, network, talk shop, and
hear Mary's thoughts on where she thinks the economy stands well.
Speaker 6 (05:50):
As counting the cranes is a future looking variable is
so important. So I just want to thank everybody who's
ever answered the base book, who's ever met with us.
If you like the bage book, we'll send you another one.
It used to be beige, by the way.
Speaker 4 (06:03):
So this is the fact finding portion of the expedition,
because yes, Mary is giving a speech about what she's
seeing in the economy, but she's also learning from the
local businesses who are listening to her.
Speaker 6 (06:15):
And what I've been hearing is that the uncertainty is
the word of the day. I guess it was on
the Bingo card, and uncertainty makes it harder for firms
and households to know what they're doing next, which makes
it harder for us as policymakers, for a reserve policymakers
to know exactly how the economy will evolve.
Speaker 1 (06:32):
Mary isn't a voting member of the committee this year,
but as a Reserve bank president, she still participates in
all the FMC meetings, where she offers her own assessments
and opinions. Based on what she's seeing in the economy
of the twelfth district right now, and so her views
still do help shape the committee's decision.
Speaker 6 (06:48):
All the states in my district on a regular basis,
as are my teams, and the reason for that is
so that we can understand firsthand what you are in
particularly thinking about what you see as your oppertunities when
you see your challenges, but also how do you see
the economy today. You know, there's an interesting statistic we
just heard that people feel decently pretty good about their
(07:10):
own situation, but pessimistic about the economy. We need to
understand why. What are you seeing as you look out?
Businesses are making decisions today about what they're going to
do at the end of the year. We need to
know what those are. We need to know how households
are feeling. Are they feeling strapped? Are they feeling like
they have enough disposable income? And the data alone, looking
(07:31):
at the published data, not all the micro data. You
could look at a hundred series and you would never
have the complete picture.
Speaker 4 (07:38):
I'm sure we've all heard the phrase data dependent, and
the feed leans heavily on the volumes and volumes of
economic statistics that get released every month when making its decisions,
but sometimes you can augment that data with things you
observe on the ground.
Speaker 1 (07:55):
Right, So, just a few days before the Alaska trip,
we got a jobs report that heavily revised down the
employment numbers from the earlier months. It was a big surprise,
huge moment for the markets, but it didn't really surprise Mary.
Speaker 6 (08:08):
And what was interesting about the jobs report on Friday
is it better matched in the direction of change, not
in the magnitude. It better matched what I've been hearing.
And so a discippointing device for data that you don't
know if they're really accurate is what you hear from people.
Because people do not tell you I feel really, really
comfortable getting a job only to find out that the
(08:29):
job market report is bad. What they will tell you is, boy,
it looks really worrisome out there. And then you get
a jobs report that doesn't look like the rapid job
growth that was the thing that was out of whack,
the rapid job growth from the month before. Is what
I said, Well, really, that's not what I'm hearing. What's
the gap? And we spent a lot of time digging
in and unpacking that but then when the job's market
(08:50):
report got revised, I was like, Okay, that makes more
sense even.
Speaker 4 (08:54):
But of course jobs aren't The only thing that FED
cares about. It's mandate is low unemployment and stable inflation,
and these things seem to be operating across currents right now.
Inflation has been above the FEDS two percent target for
a while, and the concern is that with tariffs coming
in from the Trump administration, prices are just going to go.
Speaker 8 (09:15):
Up further.
Speaker 7 (09:17):
Time.
Speaker 1 (09:20):
So to understand the risk here, we're following Mary to
the offices of Northern Solutions. It's an Alaskan company which
makes components and parts for the oil industry, which is
obviously big business in the state.
Speaker 4 (09:32):
Yeah, all the pipes and casings and spools and valves
and things like that.
Speaker 1 (09:39):
And as you can imagine, steel is a pretty key
input for a lot of these products. Since June, there's
been a whopping fifty percent tariff on steel and aluminum
coming from abroad.
Speaker 9 (09:49):
So we compared twenty one So today it's cheaper inste
if we prepared today to twenty three twenty four.
Speaker 1 (09:56):
Yeah, it's small and companies like Northern Solutions are trying
to figure out how to navigate all these new trade restrictions.
It's not as easy as just say switching to a
US supplier.
Speaker 2 (10:06):
You do that and you can't get the continuity, well,
then that's a cost to you that not need back there.
So it's really helpful for us to think about when
we try to think out the effects of parrots. Yeah,
effects of changes on any administration monitor ustory absolutely.
Speaker 9 (10:25):
I mean the terriffs, so the tariffs balanced it so
I can go to a US mil I can go
to a foreign mill and I'm going to pay the same.
Speaker 10 (10:33):
Price now with that tariff.
Speaker 9 (10:34):
But it's the industry that mill's here too, and the
lead time of that steel that's the problem. And honestly,
we have a lot of small steel mills here in
this country, a lot of small ones. They're very very
specific to a certain industry.
Speaker 4 (10:49):
In other words, all steel isn't equal.
Speaker 10 (10:52):
So there's mills all around the world, steel mills all
around the world. I can't use them all because of that,
because of their mptrs, not tree of origin, just how
well they do it. Okay, So we have a lot
of steel that comes into the US too, mean that
that comes from brought in as green to he treated
in the US, so that MTR is generated from the
(11:15):
US heat treat facility and now it's FO one percent American,
and then you avloid all this stuff on it.
Speaker 9 (11:21):
So when we talked about metals that I can use
there all over the place, but I can't use them all.
Speaker 4 (11:26):
This is actually a really good example of the kind
of information that makes Mary's visits so important. It's the
kind of thing that you can't really learn from an
economic data release.
Speaker 3 (11:36):
I'm good use that.
Speaker 6 (11:37):
One of the things that I just to show you
how you how you use things I've learned is that
if you think about how likely we gift all of
our potouction from the United States, are how likely is
a global market on steel to be able to if
we put it all back today. I mean, you've taught
me two things already that not everybody is here during
your industry, and you can have to have a specific,
(12:00):
you know, heat strategy in order to even use the tilS.
They have to be a startin following. So it just
means that you don't have the open marketplace that I
think many people would think you have, right, so they
would just look at the number of manufacturers they'd say, oh, look,
you could do all of this, but yeah, there's barriers.
Speaker 4 (12:17):
You know, there's another big Alaskan business that's grappling with tariffs,
and that is the port next stop, the Port of Alaska.
Speaker 6 (12:42):
Maybe have a demand for those ships, the commission message,
although I'll say that's it in particular.
Speaker 3 (12:48):
So they have three ships that they rotate between, and
they have.
Speaker 1 (12:52):
The Port of Alaska used to be called the Port
of Anchorage. By the way, very cool. It's a deep
water port. The tides here are crazy. Here's a Jim Jagger,
the ports acting director, explaining what they're having to deal with.
Speaker 3 (13:04):
So Port of Alaska has a variety of issues that
we're not unique, except that we're unique in the combination.
So what are our challenges? For instance, we have a
pretty fast current. We have a thirty foot tide flus
so between low tide and high tide thirty thirty four.
(13:24):
And our maximum tide flux between the lowest tide of
the season and the highest tides twenty.
Speaker 10 (13:29):
I heard the second biggest tide flux in the world.
Speaker 3 (13:31):
Yeah, it's actually depending on it's probably fifth or sixth Okay,
but in places where people actually do commerce.
Speaker 11 (13:37):
We're number two.
Speaker 4 (13:38):
So because of the harsh growing conditions and the short
summer season in Alaska, almost all of the state's fresh
food has to be imported, and the vast majority of
that food arrives by boat from west coast piers, mostly
Seattle and Tacoma, and with only four ships coming in
per week, Alaska's supply lines are stretched very tight, and
(14:00):
Mary has actually experienced the downside of those stretched supply
lines before. Here she is talking with Jim about.
Speaker 6 (14:06):
It running out of the things. We ran out of
this when I was here in May, the hotel ran
out of coffee because they said the supplier hadn't gotten
it in and they wouldn't get it until in May.
Speaker 3 (14:17):
We had we lost a ship because of a mechanical
If your timing was correct, you may have your coffee
may have been coming down there.
Speaker 6 (14:24):
Yeah, I went down for coffee and she said, we
don't have any coffee before that.
Speaker 3 (14:29):
That actually demonstrates how skinny are a supply line.
Speaker 6 (14:31):
Yeah, that's why I wanted to talk about it. I'm
still I'm not traumatized by my lack of cof but
I just was surprised at how I'm surprised at how
fragile our vulnerable.
Speaker 3 (14:43):
We have six to ten days worth of food in
the state, so we import. Depending on whose numbers you believe,
between ninety four and ninety six percent of the food
consumed in Alaska is important figure. We're handling three quarters
of that, so you know, if that's coming in. We
have four Schedu tool container ships a week, two on Sundays,
two on Tuesdays. If we lose a ship, you know,
(15:05):
that's twenty five percent of the food for the next week.
And it is very realistic that if you walk into
the fred Meyer grocery store and you go, huh, why
is there no salad? You know that's why. And you
know it's an interesting take. If you go down to
the lower forty eight and say, go to home Depot.
Home Depot's lower forty eight stores have a restock where
(15:29):
they can restock an entire store in thirty two hours.
So if you're on the Gulf Coast and they have
a hurricane, they completely sell the store out. They're set
up so that they can come in thirty two hours
later they're totally restocked. Okay, now apply that model to
the Alaska where we have no warehousing thirty two hours.
It means if if we have an earthquake or something
(15:51):
happens here and they empty out the store, they place
the order thirty two hours to get a home up
on the dock. There is then a sixty six and
a half hour float up the anchorage. And that's assuming
you're on the right cycle and you don't have to
wait a couple of days till the next ship leaves.
So it gets up here in sixty six and a
half hours, and then it's got to make it from
(16:12):
anchorage to wherever the final destination is. So if you're
in midtown Anchorage, well you'll you'll be there this afternoon.
If it's in Fairbanks, well that's another day. So suddenly
your thirty two hour restock, you know, could be six
seven days.
Speaker 4 (16:28):
Can I ask a dumb question? But why don't you
build some warehousing capacity?
Speaker 9 (16:32):
That was my question.
Speaker 4 (16:34):
I don't think it's dumb.
Speaker 8 (16:35):
I'm just going to ask those.
Speaker 3 (16:37):
Problem is that we have a very small population spread
out over a huge area.
Speaker 7 (16:42):
You know, three quarters of a million people in.
Speaker 3 (16:44):
The entire state, so basically a city, right, and our
state is twenty half times the size of Texas.
Speaker 7 (16:50):
But if you really want to see it, Go to Bushell, Aska.
Speaker 1 (16:54):
That's John Day, an engineer who is leading a big
modernization effort at the port.
Speaker 7 (16:58):
So go to these remote communities and then you'll really
see the effect of what you're talking about. It's it's pronounced.
If they if they get somebody's communities only get three
four barges a year. Basically, milk is hugely expensive. Anything
fresh is very expensive. If you go to you know,
I've worked living here, I've worked in a lot of
(17:18):
remote places. We're talking Kodiak or Saint Paul Island or
Bethel or something. Then you really see the end of
the supply chain and it's super sensitive in those locations.
Speaker 6 (17:30):
So it's very it can be vulnerable here, but it's
sort of fragile.
Speaker 7 (17:33):
Vulnerable, and we're kind of a hub. It's a hub
and spoke system, so we're a hub that helps supply
those areas and if we're sensitive there ten times.
Speaker 9 (17:42):
Yeah.
Speaker 1 (17:43):
Now, just to make things even more complicated, the port
also has tariffs to contend with. Is the primary import
hub from the entire state. You can imagine that the
port thinks about this issue quite a bit. Not only
could tariff's impact trade all those ships going in and
out of the harbor, stopping to refuel forth. But they
could get the first look at how companies choose to
respond to any increase in costs.
Speaker 6 (18:04):
Also, it's just dis likely to push up the price
of goods. Oh yeah, so they're gonna face tariffs on goods,
but they're also going to face port fees on goods,
and so then it's just more expensive.
Speaker 3 (18:13):
It gets worse though, because we have we have the
death spiral. So we raise our tariffs and then right now,
most of the cargoes coming in out our deep water vessels.
But if we raise our tariffs per ton enough, at
some point, some folks who are shipping things that are
non time sensitive new cars, you know, we'll go, you know,
(18:35):
for the tariff. I'm just going to bring it up
on a on a barge into Wittier and I'll save
the tariff. And then what happens is that then reduces
our overall tonnage. We still have to make our debt payment,
so we now have to increase our terraffs more. So
we're getting into the spiral. Food prices just wight not
(18:55):
be even more And oh, by the way, you know,
maybe you're not paying the teriff on your truck. You're
going to get it ten days later than you thought
you were, you know, so you're getting worse cargo service also,
So the impact on Alaskans is they're paying more for
certain things like food and everything else is the cargo
service is less good.
Speaker 6 (19:16):
Well that the normal way that all of this, any
kind of extra tax, ships out is you either wait
longer or you pay more. Yeah, that's that's just how
it works, I mean, in any of the things. That's
why I tried to put an optimistic endpoint on the
speech is because you can I think ultimately it's fair.
You guys are very enthusiastic about what you're trying to do.
(19:36):
But there's the other side of it, which can easily
demoralize people.
Speaker 4 (19:39):
Right.
Speaker 6 (19:40):
It just seems like an insurmountable problem when you think
of the cost structure here. But we have no option,
no exactly. So you can either back yourself into corner
with no option, or you can just say well and
be sad, right, or you can just get busy with purpose.
Speaker 1 (19:53):
So yeah, it's sort of common knowledge that it's expensive
to live in Alaska. It just costs more to get
goods and services pure and reasons. Understand that's part of
the deal. But there are limits to just how much
of a premium Alaskans are willing to pay to live here,
and just how much businesses can get away with when
it comes to pricing. Cheryl Beckham, director of finance at
the Port of Alaska, talks about this plant with Mary.
Speaker 6 (20:14):
I'm revealing my economists background, but it just makes sense
that the price would be higher here because you have
all these additional costs, right, But you're saying the small
communities think it should be like it is in the
lower forty eighth, So you have to put this difference.
Speaker 3 (20:26):
So there's a similar So they understand that there's a
transportation cost.
Speaker 6 (20:30):
But what is that margin, Okay, if they're willing.
Speaker 11 (20:33):
To accept, right, So as costs go up and fuel
goes up, and the you know, the fuel bars and
tankers that bring it, they cost more, so.
Speaker 6 (20:41):
You're probably always having a little less margin up here.
Speaker 4 (20:44):
Right, yes, right, so you do This is the really
big question. How much of the extra cost coming from
the tariffs is going to be absorbed by the companies themselves,
whether it's importers or the transportation businesses. Or middlemen like
the port, and how much of the cost is going
to be passed on to consumers, which would basically risk
(21:04):
fanning inflation again.
Speaker 1 (21:06):
And that is a big deal for a state which
already has a very high cost of living, precisely because
all this stuff needs to be imported and often sent
on to really remote locations within the state. And even
if you're not necessarily importing foreign goods, tariffs can still
push up the price of what's made domestically.
Speaker 6 (21:22):
Question that we're grappling with making monetary policies. There's taxes, immigration, deregulation, tariffs,
and those things have different likely effects, et cetera. So
one of the questions I've been asking people when we
meet is do any of those things? Can you see
any of those effects immediately affecting your business here? And
(21:43):
do you have any sense if they will immediately?
Speaker 7 (21:47):
Well, the terrible things come up in our construction. So
we have a lot of big construction coming up, like
a couple of billion dollars worth of infrastructure.
Speaker 11 (21:57):
Is that port specific Yeah, that's our doc okay, And
most of that is by America because we're trying to
get betteral bonding, and that comes with a territory, so the.
Speaker 7 (22:09):
Tariffs are not directly affecting that because theoretically that's on
foreign goods. However, it floats the whole the whole harbor up.
So the price is steel by America, steel by America,
this buy America. That all goes up. So it has
a large effect on that.
Speaker 6 (22:27):
How much of you seeing prices rise maybe from when
you were originally planning it?
Speaker 7 (22:32):
I mean, no, by one, We admit that number, but
it's a large number. We started off ten years ago
with something that was four hundred million dollars billion.
Speaker 4 (22:43):
Now right the Port of Alaska is in the middle
of a two and a half billion dollar modernization program,
so it's a pretty bad time for the cost of
materials to be going up. And there's also the financing costs.
Right if interest rates go up because inflation is rising,
that also adds to the cost, possibly exponentially.
Speaker 6 (23:04):
So can I ask a question about from all three
of you, is like, if you think about the work
you do here and the things that are facing Alaska
with all the just the economy, the changes in policy,
interest rates, et cetera, what's worrying you right now?
Speaker 7 (23:21):
Well, worries me is financing our project billion dollar project, right,
and we have some state and federal funds. The rest
of it is slated for local revenue bonds.
Speaker 6 (23:35):
Okay, now do you think does pass.
Speaker 7 (23:38):
They've given us authority to issue those. But the question
is how much can you push into the market once
and it puts our debt load front and whatever it
is fifty million, we have now up to billions from
one point one.
Speaker 8 (23:54):
We have authority for one point on it.
Speaker 7 (23:56):
It greatly increases our debtloads. So that's the biggest.
Speaker 3 (23:59):
So our goal is one third one third, one third,
one third federal money, one third state money, one third
local money. For our next DOC, it's going to be
roughly nine hundred million dollars right at this point, we
have ninety percent is going to be local, five percent state,
five percent federal. If we go forward to finance the
(24:24):
ninety percent, that's the local share after forty years, two
point two two point two eight billion dollars is what
we're going to pay back for nine hundred billion. So
you know, with that, the cost of financing it's going
to be huge. And what is that going to do
to overall cargo range? Remember, one of our things is
(24:46):
We're trying to maintain a cost effective cargo system, and
boyd when do we get crushed?
Speaker 4 (24:54):
Speaking of effective cargo systems, a huge chunk of Alaska's
imports go through the port, as we've been discussing, but
it is not the only logistics hub in town.
Speaker 7 (25:05):
Right.
Speaker 1 (25:10):
To get a complete picture, we've got to check out
the airport, which is exactly where Mary is heading.
Speaker 8 (25:15):
Next.
Speaker 6 (25:16):
I'm sort of plane like that cost three million.
Speaker 3 (25:19):
Yeah, that's you lightly used.
Speaker 9 (25:25):
We have we have a we have a handful of those.
Speaker 11 (25:26):
Yuh what are the planes to go out?
Speaker 8 (25:30):
I'm Susan Alton, the Alaska International air of course system controller,
and we're all glad to have you here today to
show off our system. Uh so I'll go ahead and
get Okay, So what is the Alaska International Airport System
also known as ai a S. It is made up
(25:51):
of Ted Stevens Anchorage International Airport, which is the largest
passenger airport in the state of Alaska. It's also the
four our busiest cargo airport in the world and the
second busiest in the United States. Anchorage is impact is
the largest airport in Alaska. Passenger activity for fiscal year
twenty five and that's four point excuse me, five point
(26:14):
four million passengers served air cargo for twenty twenty five.
We had three point seven million tons for twenty twenty five.
And again, as I said, we're number two in the
USA and number four in the world with regards to cargo.
We support one in seven jobs in the Anchorage area
(26:36):
and provide one point eight billion in annual economic impact
to the state. And you can see on the screen
about the direct jobs and wages impact versus the indirect
and induced jobs and wages. So we're pretty significant economic
mood for the state of Alaska.
Speaker 1 (26:56):
Air Transport is huge for Alaska, and the Anchorage Airport
basically acts like a truck stop for the whole state
and really global trade. Fully loaded cargo planes moving stuff
from Asia, the Mid East, parts of Europe will stop
here to refuel on their way to the rest of
North America. And for Alaskans it's the main depot for
most of the goods they order from elsewhere, which are
sorted in the huge FedEx and UPS hangars before being
(27:18):
distributed throughout the state.
Speaker 4 (27:20):
It's also a commuter hub. Many of the oil workers
on the North Slope work in two week on two
week off shifts, they catch a small plane up to
the fields where they live in company housing while on
the job, and then they return to their families and
hometown for the rest of the month.
Speaker 10 (27:36):
It's effectively use that as a suburb.
Speaker 12 (27:42):
Yeah, so this is the iconical Philips you come from
the airplane that's going up too. So if you're a slopeworker,
I have a nice Alaska lifestyle over there, pop on
a grand at the door, you walk over the next terminal,
get on your.
Speaker 4 (28:00):
Like the rest of the country, housing is a major issue,
even in a state with say it with me, Joe twice,
the land of Texas.
Speaker 1 (28:10):
Yeah, as we've seen over and over, Alaska faces all
the issues that the rest of the US does, only
at least right now more acutely.
Speaker 6 (28:17):
There's a variety of other things going on. And if
you're already your infrastructure is already a little vulnerable, then
you can imagine any shock we get into the United States.
Just in that, I mean, sorry to the United States.
You get it amplified.
Speaker 3 (28:30):
Yeah, no, that's absolutely true.
Speaker 6 (28:31):
And she's treating indicator which helps me make good decisions.
When I talk to all of you.
Speaker 1 (28:41):
Mary is going straight from the airport to the airport,
I guess she's flying to the lower forty eight. And
there's obviously a lot of possible takeaways from the trip.
Speaker 6 (28:49):
The cost structure of Alaska was something I think we
learned the most about today, just why are the prices
so much higher? And where would you ever try to
mitigate that? And of course the things that are going
on like inflation or just changes in how goods are
shipped or supply chain challenges, they're just magnified in Alaska,
and I think we also learned, you know, I learned
(29:11):
that they happen here first. It really is sort of
this canary in the coal mine almost that when you
see it here, you know it's coming elsewhere. It's going
to be lower in all likelihood because there's other ways
to ensure yourselves, but you're going to see it.
Speaker 4 (29:24):
We don't know exactly what was discussed at the FED
September meeting, or at least we don't know until the
transcript is published in like twenty thirty, but I think
you can get a good sense of what a trip
like this actually adds to the conversation. When FED governors
are all sitting around the table trying to figure out
what to do next.
Speaker 6 (29:44):
So one of the things that is challenging right now
was challenging back in the days where we're trying to
fight high inflation, and it's definitely challenging today when you're
trying to figure out the real impact of tariffs not
only on growth but on inflation. As just wanting unpacking
what's happening in Alaska and knowing at whatever point how
(30:05):
long this is going to take. Because of the non
fungibility of steel, the interoperability of some of the supply
chain networks, all of those things give me insights that
I can then take back to the meeting, and then
it's not just us exchanging forecast. I think they're going
to be like this long. I think they're going to
take this long. It provides evidence underlying evidence that you
(30:25):
can't find in your statistics because the statistics the statistics,
we just don't know. All we're doing is projecting, But
now we have our projections filled out by data and information,
and that makes a huge difference when you're trying to
make good policy.
Speaker 1 (30:51):
That's it for our special Alaska episode. We hope you
enjoyed tagging along with us and Mary on the Anchorage expedition.
Speaker 4 (30:58):
Joe, what stuck out to you?
Speaker 1 (31:00):
So many things stuck out to me from that trip,
you know, like being in Alaska, it really did feel
like the end of the world, didn't it, Like the
edge of the Empire.
Speaker 4 (31:11):
Yeah, it definitely felt frontier.
Speaker 1 (31:13):
Like for sure, I've been in rural areas before, even
more rural obviously than an urban area like Anchorage, but
I've never just felt distant like I did in Alaska,
and so it's very easy to understand why it's a
state permanently in a state of sort of supply chain stress.
Speaker 4 (31:28):
Yeah, that's what really stood out to me as well,
because when you go to a place like Anchorage, I
mean there are a lot of the same restaurants and
chain stores that you would see in any other place
in America. The difference is all that stuff has to
be transported thousands and thousands of miles to get there.
Speaker 6 (31:47):
Yeah.
Speaker 1 (31:47):
No, it's a constant strain, just extraordinary. You know, I
knew these things about how far flong everything was, but
then say, going to the airport and seeing how small
planes serve the just sort of worker commuter system was
really eye opening. Or just the sheer number of people
who own planes themselves. Yeah, like they have these pontoon
(32:08):
planes in the water that in another state would be
how people would have their boats in the marina. Except Alaska.
Its plans like, it's just it's permanently it's permanently stretched.
Speaker 4 (32:18):
Do you think we could go to Hawaii next? That's
in the twelfth district.
Speaker 10 (32:22):
Right, Let's do it.
Speaker 7 (32:23):
I'm down.
Speaker 4 (32:24):
Shall we leave it there?
Speaker 1 (32:25):
Let's leave it there.
Speaker 4 (32:26):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1 (32:31):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Thank you to Mary Daily and everyone at the San
Francisco FED, including Jen Chamberlain, for letting us come along
on their fact finding journey. Thank you also to the
Port of Alaska, the Alaska International Airport System, and Northern
Solutions for the tour of their facilities. Thank you to
Ashley Ebnett of the Anchorage Economic Development Corporation, And a
(32:52):
final thank you to all the Alaskans who took the
time to talk to us about their state. Everyone was
so friendly and don't forget scrappy. You can follow our
Purdue users Carmen Rodriguez at Carmen armand Dashel Bennett at
dashbot and kill Brooks at Kilbrooks. From our odd Loots content,
go to Bloomberg dot com slash odd Lots. We have
a daily newsletter and all of our episodes, and you
can chat about all of these topics twenty four seven
(33:13):
in our discord discord dot gg slash.
Speaker 4 (33:16):
Od lots And if you enjoy Oudlots, if you like
it when we go to far flung places, then please
leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber, you can
listen to all of our episodes absolutely ad free. All
you need to do is find the Bloomberg channel on
Apple Podcasts and follow the instructions there. Thanks for listening,
(34:01):
Stood in a
Bloomberg Audio Studios, podcasts, radio news seconds of why.
Speaker 2 (00:08):
The question is not if thou count interest rights, The
question is by how much.
Speaker 3 (00:13):
The answer to your question, John, is a quarter percentage
point cut as expected, but Fed officials also see two
more cuts this year, in October and December.
Speaker 4 (00:22):
It's Wednesday, September seventeenth. The Federal Open Market Committee has
just wrapped up their most recent meeting in Washington, DC,
and after two days of analyzing and debating and forecasting,
the Committee voted to cut interest rates by twenty five
basis points.
Speaker 5 (00:37):
I remain squarely focused on achieving our dual mandate goals
of maximum employment and stable prices for the benefit of
the American people. While the unemployment rate remains low, it
has edged up, job gains have slowed.
Speaker 1 (00:50):
Yeah, it's the first time the Fed has cut an
over a year move coming after months of debate, And
on the one hand, the labor market is slowing, But
on the other hand, we're still trying to figure what
the impact of the tariffs is on prices, and consumer
spending is still going strong.
Speaker 4 (01:05):
Right, you could make a convincing case for deeper cuts,
but you could also make a case for even raising
benchmark rates at this point, and we don't tend to
get a lot of these types of FED meetings where
the outcome is, you know, so debatable. So we have
to ask, how did the Central Bank actually make the
decision to cut to do that. Let's back up six
(01:27):
weeks to the beginning of August and head north. In fact,
we are going three thousand miles north.
Speaker 6 (01:39):
I added to my collection of flies for fly fishing yesterday.
Speaker 4 (01:44):
Oh, I am slightly obsessed with fishing, Lores.
Speaker 3 (01:47):
I don't even fish.
Speaker 6 (01:48):
I don't know I like to fish.
Speaker 4 (01:49):
That's Mary Daily, president of the Federal Reserve Bank of
San Francisco.
Speaker 6 (01:53):
So here's why I get these flies. I go to
places all over that have fly fishing, and then I
buy a fly that's specific to their area to remind you.
It's sort of geeky, but it reminds me that everybody fishes,
but that you have to have a local knowledge to fish.
Speaker 4 (02:10):
Well, yeah, you have to have like the fly that's
in season for that particular location.
Speaker 6 (02:14):
It kind of is why you go to the places
to visit to learn more about the economy. You sort
of have to You can understand it, but you don't
know it until you have the locality, so you don't
do it.
Speaker 4 (02:23):
Daily oversees the twelfth District of the FED. It's the
largest of the districts and includes the nine most western
US states, plus the most northern, the Last Frontier, the
Great Land, the Sour Dough State. I am talking about Alaska, obviously.
Speaker 1 (02:39):
In early August, Mary Daily visited Anchorage, the largest city
and biggest port in Alaska. It was actually your third
visit to the state this year. And she's on a mission.
Speaker 4 (02:48):
Of sorts, an expedition.
Speaker 1 (02:50):
Sure, she's on a northern expedition to try to find
answers to the questions that everyone in all FED officials,
everyone else are trying to constantly puzzle out. Right now,
what is going on with the US economy? Where's it headed.
Speaker 6 (03:02):
I've heard that everywhere we've gone that this city's under
so much pressure and it's hard to what's your diagnosis
about how this happened?
Speaker 4 (03:09):
So what was she seeing and how did it actually
inform the Fed's decision to cut rates A month later,
on the special edition of the All Thoughts podcast, we
are going to follow along as Daily tours her district,
speaking to local business leaders like a factory that makes
parts for the oil industry, and the airport and the
port itself to try to get a closer look at
(03:30):
the giant logistics hub that is the city of Anchorage.
Speaker 1 (03:44):
You know, every town in the world, I think probably
likes to describe its residents is quote scrappy unquote, But
this really is like the first place I've been where
I think that might actually be true. People in Alaska
really do seem scrappy.
Speaker 4 (03:57):
They have to be to get along up here. We
are on the edge of this vast wilderness. In fact,
one thing we learned is that people up here love
to compare the size of their state to how many
texases it would fit.
Speaker 1 (04:10):
In which, to be fair, Texans love to do that.
Speaker 7 (04:13):
Stuff as well.
Speaker 4 (04:14):
Yeah, the answer is two and a half. By the way,
Alaska is the size of two and a half texases. Okay,
so everyone knows Alaska is big, but until you visit,
it's hard to really appreciate just how big. The only
way to get from Anchorage, which is the largest city,
to Juneo, which is the capital, is a two hour
plane ride. And if you want to haul supplies from
(04:36):
a place like Fairbanks, which is in the interior to
the oil fields on the north slope. That is a
ten hour drive on what is mostly a dirt road
with one gas station on the way.
Speaker 1 (04:49):
It's really isolated. There's not even a railroad that takes
you to the Lower forty eight or even to Canada,
and there are mountains that basically cut off huge sections
of the state from each other.
Speaker 4 (04:58):
But as we learn during our visit, Alaska is still
dealing with all the same issues that the rest of
the US faces, so things like inflation, unemployment, tariffs, housing shortages,
logistical snarls.
Speaker 1 (05:11):
That's why Mary is here to try to get a
handle on the broader US economy by looking at a
place that, at least right now is sort of ground
zero for a lot of these trends.
Speaker 6 (05:20):
Is to collect information. So we collect information not only
on the wide array of data that are available, and
then we have history and models, we have all of
those things, and then we have conversations.
Speaker 1 (05:32):
Today, Mary is the guest of honor at the Anchorage
Economic Development Corporation's annual gathering. The Denigna Convention Center downtown
is overflowing with more than fifteen hundred local business owners, politicians,
civic leaders, they're here to mingle, network, talk shop, and
hear Mary's thoughts on where she thinks the economy stands well.
Speaker 6 (05:50):
As counting the cranes is a future looking variable is
so important. So I just want to thank everybody who's
ever answered the base book, who's ever met with us.
If you like the bage book, we'll send you another one.
It used to be beige, by the way.
Speaker 4 (06:03):
So this is the fact finding portion of the expedition,
because yes, Mary is giving a speech about what she's
seeing in the economy, but she's also learning from the
local businesses who are listening to her.
Speaker 6 (06:15):
And what I've been hearing is that the uncertainty is
the word of the day. I guess it was on
the Bingo card, and uncertainty makes it harder for firms
and households to know what they're doing next, which makes
it harder for us as policymakers, for a reserve policymakers
to know exactly how the economy will evolve.
Speaker 1 (06:32):
Mary isn't a voting member of the committee this year,
but as a Reserve bank president, she still participates in
all the FMC meetings, where she offers her own assessments
and opinions. Based on what she's seeing in the economy
of the twelfth district right now, and so her views
still do help shape the committee's decision.
Speaker 6 (06:48):
All the states in my district on a regular basis,
as are my teams, and the reason for that is
so that we can understand firsthand what you are in
particularly thinking about what you see as your oppertunities when
you see your challenges, but also how do you see
the economy today. You know, there's an interesting statistic we
just heard that people feel decently pretty good about their
(07:10):
own situation, but pessimistic about the economy. We need to
understand why. What are you seeing as you look out?
Businesses are making decisions today about what they're going to
do at the end of the year. We need to
know what those are. We need to know how households
are feeling. Are they feeling strapped? Are they feeling like
they have enough disposable income? And the data alone, looking
(07:31):
at the published data, not all the micro data. You
could look at a hundred series and you would never
have the complete picture.
Speaker 4 (07:38):
I'm sure we've all heard the phrase data dependent, and
the feed leans heavily on the volumes and volumes of
economic statistics that get released every month when making its decisions,
but sometimes you can augment that data with things you
observe on the ground.
Speaker 1 (07:55):
Right, So, just a few days before the Alaska trip,
we got a jobs report that heavily revised down the
employment numbers from the earlier months. It was a big surprise,
huge moment for the markets, but it didn't really surprise Mary.
Speaker 6 (08:08):
And what was interesting about the jobs report on Friday
is it better matched in the direction of change, not
in the magnitude. It better matched what I've been hearing.
And so a discippointing device for data that you don't
know if they're really accurate is what you hear from people.
Because people do not tell you I feel really, really
comfortable getting a job only to find out that the
(08:29):
job market report is bad. What they will tell you is, boy,
it looks really worrisome out there. And then you get
a jobs report that doesn't look like the rapid job
growth that was the thing that was out of whack,
the rapid job growth from the month before. Is what
I said, Well, really, that's not what I'm hearing. What's
the gap? And we spent a lot of time digging
in and unpacking that but then when the job's market
(08:50):
report got revised, I was like, Okay, that makes more
sense even.
Speaker 4 (08:54):
But of course jobs aren't The only thing that FED
cares about. It's mandate is low unemployment and stable inflation,
and these things seem to be operating across currents right now.
Inflation has been above the FEDS two percent target for
a while, and the concern is that with tariffs coming
in from the Trump administration, prices are just going to go.
Speaker 8 (09:15):
Up further.
Speaker 7 (09:17):
Time.
Speaker 1 (09:20):
So to understand the risk here, we're following Mary to
the offices of Northern Solutions. It's an Alaskan company which
makes components and parts for the oil industry, which is
obviously big business in the state.
Speaker 4 (09:32):
Yeah, all the pipes and casings and spools and valves
and things like that.
Speaker 1 (09:39):
And as you can imagine, steel is a pretty key
input for a lot of these products. Since June, there's
been a whopping fifty percent tariff on steel and aluminum
coming from abroad.
Speaker 9 (09:49):
So we compared twenty one So today it's cheaper inste
if we prepared today to twenty three twenty four.
Speaker 1 (09:56):
Yeah, it's small and companies like Northern Solutions are trying
to figure out how to navigate all these new trade restrictions.
It's not as easy as just say switching to a
US supplier.
Speaker 2 (10:06):
You do that and you can't get the continuity, well,
then that's a cost to you that not need back there.
So it's really helpful for us to think about when
we try to think out the effects of parrots. Yeah,
effects of changes on any administration monitor ustory absolutely.
Speaker 9 (10:25):
I mean the terriffs, so the tariffs balanced it so
I can go to a US mil I can go
to a foreign mill and I'm going to pay the same.
Speaker 10 (10:33):
Price now with that tariff.
Speaker 9 (10:34):
But it's the industry that mill's here too, and the
lead time of that steel that's the problem. And honestly,
we have a lot of small steel mills here in
this country, a lot of small ones. They're very very
specific to a certain industry.
Speaker 4 (10:49):
In other words, all steel isn't equal.
Speaker 10 (10:52):
So there's mills all around the world, steel mills all
around the world. I can't use them all because of that,
because of their mptrs, not tree of origin, just how
well they do it. Okay, So we have a lot
of steel that comes into the US too, mean that
that comes from brought in as green to he treated
in the US, so that MTR is generated from the
(11:15):
US heat treat facility and now it's FO one percent American,
and then you avloid all this stuff on it.
Speaker 9 (11:21):
So when we talked about metals that I can use
there all over the place, but I can't use them all.
Speaker 4 (11:26):
This is actually a really good example of the kind
of information that makes Mary's visits so important. It's the
kind of thing that you can't really learn from an
economic data release.
Speaker 3 (11:36):
I'm good use that.
Speaker 6 (11:37):
One of the things that I just to show you
how you how you use things I've learned is that
if you think about how likely we gift all of
our potouction from the United States, are how likely is
a global market on steel to be able to if
we put it all back today. I mean, you've taught
me two things already that not everybody is here during
your industry, and you can have to have a specific,
(12:00):
you know, heat strategy in order to even use the tilS.
They have to be a startin following. So it just
means that you don't have the open marketplace that I
think many people would think you have, right, so they
would just look at the number of manufacturers they'd say, oh, look,
you could do all of this, but yeah, there's barriers.
Speaker 4 (12:17):
You know, there's another big Alaskan business that's grappling with tariffs,
and that is the port next stop, the Port of Alaska.
Speaker 6 (12:42):
Maybe have a demand for those ships, the commission message,
although I'll say that's it in particular.
Speaker 3 (12:48):
So they have three ships that they rotate between, and
they have.
Speaker 1 (12:52):
The Port of Alaska used to be called the Port
of Anchorage. By the way, very cool. It's a deep
water port. The tides here are crazy. Here's a Jim Jagger,
the ports acting director, explaining what they're having to deal with.
Speaker 3 (13:04):
So Port of Alaska has a variety of issues that
we're not unique, except that we're unique in the combination.
So what are our challenges? For instance, we have a
pretty fast current. We have a thirty foot tide flus
so between low tide and high tide thirty thirty four.
(13:24):
And our maximum tide flux between the lowest tide of
the season and the highest tides twenty.
Speaker 10 (13:29):
I heard the second biggest tide flux in the world.
Speaker 3 (13:31):
Yeah, it's actually depending on it's probably fifth or sixth Okay,
but in places where people actually do commerce.
Speaker 11 (13:37):
We're number two.
Speaker 4 (13:38):
So because of the harsh growing conditions and the short
summer season in Alaska, almost all of the state's fresh
food has to be imported, and the vast majority of
that food arrives by boat from west coast piers, mostly
Seattle and Tacoma, and with only four ships coming in
per week, Alaska's supply lines are stretched very tight, and
(14:00):
Mary has actually experienced the downside of those stretched supply
lines before. Here she is talking with Jim about.
Speaker 6 (14:06):
It running out of the things. We ran out of
this when I was here in May, the hotel ran
out of coffee because they said the supplier hadn't gotten
it in and they wouldn't get it until in May.
Speaker 3 (14:17):
We had we lost a ship because of a mechanical
If your timing was correct, you may have your coffee
may have been coming down there.
Speaker 6 (14:24):
Yeah, I went down for coffee and she said, we
don't have any coffee before that.
Speaker 3 (14:29):
That actually demonstrates how skinny are a supply line.
Speaker 6 (14:31):
Yeah, that's why I wanted to talk about it. I'm
still I'm not traumatized by my lack of cof but
I just was surprised at how I'm surprised at how
fragile our vulnerable.
Speaker 3 (14:43):
We have six to ten days worth of food in
the state, so we import. Depending on whose numbers you believe,
between ninety four and ninety six percent of the food
consumed in Alaska is important figure. We're handling three quarters
of that, so you know, if that's coming in. We
have four Schedu tool container ships a week, two on Sundays,
two on Tuesdays. If we lose a ship, you know,
(15:05):
that's twenty five percent of the food for the next week.
And it is very realistic that if you walk into
the fred Meyer grocery store and you go, huh, why
is there no salad? You know that's why. And you
know it's an interesting take. If you go down to
the lower forty eight and say, go to home Depot.
Home Depot's lower forty eight stores have a restock where
(15:29):
they can restock an entire store in thirty two hours.
So if you're on the Gulf Coast and they have
a hurricane, they completely sell the store out. They're set
up so that they can come in thirty two hours
later they're totally restocked. Okay, now apply that model to
the Alaska where we have no warehousing thirty two hours.
It means if if we have an earthquake or something
(15:51):
happens here and they empty out the store, they place
the order thirty two hours to get a home up
on the dock. There is then a sixty six and
a half hour float up the anchorage. And that's assuming
you're on the right cycle and you don't have to
wait a couple of days till the next ship leaves.
So it gets up here in sixty six and a
half hours, and then it's got to make it from
(16:12):
anchorage to wherever the final destination is. So if you're
in midtown Anchorage, well you'll you'll be there this afternoon.
If it's in Fairbanks, well that's another day. So suddenly
your thirty two hour restock, you know, could be six
seven days.
Speaker 4 (16:28):
Can I ask a dumb question? But why don't you
build some warehousing capacity?
Speaker 9 (16:32):
That was my question.
Speaker 4 (16:34):
I don't think it's dumb.
Speaker 8 (16:35):
I'm just going to ask those.
Speaker 3 (16:37):
Problem is that we have a very small population spread
out over a huge area.
Speaker 7 (16:42):
You know, three quarters of a million people in.
Speaker 3 (16:44):
The entire state, so basically a city, right, and our
state is twenty half times the size of Texas.
Speaker 7 (16:50):
But if you really want to see it, Go to Bushell, Aska.
Speaker 1 (16:54):
That's John Day, an engineer who is leading a big
modernization effort at the port.
Speaker 7 (16:58):
So go to these remote communities and then you'll really
see the effect of what you're talking about. It's it's pronounced.
If they if they get somebody's communities only get three
four barges a year. Basically, milk is hugely expensive. Anything
fresh is very expensive. If you go to you know,
I've worked living here, I've worked in a lot of
(17:18):
remote places. We're talking Kodiak or Saint Paul Island or
Bethel or something. Then you really see the end of
the supply chain and it's super sensitive in those locations.
Speaker 6 (17:30):
So it's very it can be vulnerable here, but it's
sort of fragile.
Speaker 7 (17:33):
Vulnerable, and we're kind of a hub. It's a hub
and spoke system, so we're a hub that helps supply
those areas and if we're sensitive there ten times.
Speaker 9 (17:42):
Yeah.
Speaker 1 (17:43):
Now, just to make things even more complicated, the port
also has tariffs to contend with. Is the primary import
hub from the entire state. You can imagine that the
port thinks about this issue quite a bit. Not only
could tariff's impact trade all those ships going in and
out of the harbor, stopping to refuel forth. But they
could get the first look at how companies choose to
respond to any increase in costs.
Speaker 6 (18:04):
Also, it's just dis likely to push up the price
of goods. Oh yeah, so they're gonna face tariffs on goods,
but they're also going to face port fees on goods,
and so then it's just more expensive.
Speaker 3 (18:13):
It gets worse though, because we have we have the
death spiral. So we raise our tariffs and then right now,
most of the cargoes coming in out our deep water vessels.
But if we raise our tariffs per ton enough, at
some point, some folks who are shipping things that are
non time sensitive new cars, you know, we'll go, you know,
(18:35):
for the tariff. I'm just going to bring it up
on a on a barge into Wittier and I'll save
the tariff. And then what happens is that then reduces
our overall tonnage. We still have to make our debt payment,
so we now have to increase our terraffs more. So
we're getting into the spiral. Food prices just wight not
(18:55):
be even more And oh, by the way, you know,
maybe you're not paying the teriff on your truck. You're
going to get it ten days later than you thought
you were, you know, so you're getting worse cargo service also,
So the impact on Alaskans is they're paying more for
certain things like food and everything else is the cargo
service is less good.
Speaker 6 (19:16):
Well that the normal way that all of this, any
kind of extra tax, ships out is you either wait
longer or you pay more. Yeah, that's that's just how
it works, I mean, in any of the things. That's
why I tried to put an optimistic endpoint on the
speech is because you can I think ultimately it's fair.
You guys are very enthusiastic about what you're trying to do.
(19:36):
But there's the other side of it, which can easily
demoralize people.
Speaker 4 (19:39):
Right.
Speaker 6 (19:40):
It just seems like an insurmountable problem when you think
of the cost structure here. But we have no option,
no exactly. So you can either back yourself into corner
with no option, or you can just say well and
be sad, right, or you can just get busy with purpose.
Speaker 1 (19:53):
So yeah, it's sort of common knowledge that it's expensive
to live in Alaska. It just costs more to get
goods and services pure and reasons. Understand that's part of
the deal. But there are limits to just how much
of a premium Alaskans are willing to pay to live here,
and just how much businesses can get away with when
it comes to pricing. Cheryl Beckham, director of finance at
the Port of Alaska, talks about this plant with Mary.
Speaker 6 (20:14):
I'm revealing my economists background, but it just makes sense
that the price would be higher here because you have
all these additional costs, right, But you're saying the small
communities think it should be like it is in the
lower forty eighth, So you have to put this difference.
Speaker 3 (20:26):
So there's a similar So they understand that there's a
transportation cost.
Speaker 6 (20:30):
But what is that margin, Okay, if they're willing.
Speaker 11 (20:33):
To accept, right, So as costs go up and fuel
goes up, and the you know, the fuel bars and
tankers that bring it, they cost more, so.
Speaker 6 (20:41):
You're probably always having a little less margin up here.
Speaker 4 (20:44):
Right, yes, right, so you do This is the really
big question. How much of the extra cost coming from
the tariffs is going to be absorbed by the companies themselves,
whether it's importers or the transportation businesses. Or middlemen like
the port, and how much of the cost is going
to be passed on to consumers, which would basically risk
(21:04):
fanning inflation again.
Speaker 1 (21:06):
And that is a big deal for a state which
already has a very high cost of living, precisely because
all this stuff needs to be imported and often sent
on to really remote locations within the state. And even
if you're not necessarily importing foreign goods, tariffs can still
push up the price of what's made domestically.
Speaker 6 (21:22):
Question that we're grappling with making monetary policies. There's taxes, immigration, deregulation, tariffs,
and those things have different likely effects, et cetera. So
one of the questions I've been asking people when we
meet is do any of those things? Can you see
any of those effects immediately affecting your business here? And
(21:43):
do you have any sense if they will immediately?
Speaker 7 (21:47):
Well, the terrible things come up in our construction. So
we have a lot of big construction coming up, like
a couple of billion dollars worth of infrastructure.
Speaker 11 (21:57):
Is that port specific Yeah, that's our doc okay, And
most of that is by America because we're trying to
get betteral bonding, and that comes with a territory, so the.
Speaker 7 (22:09):
Tariffs are not directly affecting that because theoretically that's on
foreign goods. However, it floats the whole the whole harbor up.
So the price is steel by America, steel by America,
this buy America. That all goes up. So it has
a large effect on that.
Speaker 6 (22:27):
How much of you seeing prices rise maybe from when
you were originally planning it?
Speaker 7 (22:32):
I mean, no, by one, We admit that number, but
it's a large number. We started off ten years ago
with something that was four hundred million dollars billion.
Speaker 4 (22:43):
Now right the Port of Alaska is in the middle
of a two and a half billion dollar modernization program,
so it's a pretty bad time for the cost of
materials to be going up. And there's also the financing costs.
Right if interest rates go up because inflation is rising,
that also adds to the cost, possibly exponentially.
Speaker 6 (23:04):
So can I ask a question about from all three
of you, is like, if you think about the work
you do here and the things that are facing Alaska
with all the just the economy, the changes in policy,
interest rates, et cetera, what's worrying you right now?
Speaker 7 (23:21):
Well, worries me is financing our project billion dollar project, right,
and we have some state and federal funds. The rest
of it is slated for local revenue bonds.
Speaker 6 (23:35):
Okay, now do you think does pass.
Speaker 7 (23:38):
They've given us authority to issue those. But the question
is how much can you push into the market once
and it puts our debt load front and whatever it
is fifty million, we have now up to billions from
one point one.
Speaker 8 (23:54):
We have authority for one point on it.
Speaker 7 (23:56):
It greatly increases our debtloads. So that's the biggest.
Speaker 3 (23:59):
So our goal is one third one third, one third,
one third federal money, one third state money, one third
local money. For our next DOC, it's going to be
roughly nine hundred million dollars right at this point, we
have ninety percent is going to be local, five percent state,
five percent federal. If we go forward to finance the
(24:24):
ninety percent, that's the local share after forty years, two
point two two point two eight billion dollars is what
we're going to pay back for nine hundred billion. So
you know, with that, the cost of financing it's going
to be huge. And what is that going to do
to overall cargo range? Remember, one of our things is
(24:46):
We're trying to maintain a cost effective cargo system, and
boyd when do we get crushed?
Speaker 4 (24:54):
Speaking of effective cargo systems, a huge chunk of Alaska's
imports go through the port, as we've been discussing, but
it is not the only logistics hub in town.
Speaker 7 (25:05):
Right.
Speaker 1 (25:10):
To get a complete picture, we've got to check out
the airport, which is exactly where Mary is heading.
Speaker 8 (25:15):
Next.
Speaker 6 (25:16):
I'm sort of plane like that cost three million.
Speaker 3 (25:19):
Yeah, that's you lightly used.
Speaker 9 (25:25):
We have we have a we have a handful of those.
Speaker 11 (25:26):
Yuh what are the planes to go out?
Speaker 8 (25:30):
I'm Susan Alton, the Alaska International air of course system controller,
and we're all glad to have you here today to
show off our system. Uh so I'll go ahead and
get Okay, So what is the Alaska International Airport System
also known as ai a S. It is made up
(25:51):
of Ted Stevens Anchorage International Airport, which is the largest
passenger airport in the state of Alaska. It's also the
four our busiest cargo airport in the world and the
second busiest in the United States. Anchorage is impact is
the largest airport in Alaska. Passenger activity for fiscal year
twenty five and that's four point excuse me, five point
(26:14):
four million passengers served air cargo for twenty twenty five.
We had three point seven million tons for twenty twenty five.
And again, as I said, we're number two in the
USA and number four in the world with regards to cargo.
We support one in seven jobs in the Anchorage area
(26:36):
and provide one point eight billion in annual economic impact
to the state. And you can see on the screen
about the direct jobs and wages impact versus the indirect
and induced jobs and wages. So we're pretty significant economic
mood for the state of Alaska.
Speaker 1 (26:56):
Air Transport is huge for Alaska, and the Anchorage Airport
basically acts like a truck stop for the whole state
and really global trade. Fully loaded cargo planes moving stuff
from Asia, the Mid East, parts of Europe will stop
here to refuel on their way to the rest of
North America. And for Alaskans it's the main depot for
most of the goods they order from elsewhere, which are
sorted in the huge FedEx and UPS hangars before being
(27:18):
distributed throughout the state.
Speaker 4 (27:20):
It's also a commuter hub. Many of the oil workers
on the North Slope work in two week on two
week off shifts, they catch a small plane up to
the fields where they live in company housing while on
the job, and then they return to their families and
hometown for the rest of the month.
Speaker 10 (27:36):
It's effectively use that as a suburb.
Speaker 12 (27:42):
Yeah, so this is the iconical Philips you come from
the airplane that's going up too. So if you're a slopeworker,
I have a nice Alaska lifestyle over there, pop on
a grand at the door, you walk over the next terminal,
get on your.
Speaker 4 (28:00):
Like the rest of the country, housing is a major issue,
even in a state with say it with me, Joe twice,
the land of Texas.
Speaker 1 (28:10):
Yeah, as we've seen over and over, Alaska faces all
the issues that the rest of the US does, only
at least right now more acutely.
Speaker 6 (28:17):
There's a variety of other things going on. And if
you're already your infrastructure is already a little vulnerable, then
you can imagine any shock we get into the United States.
Just in that, I mean, sorry to the United States.
You get it amplified.
Speaker 3 (28:30):
Yeah, no, that's absolutely true.
Speaker 6 (28:31):
And she's treating indicator which helps me make good decisions.
When I talk to all of you.
Speaker 1 (28:41):
Mary is going straight from the airport to the airport,
I guess she's flying to the lower forty eight. And
there's obviously a lot of possible takeaways from the trip.
Speaker 6 (28:49):
The cost structure of Alaska was something I think we
learned the most about today, just why are the prices
so much higher? And where would you ever try to
mitigate that? And of course the things that are going
on like inflation or just changes in how goods are
shipped or supply chain challenges, they're just magnified in Alaska,
and I think we also learned, you know, I learned
(29:11):
that they happen here first. It really is sort of
this canary in the coal mine almost that when you
see it here, you know it's coming elsewhere. It's going
to be lower in all likelihood because there's other ways
to ensure yourselves, but you're going to see it.
Speaker 4 (29:24):
We don't know exactly what was discussed at the FED
September meeting, or at least we don't know until the
transcript is published in like twenty thirty, but I think
you can get a good sense of what a trip
like this actually adds to the conversation. When FED governors
are all sitting around the table trying to figure out
what to do next.
Speaker 6 (29:44):
So one of the things that is challenging right now
was challenging back in the days where we're trying to
fight high inflation, and it's definitely challenging today when you're
trying to figure out the real impact of tariffs not
only on growth but on inflation. As just wanting unpacking
what's happening in Alaska and knowing at whatever point how
(30:05):
long this is going to take. Because of the non
fungibility of steel, the interoperability of some of the supply
chain networks, all of those things give me insights that
I can then take back to the meeting, and then
it's not just us exchanging forecast. I think they're going
to be like this long. I think they're going to
take this long. It provides evidence underlying evidence that you
(30:25):
can't find in your statistics because the statistics the statistics,
we just don't know. All we're doing is projecting, But
now we have our projections filled out by data and information,
and that makes a huge difference when you're trying to
make good policy.
Speaker 1 (30:51):
That's it for our special Alaska episode. We hope you
enjoyed tagging along with us and Mary on the Anchorage expedition.
Speaker 4 (30:58):
Joe, what stuck out to you?
Speaker 1 (31:00):
So many things stuck out to me from that trip,
you know, like being in Alaska, it really did feel
like the end of the world, didn't it, Like the
edge of the Empire.
Speaker 4 (31:11):
Yeah, it definitely felt frontier.
Speaker 1 (31:13):
Like for sure, I've been in rural areas before, even
more rural obviously than an urban area like Anchorage, but
I've never just felt distant like I did in Alaska,
and so it's very easy to understand why it's a
state permanently in a state of sort of supply chain stress.
Speaker 4 (31:28):
Yeah, that's what really stood out to me as well,
because when you go to a place like Anchorage, I
mean there are a lot of the same restaurants and
chain stores that you would see in any other place
in America. The difference is all that stuff has to
be transported thousands and thousands of miles to get there.
Speaker 6 (31:47):
Yeah.
Speaker 1 (31:47):
No, it's a constant strain, just extraordinary. You know, I
knew these things about how far flong everything was, but
then say, going to the airport and seeing how small
planes serve the just sort of worker commuter system was
really eye opening. Or just the sheer number of people
who own planes themselves. Yeah, like they have these pontoon
(32:08):
planes in the water that in another state would be
how people would have their boats in the marina. Except Alaska.
Its plans like, it's just it's permanently it's permanently stretched.
Speaker 4 (32:18):
Do you think we could go to Hawaii next? That's
in the twelfth district.
Speaker 10 (32:22):
Right, Let's do it.
Speaker 7 (32:23):
I'm down.
Speaker 4 (32:24):
Shall we leave it there?
Speaker 1 (32:25):
Let's leave it there.
Speaker 4 (32:26):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1 (32:31):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Thank you to Mary Daily and everyone at the San
Francisco FED, including Jen Chamberlain, for letting us come along
on their fact finding journey. Thank you also to the
Port of Alaska, the Alaska International Airport System, and Northern
Solutions for the tour of their facilities. Thank you to
Ashley Ebnett of the Anchorage Economic Development Corporation, And a
(32:52):
final thank you to all the Alaskans who took the
time to talk to us about their state. Everyone was
so friendly and don't forget scrappy. You can follow our
Purdue users Carmen Rodriguez at Carmen armand Dashel Bennett at
dashbot and kill Brooks at Kilbrooks. From our odd Loots content,
go to Bloomberg dot com slash odd Lots. We have
a daily newsletter and all of our episodes, and you
can chat about all of these topics twenty four seven
(33:13):
in our discord discord dot gg slash.
Speaker 4 (33:16):
Od lots And if you enjoy Oudlots, if you like
it when we go to far flung places, then please
leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber, you can
listen to all of our episodes absolutely ad free. All
you need to do is find the Bloomberg channel on
Apple Podcasts and follow the instructions there. Thanks for listening,
(34:01):
Stood in a
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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