Wisconsin is Open for Business
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Economy
Sizing up Today’s Economy
Wisconsin Economics Association
Wisconsin
Economics
Association
Dennis Winters
Chief, Office of Economic Advisors
Department of Workforce Development
November 4, 2011
November 4, 2011
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Wisconsin is Open for Business
FIRST OF ALL, YOU NEED TO
UNDERSTAND WISCONSIN’S ECONOMY
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CONFUSED? NO WONDER
WHO DO YOU BELIEVE
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 G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus
The New York Times, July 31, 2008
 U.S. Economy Grows at Solid Pace in 2nd Quarter
Washington Post, July 31, 2008

Yes, Virginia, It is a Recession
Business Week, July 31, 2008
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
Still on the right road – The American economy has
often defied predictions of its demise. It has done
so again.
The Economist, July 31, 2008
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CONFUSED? NO WONDER
WHICH DO YOU BELIEVE
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Home Prices in 20 U.S. Cities Unexpectedly Climb 0.3%,
Case-Shiller Says ,Home prices in 20 U.S. cities unexpectedly
rose in January, indicating the housing market is stabilizing as
the economy expands.
Bloomberg, March 30, 2010
Home price dip extends to 4th month
9:20am: Case-Shiller index declines 0.4% in January as
market recovery appears to have stalled.
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CNN, March 30, 2010
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CONFUSED? NO WONDER
WHAT DO YOU BELIEVE
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INDUSTRIAL PRODUCTION RISES FOR FOURTH MONTH
•
INDUSTRIAL PRODUCTION IN THE U.S. UNEXPECTEDLY ROSE IN
AUGUST, SIGNALING MANUFACTURING WILL SUPPORT THE
WORLD’S LARGEST ECONOMY.
Bloomberg, September 14, 2011
http://www.bloomberg.com/news/economy/
U.S. JOBLESS CLAIMS ROSE TO HIGHEST SINCE JUNE
•
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APPLICATIONS FOR U.S. UNEMPLOYMENT BENEFITS
UNEXPECTEDLY ROSE LAST WEEK TO THE HIGHEST LEVEL SINCE
THE END OF JUNE, UNDERSCORING THE RISK OF FURTHER
WEAKNESS IN THE LABOR MARKET.
Bloomberg, September 14, 2011
http://www.bloomberg.com/news/economy/
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HOW DO YOU SPELL
RECOVERY?
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• GDP
• DJIA
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• JOBS
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WHAT IS RECOVERY?
GDP; Nine positive quarters, Q3 advanced up 2.5%
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Real GDP Growth
10.0
8.0
Percent Q/Q Change
6.0
Wisconsin
Economics
Association
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
2000q1
2002q1
2004q1
Source: Bureau of Economic Analysis, OEA
November 4, 2011
2006q1
2008q1
2010q1
2012q1
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BUSINESS CYCLE SEVERE
FINALLY RECOVERED AFTER NINE QUARTERS
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Real GDP
$13,500
$13,400
$13,300
$13,200
$13,100
$13,000
$12,900
$12,800
$12,700
$12,600
Source: BEA, OEA
November 4, 2011
2011-IV
2011-III
2011-II
2011-I
2010-IV
2010-III
2010-II
2010-I
2009-IV
2009-III
2009-II
2009-I
2008-IV
2008-III
2008-II
2008-I
2007-IV
2007-III
2007-II
2007-I
2006-IV
2006-III
2006-II
$12,500
2006-I
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RETAIL SALES CLIMBING
WE’RE BACK
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RETAIL SALES
USING THE APPROPRIATE ADJUSTMENTS
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THE GOOD NEWS FOR CONSTRUCTION
SETTING A BOTTOM (?)
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INTEREST IS LESS DISMAL
BUT STILL CONTRACTING
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CORPORATE PROFITS LOOK HEALTHY
MOSTLY DUE TO COST CUTTING
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WHAT IS RECOVERY?
DJIA; UP 85% SINCE MARCH 9, 2009
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Source: http://moneycentral.msn.com/investor/charts/chartdl.aspx
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MANAGING RISK
WHERE IS THE INCENTIVE TO EXPAND
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INVESTMENT GROWTH IS IN
PRODUCTIVITY, NOT EXPANSION
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Source: BEA, OEA
November 4, 2011
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INDUSTRY EXPANSION
SLOWING
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Industry Indexes
70.0
65.0
60.0
55.0
50.0
45.0
40.0
Non-Manufacturing
35.0
Manufacturing
Source: St. Lous Fed, OEA
November 4, 2011
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30.0
Ju
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Ju
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WHAT IS RECOVERY?
JOBS; STILL DOWN 130,000
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Wisconsin Total Nonfarm Jobs (NSA)
2,950,000
2007
2009
2010
2011
2,900,000
2,850,000
2,800,000
2,750,000
2,700,000
Wisconsin
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2,650,000
2,600,000
Jan
Feb
Mar
Apr
May
Source: Bureau of Labor Statistics, LMI, OEA
November 4, 2011
Jun
Jul
Aug
Sep
Oct
Nov
Dec
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Wisconsin is Open for Business
JOBS RECOVERY
HOW IS THIS ONE NOT LIKE THE OTHER ONES
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JOB RECOVERY
WILL TAKE TIME
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Job Losses in Recent Recessions - Wisconsin - # of Months Since Recession Declaration
1.0%
0.0%
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
57
59
Job Losses Relative to Peak Month
-1.0%
Wisconsin
Economics
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-2.0%
-3.0%
-4.0%
-5.0%
1981 Recession
1990 Recession
-6.0%
2001 Recession
2007-2009 Recesion
-7.0%
Source: DWD, OEA, X12 adjustment of not seasonally adjusted CES via U.S. BLS
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Source: BLS, OEA
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Wisconsin is Open for Business
♦ Blue is history (CES SA, December 2010 is benchmark, 2,317,200).
♦ Orange is DOR forecast (quarterly then annual, Fall 2011 Outlook).
♦ Yellow is 250,000 goal for December 2014 (2,567,200).
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Economy
Total Private Jobs
2,600,000
2,550,000
2,500,000
2,450,000
2,400,000
2,350,000
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2,300,000
2,250,000
M
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pJa 08
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Se -09
pJa 09
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pJa 10
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-1
5
2,200,000
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November 4, 2011
Source: BLS, DOR, OEA
Wisconsin is Open for Business
REAL EARNINGS
ARE FLAT
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Wisconsin Real Average Annual Wage
$38,000
$36,000
$34,000
$32,000
$30,000
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
$28,000
1990
Wisconsin
Economics
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IS THE PHILLIPS CURVE BACK?
IF YES, THEN FED HAS LEEWAY
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November 4, 2011
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HISTORICAL COMPARISONS
CAN BE INSIGHTFUL and DISCONCERTING
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November 4, 2011
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IN CONCLUSION
CONTINUED RECOVERY
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 Recovery is self-sustaining.
 Employment may breach in 2014.
 Strength of recovery subject to consumer income
and wealth uncertainty.
Risks
 High unemployment dampens income growth.
 Prolonged high gasoline prices sap consumption.
 European Union fiscal problems wash over the
global financial markets.
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November 4, 2011
Wisconsin is Open for Business
SUMMING UP
WHERE IS THE SMART(?) MONEY
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Economy
"We hope to become manifestly,
aggressively, stunningly bullish of
equities," Dennis Gartman, hedge fund
manager and author of The Gartman
Letter, said in his Monday commentary.
"Until then, we are sellers of rallies.“
Wisconsin
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– USA TODAY, October 8, 2011.
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Questions ?
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CONTACT INFORMATION
 Dennis Winters
 Phone: 608-267-3262
 Email: dennis.winters@dwd.wisconsin.gov
 Website: www.dwd.wisconsin.gov
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 OEA website: www.dwd.wisconsin.gov/oea
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November 4, 2011
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HOUSEHOLD DEBT
DELEVERAGING
Household Debt as % of Disposable Income
Percent
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15
14
13
12
11
Source: Fed flow of Funds
November 4, 2011
Jan-10
Jan-08
Jan-06
Jan-04
Jan-02
Jan-00
Jan-98
Jan-96
Jan-94
Jan-92
Jan-90
Jan-88
Jan-86
Jan-84
Jan-82
10
Jan-80
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Wisconsin is Open for Business
HOUSEHOLD DEBT
SHEDDING OF WEALTH
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Ratio: Household Assets to Liabilities
3.5
3.0
2.5
2.0
1.5
19
86
19 Q3
87
19 Q3
88
19 Q3
89
19 Q3
90
19 Q3
91
19 Q3
92
19 Q3
93
19 Q3
94
19 Q3
95
19 -III
96
19 -III
97
19 -III
98
19 -III
99
20 -III
00
20 -III
01
20 -III
02
20 -III
03
20 -III
04
20 -III
05
20 -III
06
20 -III
07
20 -III
08
20 -III
09
20 -III
10
-II
I
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Source: Fed flow of Funds
November 4, 2011
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