An Outlook for the Wisconsin Economy Noah Williams University of - PowerPoint PPT Presentation

An Outlook for the Wisconsin Economy Noah Williams University of Wisconsin-Madison Center for Research On the Wisconsin Economy (CROWE) https://crowe.wisc.edu Williams Outlook for the Wisconsin Economy

CROWE: Brief Introduction Center for Research on the Wisconsin Economy (CROWE) recently established in the Department of Economics at UW-Madison. Primary mission: support and disseminate economic policy research, with particular focus on Wisconsin economy and state-level economic policy issues. Director, economists, fellows and affiliates in Department of Economics Providing economic policy research opportunities for UW-Madison students Williams Outlook for the Wisconsin Economy

CROWE Research Research Reports : The Impact of the Manufacturing and Agriculture Credit in Wisconsin An Evaluation of the Economic Impact of the Foxconn Proposal Forecasting the US and Wisconsin Economies in 2018 Business Formation in Wisconsin During and After the Great Recession CROWE’s Nest Blog shorter pieces: The Impact of the Federal Tax Reform on Wisconsin Taxpayers Recent Migration Trends in Wisconsin and Other States Tax Rebates and Tax Holidays More to come soon! Williams Outlook for the Wisconsin Economy

Overview and Outlook for the Wisconsin Economy Tight labor market: low unemployment, high employment-population ratio Labor force challenges: low population growth, aging workforce, net outmigration State economy has diversified but remains manufacturing-heavy, lacks vibrant urban center Biggest economic story: Foxconn. High fiscal costs but potential large gains Forecasts: slow and steady growth over next 2+ years Williams Outlook for the Wisconsin Economy

Unemployment and Employment-Population Unemployment Rate Employment−Population Ratio 68 US 10 WI 67 9 66 65 8 64 7 63 6 62 61 5 60 4 59 3 58 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Williams Outlook for the Wisconsin Economy

Employment and Labor Force Nonfarm Employment, 2010=100 Labor Force, 2010=100 106 US 114 WI 105 112 104 110 103 108 102 106 101 104 100 102 99 100 98 98 97 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Williams Outlook for the Wisconsin Economy

Aging of the Population Williams Outlook for the Wisconsin Economy

Net Outmigration Has declined in latest Census data: -15,130 in 2015, -11,439 in 2016, -2,086 in 2017 Williams Outlook for the Wisconsin Economy

Differences in Sector Shares and Growth Real GDP by State by Industry United States Wisconsin 2016 2011-16 2016 2011-16 Industry Share Growth Share Growth All industry total (billion) $ 16,259 10.5 $ 273 7.4 Private industries 88.0 12.3 89.1 8.9 Construction 4.0 19.7 3.9 21.8 Manufacturing 11.7 5.3 18.6 4.3 Wholesale & Retail trade 12.1 13.2 12.0 12.1 Information 5.5 23.2 3.8 24.5 Finance and insurance 6.3 4.3 7.0 11.0 Real estate and rental and leasing 13.5 11.2 12.5 2.9 Professional, scientific services 7.4 17.6 4.3 13.6 Health care and social assistance 7.5 14.5 8.8 8.4 Government 12.0 -0.7 10.9 -3.2 Williams Outlook for the Wisconsin Economy

Urban Concentration: Wisconsin vs Minnesota Share of WI Emp in MKE Share of MN Emp in MSP 0.31 0.68 0.305 0.675 0.3 0.67 0.295 0.665 0.29 0.66 2000 2005 2010 2015 2000 2005 2010 2015 Employment, 2010=100 115 Milwaukee Minneapolis−St. Paul 110 105 100 2006 2008 2010 2012 2014 2016 Williams Outlook for the Wisconsin Economy

Wildcard: Foxconn Foxconn investment deal announced in July, legislation in September, contract ongoing, planned opening 2019-20. Planned investment of up to $10 billion, initial employment of 3,000 increasing to up to 13,000 State subsidies of $2.85 billion over 15 years tied to scale: 15% of investment, 17% of payroll. At full operation, we estimated 32,000-39,000 total direct and indirect jobs including Foxconn’s supply chain and other induced activity Even if all output produced by Foxconn except direct labor income went out of state, cumulative multiplier of 3.9 on the state’s subsidy costs. Recent studies have shown large plant openings can have big spillovers on incumbent companies especially in productivity. But wide variation in outcomes. Williams Outlook for the Wisconsin Economy

Illinois-Wisconsin Worker flows There were many popular concerns that Foxconn opening would benefit largely Illinois workers. Relatively few workers from Illinois commute to Southeast Wisconsin, more Wisconsin workers go the other way. Now that we know plant will be in Racine area, the commuting issue is less severe. Williams Outlook for the Wisconsin Economy

Large Plant Openings: Heterogeneity Significant heterogeneity, two examples: - BMW in South Carolina: 1992 promise of 2000 jobs. By 2014 employing over 7600, with estimated 22,000 induced and indirect jobs - Mercedes in Alabama: 1993 promise of 1500 jobs. Within 5 years lost more than 800 supplier jobs EY study on Foxconn used a multiplier of 2.7. Multiplier estimates in the literature range from 1.5 to more than 3. Those most relevant to this case are in the 2.5-3.0 range, which suggests with 13,000 direct jobs, an additional 19,000-26,000 indirect and induced jobs. But much variation on either side of that estimate. Williams Outlook for the Wisconsin Economy

Economic Forecasts Recently at CROWE we have constructed an empirical model for the US and WI economies We adapt an approach that was used the Federal Reserve Bank of Minneapolis to forecast the U.S. economy. Our approach uses the relationships among 28 variables: 17 national and 11 at the state level. State-level variables depend on national but not vice versa. We estimate the model and then use it to project over the next two years. Williams Outlook for the Wisconsin Economy

National Forecast: GDP Growth Williams Outlook for the Wisconsin Economy

Wisconsin Forecast: Unemployment Rate Williams Outlook for the Wisconsin Economy

Wisconsin Forecast: GDP Williams Outlook for the Wisconsin Economy

Wisconsin Forecast: Employment Williams Outlook for the Wisconsin Economy

Wisconsin Forecast: Manufacturing Employment Williams Outlook for the Wisconsin Economy

Economic Performance in Wisconsin since the Great Recession: A County-Level Analysis The discussion so far has been based on state-level data, but not all parts of the state have done equally well economically. While there has been talk about areas left behind, in forthcoming report I find strong evidence of convergence in living standards . Counties that had the highest unemployment rates, poverty rates, lowest incomes before the recession have seen the largest improvements in the following decade. Counties which suffered the most during the recession have had the largest improvements during recovery But divergence in overall size : counties that had larger employment, labor force, or population before the recession experienced faster average growth in those measures Williams Outlook for the Wisconsin Economy

Unemployment by County Wisconsin County Unemployment Rates March 2018 < 2.9% 3.0% - 3.4 3.5% - 3.9 4.0% - 4.4 4.5% - 4.9 5.0% - 5.4 5.5% - 5.9 Not-Seasonally Seasonally 6.0% - 6.4 Adjusted Adjusted 6.5% - 6.9 US 4.1% 4.1% 7.0% > WI 3.2 2.9 Not-Seasonally Adjusted Unemployment Rates for Wisconsin Counties Dane 2.2% Sauk 3.0% Kenosha 3.6% Langlade 4.4% Jefferson 3.1 Lincoln 3.6 Crawford 4.5 Lafayette 2.4 Richland 3.1 Manitowoc 3.6 Douglas 4.5 Ozaukee 2.4 Calumet 2.6 Grant 3.2 Pierce 3.6 Marinette 4.6 Iowa 3.2 Jackson 3.7 Oneida 4.7 Eau Claire 2.6 Walworth 3.2 Racine 3.7 Polk 4.7 Sheboygan 2.6 Washington 2.6 Kewaunee 3.3 Buffalo 3.8 Menominee 4.8 St. Croix 3.3 Marquette 4.1 Rusk 4.8 Waukesha 2.6 Trempealeau 3.3 Oconto 4.1 Washburn 4.8 Fond du Lac 2.7 La Crosse 2.7 Waupaca 3.3 Price 4.1 Ashland 5.0 Portage 3.4 Wood 4.1 Door 5.4 Winnebago 2.7 Rock 3.4 Chippewa 4.2 Adams 5.5 Monroe 2.8 Brown 2.9 Shawano 3.4 Green Lake 4.2 Forest 5.5 Vernon 3.4 Taylor 4.2 Sawyer 5.5 Dodge 2.9 Clark 3.5 Waushara 4.2 Burnett 5.6 Green 2.9 Milwaukee 3.5 Barron 4.3 Vilas 5.6 Marathon 2.9 Dunn 3.6 Florence 4.3 Bayfield 6.5 Outagamie 2.9 Juneau 3.6 Pepin 4.3 Iron 6.8 Columbia 3.0 DETI-17241-P (R. 4/2018) WI Dept. of Workforce Development, Labor Market Information 4/25/2018 Williams Outlook for the Wisconsin Economy

Unemployment by County Fond du Lac: 4.2% in 2007, 7.4% 2010, 2.4% in 2017 Unemployment Changes in Wisconsin by County Unemployment Changes in Wisconsin by County −3 −0.5 Change in Unemployment Rate: 2010−2017 Change in Unemployment Rate 2007−2017 −1 −4 −1.5 −5 −2 −6 −2.5 −7 −3 −8 −3.5 −4 −9 −4.5 −10 −5 −11 −5.5 1 2 3 4 5 6 7 4 6 8 10 Change in Unemployment Rate: 2007−2010 Unemployment Rate in December 2007 Williams Outlook for the Wisconsin Economy