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

• f 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

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

Williams Outlook for the Wisconsin Economy

Employment and Labor Force

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

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 Industry 2016 Share 2011-16 Growth 2016 Share 2011-16 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

United States Wisconsin

Williams Outlook for the Wisconsin Economy

Urban Concentration: Wisconsin vs Minnesota

2000 2005 2010 2015 0.29 0.295 0.3 0.305 0.31 Share of WI Emp in MKE 2000 2005 2010 2015 0.66 0.665 0.67 0.675 0.68 Share of MN Emp in MSP 2006 2008 2010 2012 2014 2016 100 105 110 115 Employment, 2010=100 Milwaukee Minneapolis−St. Paul

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

• f 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

• ther 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

March 2018

Wisconsin County Unemployment Rates

Not-Seasonally Adjusted Unemployment Rates for Wisconsin Counties WI Dept. of Workforce Development, Labor Market Information 4/25/2018 DETI-17241-P (R. 4/2018)

US WI

Not-Seasonally Adjusted Seasonally Adjusted

Dane 2.2% Lafayette 2.4 Ozaukee 2.4 Calumet 2.6 Eau Claire 2.6 Sheboygan 2.6 Washington 2.6 Waukesha 2.6 Fond du Lac 2.7 La Crosse 2.7 Winnebago 2.7 Monroe 2.8 Brown 2.9 Dodge 2.9 Green 2.9 Marathon 2.9 Outagamie 2.9 Columbia 3.0 Sauk 3.0% Jefferson 3.1 Richland 3.1 Grant 3.2 Iowa 3.2 Walworth 3.2 Kewaunee 3.3

• St. Croix

3.3 Trempealeau 3.3 Waupaca 3.3 Portage 3.4 Rock 3.4 Shawano 3.4 Vernon 3.4 Clark 3.5 Milwaukee 3.5 Dunn 3.6 Juneau 3.6 Kenosha 3.6% Lincoln 3.6 Manitowoc 3.6 Pierce 3.6 Jackson 3.7 Racine 3.7 Buffalo 3.8 Marquette 4.1 Oconto 4.1 Price 4.1 Wood 4.1 Chippewa 4.2 Green Lake 4.2 Taylor 4.2 Waushara 4.2 Barron 4.3 Florence 4.3 Pepin 4.3 Langlade 4.4% Crawford 4.5 Douglas 4.5 Marinette 4.6 Oneida 4.7 Polk 4.7 Menominee 4.8 Rusk 4.8 Washburn 4.8 Ashland 5.0 Door 5.4 Adams 5.5 Forest 5.5 Sawyer 5.5 Burnett 5.6 Vilas 5.6 Bayfield 6.5 Iron 6.8 4.1% 4.1% 3.2 2.9 < 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 6.0% - 6.4 6.5% - 6.9 7.0% >

Williams Outlook for the Wisconsin Economy

Unemployment by County

Fond du Lac: 4.2% in 2007, 7.4% 2010, 2.4% in 2017

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

Poverty Rate by County

Fond du Lac: 8.4% in 2007, 11.6% 2010, 7.7% in 2017

−4 −2 2 4 6 −8 −6 −4 −2 2 Change in Poverty Rate: 2007−2010 Change in Poverty Rate: 2010−2016 Poverty Changes by County 5 10 15 20 25 30 35 −6 −4 −2 2 4 Poverty Rate in 2007 Change in Poverty Rate 2007−2016 Poverty Changes by County All Counties Excluding Menominee All Counties Excluding Menominee Williams Outlook for the Wisconsin Economy

Labor Force by County

Fond du Lac: -3.1% in 2007-10, 1.6% 2010-17, -1.5% 2007-17

−15 −10 −5 5 10 −10 −5 5 10 Growth Rate of Labor Force 2007−2010 Growth Rate of Labor Force 2010−2017 Labor Force Changes in Wisconsin by County 8 10 12 −20 −15 −10 −5 5 10 15 Log Labor Force in 2007 Growth Rate of Labor Force 2007−2017 Labor Force Changes in Wisconsin by County Williams Outlook for the Wisconsin Economy