Monday, February 17, 2014

Consumer sector in Wisconsin has the winter chill

In the middle of another snowy, cold day for the winter of 2013-14, we received more information that the Wisconsin economy may
be going the same way as the temperatures have been going.

The big bombshell was American TV announcing today that they would close ALL of their remaining stores in the coming weeks, which includes 7 stores in Wisconsin and the corporate offices in Madison. In addition to the nearly 1,000 jobs going away nationwide, it also hits home to a lot of us who grew up in the Madison and Milwaukee areas with extra sadness, because we grew up with ads like this from "Crazy TV Lenny".

I suppose it's a sign of the times, as brick-and-mortar electronics and furniture stores could be considered relics from a pre-Internet era. But it's worth noting that American is just the latest victim of what seems to be a rough retail sector in Wisconsin. You may remember that J.C. Penney announced last month that it would close 5 stores in Wisconsin in the coming months, more than any other state. Racine-based S.C. Johnson (the makers of Windex and other household items) said in early February that they were going to lay off as many as 400 in a corporate "restructuring." And nationwide, the retail sector has been seeing a recent downturn, as retail sales have been down year-over-year for each of the last two months, including 0.4% in January.

The consumer weakness spread to the housing sector in January, as the Wisconsin Realtors Association reported that home sales in Wisconsin were down 6.8% compared to January 2013, the second decline in the last 3 months after 28 straight months of sales growth.

The bad winter weather may indeed be a factor- NOAA reports that Wisconsin had its coldest combined December and January in 35 years, and 6th-coldest ever. But maybe it's also a reflection of the stagnant wages that have hammered a whole of lot of Wisconsinites in the Age of Fitzwalkerstan. We still have the lowest weekly manufacturing wage in the Midwest, and public sector workers still haven't received a payback from having thousands of dollars a year pulled out of their pockets in 2011. And no tax cut will make up for the lack of income in the first place. Perhaps demand matters, especially when it comes to, you know, BUYING STUFF.

But do these retail job losses, lower house sales and other economic uncertainties make our "Unintimidated" leader think twice about whether our projected surplus is going to actually happen? Of course not! Scotty and most of the rest of WisGOP are full-speed ahead with fiscally wrecking the state for the future. Even Senate Majority Leader Scott Fitzgerald said this weekend that the biggest changes his house would make would be refusing to require excess revenues to be added to the state's rainy-day fund, and instead leave it for later budgets. It's a cosmetic change at best, and if anything, it reduces flexibility for the state's ability to dig its way out of the problems that will result with the next recession- which economic history indicates will happen sooner than later.

On the three-year anniversary of the "Wisconsin 14" leaving the state to allow the details of Act 10 to be revealed, the more it makes sense why such a drastic move was made by the Senate Democrats. They saw what a mess these ALEC-mentality policies would lead to, and the Fitzwalkerstanis continue to fail and leave Wisconsinites behind, in no small part due to the lack of demand and resulting job losses in consumer-related sectors. I know it's been a bad winter here and yes, that'll drive your desire to spend stuff, but I think the retail job losses and a stagnating Wisconsin economy goes a lot deeper than just the snow flying and falling temperatures.


  1. I'm not convinced about the Wisconsin retail market being that bad right now: sales tax receipts were up 4.6% year-on-year in January. That's a retreat from 2013's momentum but still pretty strong.

    It does include Amazon's collection of sales taxes (which started in November), but seeing as this is estimated to produce $30 million in year 1, about two thirds of a percent of total sales tax revenues that we didn't have the same time last year, the like-for-like year-on-year change to January 2014 is probably something like 4%.

    The number to watch is 5.2%, which is the projection for sales tax revenues to rise by from FY13 to FY14 according to the LFB's projections of a surplus (see page 11).

  2. Geoff- I do think some of this a structural change away from large retail stores in general (and watch what that'll do to suburban tax base). But I bet Amazon has a bigger effect on sales tax revenues in January, when people use XMas gift cards.

    And if it was all structural change, then why are so many of the store closings centered on Wisconsin. It feels like there's more going on here.

    1. It should be noted that sales taxes are due on the 20th of each month, so the January figures actually cover very last-minute Christmas shopping too.

      While it's certainly conceivable that Amazon may be having a more significant one-off effect on year-on-year January sales tax receipts due to seasonal factors, I can't seeing it being a vast multiplier of the 0.6% since their Q4 revenue would seem to be about 1/3 of their 2013 total. I could credit perhaps a factor of 2, but it just wouldn't appear to be enough to explain the year-on-year gains in sales tax receipts.

      On the other hand, the American TV and JC Penney closings and S.C. Johnson layoffs haven't happened yet. The initial UI claims for week 5 and week 6 of this year are both worse than the same time last year. It doesn't bode well for February's economic indicators.

      It would be helpful if we still had mass layoff statistics, but those are a victim of sequestration.