Sunday, March 23, 2014

Lost in the Madness- 2 Wisconsin Econ reports released

If you were distracted by March Madness like I was at the end of the week, you may not have noticed that the Wisconsin Department of Revenue released two reports on Friday. Both are interesting benchmarks of where our state's economy stands, and both show that a couple of Scott Walker's potential bragging points in November may not work out as his campaign wants to portray it.

The first was the Wisconsin Economic Outlook. This comes out a few times a year, with data updated to the latest information and forecasts, and the March 2014 version leads off by noting that Wisconsin's income and job creation has slightly lagged the nation, but may pick up over the next 2 years.
The Wisconsin economy grew at a moderate pace in 2013 and will gain steam in 2014. The Wisconsin economy, as measured by personal income, grew 3.9% in 2012, just below the 4.2% growth nationwide. Wisconsin personal income should post growth of 2.9% in 2013 and will grow 4.0% in 2014.

Employment in Wisconsin added around 30,000 jobs per year in 2012 and 2013. The forecast calls for increases of
more than 40,000 jobs per year in 2014 and 2015. Wisconsin employment will grow 1.5% in 2014 and 1.7% in 2015 and 2016.
The basis for the DOR's projected increase in Wisconsin's economic performance is mostly due to an improving economic recovery in the U.S. as a whole, as the report cites Global Insight projections of 2.7% GDP growth in 2014, 3.2% for 2015 and 3.4% for 2016. In fact, the DOR's report indicates that Wisconsin will continue to lag behind the U.S. rate of growth in both jobs and personal income, as it has done throughout of the Age of Fitzwalkerstan.

Non-Farm job growth, U.S. vs. Wisconsin
2011 1.2% U.S., 1.1% Wis.
2012 1.7% U.S., 1.0% Wis.
2013 1.6% U.S., 1.0% Wis.
2014 (proj) 1.7% U.S., 1.5% Wis.
2015 (proj) 2.0% U.S., 1.7% Wis.

Personal income growth, U.S. vs. Wisconsin
2011 6.1% U.S., 5.3% Wis.
2012 4.2% U.S., 3.9% Wis.
2013 (Wis. not final) 2.9% U.S., 2.9% Wis.
2014 (proj) 4.6% U.S., 4.0% Wis.
2015 (proj) 5.0% U.S., 4.5% Wis.

It's also worth noting that even with the improved prospects the Wisconsin Economic Outlook cites, the 39,000 in projected private sector job growth for 2014 would mean that approximately 146,000 private sector jobs would be added in Wisconsin over Scott Walker's 4-year term- or more than 100,000 BELOW Walker's "floor" of 250,000 jobs added.

In addition, the Wisconsin Economic Outlook assumes that construction and housing growth will be a key factor for the U.S. and Wisconsin for 2014. That seems to be in question as of now, as the cold winter and rising interest rates have led to housing sales to fall, both in the U.S., and in Wisconsin, where last month's home sales were down more than 10% compared to February 2013, and 7.7% for the first two months of the year. Yes, some of this may rebound as the weather warms (assuming we do eventually have a Spring and Summer), but it also could throw some cold water on the hot expectations for 2014's economy, and would further dampen the already-lagging numbers.

The below-trend February was also reflected in the DOR's other release on Friday, as state revenues dropped 9.8% vs. the same month last year. Some of this was predictable, as the Koo-Koo tax cuts are taking effect in the form of higher tax refunds (WisGOP hopes you noticed), but it also includes a below-inflation increase of 0.5% in sales taxes, and a decrease in excise taxes (which previously had been going to the upside, largely due to avoidance of Minnesota cigarette taxes). These lower numbers should cause a bit of concern as the effects of the latest round of Walker-WisGOP tax cuts shows a $170 million cut in revenues for the 2013-14 fiscal year from those measures, which will go on top of the larger tax refunds resulting from the first round of Koo-Koo tax cuts. In addition, sales taxes need to increase 3.5% from March-June 2014 compared to the same four months of the previous year just to keep pace with projections, which is a whole lot more than the 0.5% rise we had in February.

Now perhaps there will be a boost in state revenues from all the tourism dollars that flooded Milwaukee from March Madness this weekend. But if things stay slow for sales like they were in February, or if we have another slow month for March job or income growth, or if the tax refunds are even bigger than the LFB thought, it becomes quite possible that we fall short of the rosy revenue figures the LFB released in January. And if a deficit starts to open up for the last year of the 2014-15 biennium, a big part of Scott Walker's 2014 election meme ("I balanced the budget and cut taxes") completely blows up.

Like a lot of you, I've been concentrating on the hoops for this weekend over wanting to care about politics or economic reports. But the documents released from the Wisconsin Department of Revenue on Friday certainly put the idea of a booming Wisconsin economy into check, and instead they seem to indicate that the state's performance will continue to be left behind the U.S. as a whole.


  1. Let's not forget that while perhaps the Winter of 2012/13 wasn't as harsh as 2013/14's has been, it was persistent into April. So the March and April tax revenue figures have a low base to start from. The new withholding rates start in April.

    Also we have to remember the Amazon sales tax collections that occurred in February 2014 but not February 2013: probably good for a 0.2-0.3% boost. Midwestern year-on-year inflation is at just 0.9% for February, so even with that dramatically low figure February's sales tax receipts are not keeping pace.

    I have mentioned in previous comments on your blog why I believe the CES December 2013 private sector jobs total is likely an overestimate. This, however, is actually bad news for Walker: PolitiFact keep track of whole-year QCEW changes, and that'll be possible for 2013 from June onwards. Then they add the CES difference from December to the latest available month, so an inflated December 2013 will depress the total that they report after June.

    February UI numbers for the monthly survey reference week were slightly better than 2013's, both for initial and continued claims, but not by as much as we've seen recently. So there are many reasons to expect February's jobs report to be substandard: we'll find out on Thursday