Monday, November 13, 2017

Pretty pictures, but not good results as Wis economy still lags

I wanted to point you over to a couple of recent bits of Wisconsin economic analysis which evaluates where Wisconsin’s economy is, and where it might be going.

The first is another installment of Bruce Thompson’s Data Wonk segment in Urban Milwaukee, titled "The Wisconsin Jobs Mystery." That "mystery" that Thompson looks into is why the state has a low unemployment rate, but also low job growth, and I wanted to go over this portion of Thompson’s analysis, which seems to indicate that a significant reason Wisconsin’s unemployment rate is at a low 3.5% is because people are moving out of the state.
Other groups [of the unemployed] are new workers, such as recent graduates and those reentering the workforce after stopping work to raise children, get married or care for elderly relatives, who now want to re-enter the workforce. If they move to another state because they perceive it as more favorable, Wisconsin’s unemployment rate will go down and the other state’s will rise.

As the next chart (based on IRS data, comparing 2014 returns to the same people in 2015) shows, Wisconsin is a net exporter of people.

The next chart shows the average adjusted gross income for Wisconsinites who stayed put (in blue), those who moved within Wisconsin (brown), those moving to other states (yellow), and people from other states to Wisconsin (green). The solid lines are their 2014 income; the dotted lines are for 2015.

For younger people, there is not a lot of difference in income between those who move from the state and those who don’t. The differences get much starker with age. Those moving within Wisconsin fare worse, perhaps reflecting
the effect of evictions or other moves forced by finances. The most prosperous middle-agers are those leaving Wisconsin. It would be useful, I think, to better understand the reasons for these moves.

Look at that spike up for both of the yellow lines, which shows mid-career Wisconsinites that leave the state make more money. If Bruce isn’t going to say it, I will- Wisconsin businesses aren’t paying people enough to keep them around, and job growth is suffering as a result.

Another recent analysis of the state of Wisconsin’s economy comes from UW Professor Menzie Chinn in Econbrowser. Prof. Chinn notes that in 2017, the state has fallen short of the “future so bright, I gotta wear shades” rhetoric that Walker was trying to sell earlier in the year.
To begin with, let’s look at the forecasts used in the Governor’s budget, from February (based on IHS MarkIt forecasts), and compare to outcomes realized so far.

First employment:

As noted in this earlier post, employment has been trending sideways for some months. Currently, average employment through September 2017 is nearly 11,000 below the forecast for 2017 (and is still 29,400 below the level promised by Governor Walker for January 2015).

Second real GDP:

So far, GDP has grown 2.1% q/q SAAR in 2017. It would need to grow about 3.2% SAAR for the next 3 quarters to hit the forecasted level.
And Scott Walker's office seems to recognize that he looks ridiculous today in making those "future's so bright" statements, because you can't even find a record of that release on his site anymore.

And how much more are things going to pick up in a maxed-out work force that isn’t being paid enough? Walker and WisGOP have no plan to turn around this state’s unfavorable demographics and low pay - in fact, I’d argue they and their puppetmasters WANT that slow decline for political reasons.

Which means is if we want this state to snap out of the economic doldrums that we have been in for several years, it’s going to take a new crew in charge and a new way of thinking to do so. And even then, it'll take quite an effort to dig us out of the hole we've been put into under this Reign of Error.

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