Wednesday, July 24, 2013

Madison and Milwaukee booming? Or seasonal fluke?

As I was coming back from Vilas County, I saw an interesting stat jump out at me in the latest jobs report for local areas throughout Wisconsin, the most recent edition of which came out today for June 2013.

Change in jobs, May-June 2013
Milwaukee Metro- +4,400 seasonally-adjusted, +9,800 non-seasonally adjusted
Madison Metro- +5,000 s.a., +5,100 n.s.a

A couple of things jump out. First is the fact that the two biggest metro areas in Wisconsin added a combined 9,400 seasonally-adjusted jobs in June. That's more than half of the 17,500 added in the state, and goes against a hypothesis I had that many of the job gains might be in rural areas heavily-reliant on tourism. The second item is the fact that Milwaukee's numbers are deflated by 5,400 to reflect seasonal adjustments, but Madison's is only dropped by 100. Is there something odd going on here, and is this related to the UW calendar?

I decided to take a look at the May numbers for these places, and see if there was a similar correlation.

Change in jobs, April-May 2013
Milwaukee Metro- +3,900 s.a., +9,600 n.s.a.
Madison Metro- -5,000 s.a., +900 n.s.a

This time both Madison and Milwaukee have a major seasonal deflator, Milwaukee's is 5,700 and Madison's is 5,900. It also means that the Milwaukee area has added 8,300 jobs on a seasonally-adjusted basis for the last 2 months, while Madison has added 0. So Madison's "good" numbers in June could indeed reflect the later end of the UW-Madison school year, meaning Summer jobs started after the May survey was done, explaining the "loss" in May and "gain" in June compared to most years.

So is the Milwaukee Metro area all of a sudden taking off in jobs? And what is Madison's trend? Doesn't appear that way according to year-over-year numbers.

Year-over-year change in jobs
Milwaukee Metro- +8,500 s.a., +9,000 n.s.a.
Madison Metro- -500 s.a., +2,200 n.s.a.

This now means practically all of Milwaukee's added jobs in the last 12 months has happened in May and June (on a seasonally-adjusted basis), and Madison's also basically stagnated. It's also interesting to note that the non-seasonally adjusted number is higher than the seasonally adjusted one, which indicates seasonal jobs are more likely to be added than non-seasonal ones who don't get deflated in the seasonal adjustment.

This is especially true when you look at the state figures for the last 2 months.

Year-over-year change in jobs
Wisconsin May 2013- +5,400 s.a., +5,600 n.s.a.
Wisconsin June 2013- +24,600 s.a., +36,400 n.s.a.

Now here's an interesting difference. Both seasonal and non-seasonal adjusted jobs have big increases in the year-over-year number, but look at how the seasonal deflator expands from 200 in May to 11,800 in June. That same deflator was only 4,900 in June 2012. It tells you that a lot of the recent jobs increase is in seasonally-sensitive areas, and do not show underlying economic strength.

What it also means is that the real test is yet to come when it comes to figuring out if Milwaukee and Wisconsin's recent job increases are legit, because the jobs reports from July through September would see these seasonally-adjusted jobs go away as tourism season ends and students go back to school. If the jobs in other areas don't pick up you'll see the year-over-year jobs figures drop as larger-than-normal Summer job increase goes away.

And I do worry about how this plays out, because my Aunt and Uncle were mentioning that plenty of the folks up North were saying that the tourist season had been the slowest they'd seen in the last 3 years. Granted, this area could have had a slow start due to the cold, rainy weather in April and May that delayed seasonal hiring and could have also delayed tourists from heading that way. But it's worth keeping an eye on this area in the next couple of months, because a bad Summer season there could level off hiring when May and June 2014 comes around, and cause reported job "drops" in a time when Governor Walker won't want to see that kind of news.

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