Sunday, March 28, 2021

An uneven 2020 economy in the US and Wisconsin means there's a lot of recovery that's still needed

Wanted to give a few charts that came out from the US Bureau of Economic Analysis in recent days. And it illustrates more of the overall backslide that happened in 2020, and how uneven much of the economic activity truly was last year.

Let's start with overall GDP, which dropped by 3.5% on an annual basis last year. But as you will see, what added up to that -3.5% was heavily concentrated in services that relied on people going out and/or traveling, while manufacturing and construction only had minor losses for the year, and IT and finance industries actually grew.

Economic growth was also widely varied by state, and not just due to the "locked down vs COVID-available" differences between various parts of the country.

It makes sense that Hawaii would have the most depressed economy in America (with the collapse in long-distance/air travel) and that New York would be bottom 5 for growth (lots of death will do that). But West Virginia, Oklahoma and Wyoming are three of the Trumpiest places in America with few/any shutdowns in place for much of the year.

In Wisconsin's case, a few industries explain our larger GDP decline of 4.5%. The biggest gaps include government enterprises (-0.53% of our 4.5% drop, 2nd largest drop in America), and IT/Information, which took away 0.21% of our GDP in a time when the industry grew nationwide - the largest decline of any state in America.

Wisconsin also didn't benefit from the farm bailouts as much as other states - our agricultural industries slightly declined while they were a minor boost to GDP nationwide. And manufacturing in Wisconsin took away a total of 0.71% of our GDP compared to a drop of 0.30% for the US. Oh, but giving away hundreds of millions in tax cut to farmers and manufacturers is making us more prosperous, right WMC?

I also wanted to give you a look at how Wisconsin shaped up compared to the rest of the US in personal income. This number went up across the board in the US despite the COVID recession because of thousands of dollars in stimulus payments, enhanced unemployment benefits, and PPP bailouts. But Wisconsin didn't have nearly the boost that most places had, with our income growth of 4.4% putting us down at 46th in the country.

We trailed in all three areas, particularly in those transfer receipts, which may reflect that we had fewer people collecting those higher unemployment benefits, stimulus checks and PPP funds. But we also trailed in earnings (Wis down 0.3%, US was up 0.3%), and lagging in wage and earnings growth has continued to be a worrying trend in the last decade in Wisconsin.

That being said, it was even worse in the first 3 quarters of 2020, as Wisconsin ended up 8th in the US for income growth in a Q4 time period when most states had declines due to the unwinding of all of that CARES-era aid.

By the way, notice the big jumps in the Northern Plains? MAJOR farm subsidies from TrumpWorld in Q4 last year, especially for that part of the country. Iowa, Nebraska, and both Dakotas each had more than 10% of that listed rise in income due to farm "earnings", and Kansas 6.5% (tough, independent Red States, you know). By comparison, Wisconsin farmers only accounted for 1.4% of our state's income increase in the last 3 months of 2020.

In breaking it down, it looks like Wisconsin had much better earnings growth than the rest of the nation, and they had a much smaller unwinding of those CARES funds...likely because more of it unwound earlier in Wisconsin during Q3 (when our declines were much larger than the US).

Contributions to Q4 change in income
Wis +5.7%
US +3.5%

Transfer payments
Wis -5.0%
US -11.3%

Of course, both the US and Wisconsin should see sizable increases in income due to more stimulus checks and enhanced unemployment benefits returning in the first 3 months of 2021. But earnings growth is the real indicator of whether people are becoming better off, along with overall economic output, and Wisconsin has even more to make up in those areas than the rest of the nation does.

Hopefully our strong budgetary situation and a lessening burden of COVID will help us to pump out enough funds and activities to make up our sizable gap. But there's a long way to go, especially in some harder-hit industries, and Wisconsin needs to follow the US's lead by giving strong economic support to the many that are in need, while hammering down on the gas to kick our recovery into the next level among those who were able to get through 2020 without much (if any) damage.

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