Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development

Wisconsin is Open for Business

February 8, 2013

WISCONSIN’SWISCONSIN’SCONSTRUCITONCONSTRUCITON

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Dennis K. WintersChief, Office of Economic AdvisorsWisconsin Department of Workforce Development

February 8, 2013

WISCONSIN’SWISCONSIN’SCONSTRUCTION CONSTRUCTION

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2013 Winter Convention


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FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN’S ECONOMY


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THE ECONOMY

HAS CHANGED

AND SO MUST YOU


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Average Real GDP Growth First 9 Quarters of Recovery

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0Pe

rcent

4

ECONOMIC RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES


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JOBS RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES


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ECONOMICOUTLOOK


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7Source: BEA, OEA

BUSINESS CYCLE SEVEREIT TOOK NINE QUARTERS TO RECOVER

Recovered


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REAL EARNINGS ARE FLAT

Wisconsin Real Average Annual Wage

$28,000

$30,000

$32,000

$34,000

$36,000

$38,000


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INTEREST INCOME TAKE HIT WITH LOW INTEREST RATES

Personal Interest Income

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

Dec07

Mar08

Jun08

Sep08

Dec08

Mar09

Jun09

Sep09

Dec09

Mar10

Jun10

Sep10

Dec10

Mar11

Jun11

Sep11

Billi

ons


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HOME EQUITY WAS USED FOR CONSUMPTIONNOW PART OF DELEVERAGING


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111111

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000Ch

ange

ove

r Pri

or Y

ear $

M

Source: Federal Reserve Board of Governors

REVOLVING CREDIT WAS USED FOR CONSUMPTIONNOW PART OF DELEVERAGING


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121212

Personal Savings, Billions of Dollars

0

100

200

300

400

500

600

700

800

200

0-I

200

0-III

200

1-I

200

1-III

200

2-I

200

2-III

200

3-I

200

3-III

200

4-I

200

4-III

200

5-I

200

5-III

200

6-I

200

6-III

200

7-I

200

7-III

200

8-I

200

8-III

200

9-I

200

9-III

201

0-I

201

0-III

2011

-I

NO SAVINGS – WAS USED FOR CONSUMPTIONNOW PART OF DELEVERAGING


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It is difficult to increase consumptionwhen you:

1. have stagnant income,2. are losing wealth,3. paying down debt,4. increasing savings,5. and are paying more for food and gas.


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CORPORATE PROFITS AT NEW RECORDSMOSTLY DUE TO COST CUTTING


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MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND


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Change In Investment From 2007 4th Qtr

-600

-500

-400

-300

-200

-100

0

100Bil

lions

of 20

05 $

Private investmentResidential

16

CORPORATE PROFITSBUILDING CASH HOARD


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INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION

Source: BEA, OEA


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18Source: Federal Reserve Bank of St. Louis, Economic Research; OEA

EXTENDING CREDITBANKS ARE RETICENT TO LEND FUNDS

Reserves of Depository Institutions(billions of dollars)


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Breach May 2015

JOBS RECOVERYOUR BEST ESTIMATES PUT THE BREACH AT MAY 2015


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VEHICLE SALESCONTINUE STRONG


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HOUSING STARTSTRENDING HIGHER


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0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2004M01 2006M01 2008M01 2010M01 2012M01

Wisconsin Housing Starts (thousands)

Source: U.S. Census

WISCONSIN HOUSING STARTSHOPEFULLY NOT A HEAD FAKE


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ARE THE GOOD DAYSGONE FOREVER?


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ARE THE GOOD DAYS GONE?PROBABLY FOR RESIDENTIAL

Source: U.S. Census


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2006 2011 $ Change % Change

Wisconsin $12.545 $3.846 $8.698 -69.3

M7 Region $4.572 $1.085 $3.488 -76.3

OUCH !

Source: Wisconsin Department of Revenue, Real Estate Value Data

Total New Construction Spending( $ billions )


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27Source: BEA, OEA


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Peak Trough % Change

Total Jobs 2,889,300 2,713,700 - 6.1

Construction 130,100 83,200 - 36.0

Milw MSA 33,900 17,200 - 49.2

* Peak Wisconsin construction employment in July 2004, trough in March 2012

OUCH !AGAIN

Source: U.S. Bureau of Labor Statistics, QCEW

Wisconsin Employment Through Recession


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Peak Trough % Change

Residential 4,088 3,125 - 23.4

Non-residential 811 655 - 19.2

Heavy Cnstructn 967 800 - 13.3

Trades 12,119 9,705 - 18.5

* Peak Wisconsin construction establishment in 2003, trough yet uncertain

OUCH !YET AGAIN

Source: U.S. Bureau of Labor Statistics, QCEW

Wisconsin Construction Establishments Through Recession


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Shar

e Union v. Non-Union Shares

Union YesUnion No

Source: U.S. Census; CPS-MORG

CHANGE IN REPRESENTATIONUNION v. MERIT SHOPS


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So, what will be the biggest socio-economic

policy challenge in the next 20 years?


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ELDERLY NUMBERS WILL SWELLWIDEN THE SIDEWALKS WILL YA !?


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OR PERHAPS THE MORE INTERGENERATIONAL VERSION


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QUANTITY


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WISCONSIN’S WORKFORCE GROWTHBECOMES FLAT

Source: Bureau of Labor Statistics, OEA

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1960 1970 1980 1990 2000 2010 2020 2030

Thou

sand

s

Population

Civilian Labor Force

Wisconsin Population and Labor Force


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BLS RAISED LFPR FOR THE FUTUREPARTICULARLY FOR OLDER COHORTS

Source: Bureau of Labor Statistics, Bureau of the Census, OEA

Changes in LFPR by Age Cohort

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

16-19 20-24 25-34 35-44 45-54 55-59 60-64 65-69 70-74 75+

Constant2000201020202030


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WISCONSIN’S WORKFORCE HIGHER LFPRs OFFER LIMITED GAINS

Source: Bureau of Labor Statistics, OEA

(30,000)

(10,000)

10,000

30,000

50,000

70,000

90,000

110,000

2010 2010 2020 2020 2030 2030

New BLS Plus 3% New BLS Plus 3% New BLS Plus 3%

Worker Difference from Census 2000


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LITTLE CHANGES EVEN WITH HIGHER LFPRRETIREMENTS SWAMP PARTICIPATION

Source: Bureau of the Census, DOA, OEA

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1960 1970 1980 1990 2000 2010 2020 2030

Thou

sand

s PopulationLabor force base caseBLS prj. changeElevated LFPR of 3 percentage points

Wisconsin Population and Labor Force


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NURSING WORKFORCE IN WISCONSIN DEMOGRAPHICS AT WORK

Source: Office of Economic Advisors

Wisconsin Nurses by Age

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

< 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75 +


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POPULATION PARTICIPATION FUNCTION OF RECESSION SEVERITY


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WORKFORCE PARTICIPATION TRENDS DWARF FLUCUATION


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IT’S THE YOUNG THAT ARE DELAYING ENTERING THE WORKFORCE


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CHANGING LFPR GREATLY ALTERS WORKER AGE MIX


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QUALITY


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"The days are over when you could walk into a paper mill with a high school diploma and run one of the machines."

– Patrick Schillinger, former Wisconsin Paper Council President, Center will teach paper-industry technology, Milwaukee Journal Sentinel, JS Online, October 21, 2004.

NEW ECONOMY NEED FOR SKILLS


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TURN YOU LOOSE ON THIS BABYI DON’T THINK SO


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NEW ECONOMYSCARCITY OF SKILLED WORKERS

Former Federal Reserve Chairman Alan Greenspan voiced his concern about a growing earnings gap between highly skilled and unskilled workers.

"It's a problem caused basically by our skill mix not keeping up with the technology that our capital stock requires," the Fed chairman said. . . .


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WORKFORCE TRENDSARE:

Unprecedented – we have never faced a declining workforce before;

Assured – demographics will change little;

Largely unalterable – demographics and migration patterns do not change abruptly.


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RAMIFICATIONS OF WORKFORCE TRENDS ARE:

Potentially devastating – without sufficient productivity gains the state’s economy will stagnate;

Necessitating a focus on talent – large investments in education and training are needed;

Requiring match – talent supply and industry demand must be matched or you lose both.


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Questions ?


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Dennis Winters

Phone: 608-267-3262

Email: [email protected]

Website: www.dwd.wisconsin.gov

OEA website: www.dwd.wisconsin.gov/oea

CONTACT INFORMATION

Documents

Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development