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Wisconsin is Open for Business
November 4, 2011
Sizing up Sizing up Today’s Today’s
EconomyEconomy
1
Wisconsin Economics Association
Dennis WintersChief, Office of Economic Advisors
Department of Workforce DevelopmentNovember 4, 2011
Sizing up Today’s EconomySizing up Today’s Economy
Wisconsin Economics Association
Wisconsin is Open for Business
November 4, 2011
Sizing up Sizing up Today’s Today’s
EconomyEconomy
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Wisconsin Economics Association
FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN’S ECONOMY
Wisconsin is Open for Business
November 4, 2011
Sizing up Sizing up Today’s Today’s
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G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus
The New York Times, July 31, 2008
U.S. Economy Grows at Solid Pace in 2nd Quarter Washington Post, July 31, 2008
Yes, Virginia, It is a Recession
Business Week, July 31, 2008
Still on the right road – The American economy has often defied predictions of its demise. It has
done so again.
The Economist, July 31, 2008
CONFUSED? NO WONDERWHO DO YOU BELIEVE
Wisconsin is Open for Business
November 4, 2011
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CONFUSED? NO WONDERWHICH DO YOU BELIEVE
Home price dip extends to 4th month9:20am: Case-Shiller index declines 0.4% in January as market recovery appears to have stalled.
CNN, March 30, 2010
Home Prices in 20 U.S. Cities Unexpectedly Climb 0.3%, Case-Shiller Says ,Home prices in 20 U.S. cities unexpectedly rose in January, indicating the housing market is stabilizing as the economy expands.
Bloomberg, March 30, 2010
Wisconsin is Open for Business
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INDUSTRIAL PRODUCTION RISES FOR FOURTH MONTH• INDUSTRIAL PRODUCTION IN THE U.S. UNEXPECTEDLY ROSE IN
AUGUST, SIGNALING MANUFACTURING WILL SUPPORT THE WORLD’S LARGEST ECONOMY.
Bloomberg, September 14, 2011http://www.bloomberg.com/news/economy/
U.S. JOBLESS CLAIMS ROSE TO HIGHEST SINCE JUNE • APPLICATIONS FOR U.S. UNEMPLOYMENT BENEFITS
UNEXPECTEDLY ROSE LAST WEEK TO THE HIGHEST LEVEL SINCE THE END OF JUNE, UNDERSCORING THE RISK OF FURTHER WEAKNESS IN THE LABOR MARKET.
Bloomberg, September 14, 2011http://www.bloomberg.com/news/economy/
CONFUSED? NO WONDERWHAT DO YOU BELIEVE
Wisconsin is Open for Business
November 4, 2011
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Wisconsin Economics Association
• GDP
• DJIA
• JOBS
HOW DO YOU SPELLRECOVERY?
Wisconsin is Open for Business
November 4, 2011
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Wisconsin Economics Association
Real GDP Growth
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2000q1 2002q1 2004q1 2006q1 2008q1 2010q1 2012q1
Pe
rce
nt
Q/Q
Ch
an
ge
Source: Bureau of Economic Analysis, OEA
WHAT IS RECOVERY?GDP; Nine positive quarters, Q3 advanced up 2.5%
Wisconsin is Open for Business
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Real GDP
$12,500
$12,600
$12,700
$12,800
$12,900
$13,000
$13,100
$13,200
$13,300
$13,400
$13,500
200
6-I
200
6-II
200
6-III
200
6-IV
200
7-I
200
7-II
200
7-III
200
7-IV
200
8-I
200
8-II
200
8-III
200
8-IV
200
9-I
200
9-II
200
9-III
200
9-IV
201
0-I
201
0-II
201
0-III
201
0-IV
2011
-I
2011
-II
2011
-III
2011
-IV
Source: BEA, OEA
BUSINESS CYCLE SEVEREFINALLY RECOVERED AFTER NINE QUARTERS
Wisconsin is Open for Business
November 4, 2011
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RETAIL SALES CLIMBINGWE’RE BACK
Wisconsin is Open for Business
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RETAIL SALESUSING THE APPROPRIATE ADJUSTMENTS
Wisconsin is Open for Business
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THE GOOD NEWS FOR CONSTRUCTIONSETTING A BOTTOM (?)
Wisconsin is Open for Business
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INTEREST IS LESS DISMALBUT STILL CONTRACTING
Wisconsin is Open for Business
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CORPORATE PROFITS LOOK HEALTHYMOSTLY DUE TO COST CUTTING
Wisconsin is Open for Business
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WHAT IS RECOVERY?DJIA; UP 85% SINCE MARCH 9, 2009
Source: http://moneycentral.msn.com/investor/charts/chartdl.aspx
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MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND
Wisconsin is Open for Business
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INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION
Source: BEA, OEA
Private Domestic Investment
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800(b
illio
ns)
Nonresidential Equipment and software Structures
Wisconsin is Open for Business
November 4, 2011
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INDUSTRY EXPANSION SLOWING
Source: St. Lous Fed, OEA
Industry Indexes
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Non-Manufacturing
Manufacturing
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WHAT IS RECOVERY?JOBS; STILL DOWN 130,000
Source: Bureau of Labor Statistics, LMI, OEA
Wisconsin Total Nonfarm Jobs (NSA)
2,600,000
2,650,000
2,700,000
2,750,000
2,800,000
2,850,000
2,900,000
2,950,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007200920102011
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JOBS RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES
Wisconsin is Open for Business
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JOB RECOVERY WILL TAKE TIME
Source: BLS, OEA
Job Losses in Recent Recessions - Wisconsin - # of Months Since Recession Declaration
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61
Source: DWD, OEA, X12 adjustment of not seasonally adjusted CES via U.S. BLS
Job
Loss
es R
elati
ve to
Pea
k M
onth
1981 Recession
1990 Recession
2001 Recession
2007-2009 Recesion
Wisconsin is Open for Business
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Source: BLS, DOR, OEA
♦ Blue is history (CES SA, December 2010 is benchmark, 2,317,200).
♦ Orange is DOR forecast (quarterly then annual, Fall 2011 Outlook).
♦ Yellow is 250,000 goal for December 2014 (2,567,200).
Total Private Jobs
2,200,000
2,250,000
2,300,000
2,350,000
2,400,000
2,450,000
2,500,000
2,550,000
2,600,000
Wisconsin is Open for Business
November 4, 2011
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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
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Wisconsin is Open for Business
November 4, 2011
Sizing up Sizing up Today’s Today’s
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IS THE PHILLIPS CURVE BACK?IF YES, THEN FED HAS LEEWAY
Wisconsin is Open for Business
November 4, 2011
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HISTORICAL COMPARISONS CAN BE INSIGHTFUL and DISCONCERTING
Wisconsin is Open for Business
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Recovery is self-sustaining. Employment may breach in 2014. Strength of recovery subject to consumer income
and wealth uncertainty.
Risks High unemployment dampens income growth. Prolonged high gasoline prices sap consumption. European Union fiscal problems wash over the
global financial markets.
IN CONCLUSIONCONTINUED RECOVERY
Wisconsin is Open for Business
November 4, 2011
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"We hope to become manifestly, aggressively, stunningly bullish of equities," Dennis Gartman, hedge fund manager and author of The Gartman Letter, said in his Monday commentary. "Until then, we are sellers of rallies.“
– USA TODAY, October 8, 2011.
SUMMING UPWHERE IS THE SMART(?) MONEY
Wisconsin is Open for Business
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Wisconsin Economics Association
Questions ?
Wisconsin is Open for Business
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Wisconsin Economics Association
Dennis Winters
Phone: 608-267-3262
Email: [email protected]
Website: www.dwd.wisconsin.gov
OEA website: www.dwd.wisconsin.gov/oea
CONTACT INFORMATION
Wisconsin is Open for Business
November 4, 2011
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Wisconsin Economics Association
Household Debt as % of Disposable Income
10
11
12
13
14
15
Jan-
80
Jan-
82
Jan-
84
Jan-
86
Jan-
88
Jan-
90
Jan-
92
Jan-
94
Jan-
96
Jan-
98
Jan-
00
Jan-
02
Jan-
04
Jan-
06
Jan-
08
Jan-
10
Per
cent
HOUSEHOLD DEBT DELEVERAGING
Source: Fed flow of Funds
Wisconsin is Open for Business
November 4, 2011
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Ratio: Household Assets to Liabilities
1.5
2.0
2.5
3.0
3.5
HOUSEHOLD DEBT SHEDDING OF WEALTH
Source: Fed flow of Funds