an outlook for the wisconsin economy - crowe

An Outlook for the Wisconsin Economy

Noah WilliamsUniversity of Wisconsin-Madison

Center for Research On the Wisconsin Economy (CROWE)https://crowe.wisc.edu

April 26, 2018

Williams Outlook for the Wisconsin Economy

CROWE: Brief Introduction

Center for Research on the Wisconsin Economy (CROWE)recently established in the Department of Economics atUW-Madison.Primary mission: support and disseminate economic policyresearch, with particular focus on Wisconsin economy andstate-level economic policy issues.Director, economists, fellows and affiliates in Departmentof EconomicsProviding economic policy research opportunities forUW-Madison students


CROWE Research

Research Reports:The Impact of the Manufacturing and Agriculture Credit inWisconsinAn Evaluation of the Economic Impact of the FoxconnProposalForecasting the US and Wisconsin Economies in 2018Business Formation in Wisconsin During and After theGreat Recession

CROWE’s Nest Blog shorter pieces:The Impact of the Federal Tax Reform on WisconsinTaxpayersRecent Migration Trends in Wisconsin and Other StatesTax Rebates and Tax Holidays

More to come soon!


Overview and Outlook for the Wisconsin Economy

Tight labor market: low unemployment, highemployment-population ratioLabor force challenges: low population growth, agingworkforce, net outmigrationState economy has diversified but remainsmanufacturing-heavy, lacks vibrant urban centerBiggest economic story: Foxconn. High fiscal costs butpotential large gainsForecasts: slow and steady growth over next 2+ years


Unemployment and Employment-Population

2006 2008 2010 2012 2014 2016 2018

3

4

5

6

7

8

9

10

Unemployment Rate

USWI

2006 2008 2010 2012 2014 2016 201858

59

60

61

62

63

64

65

66

67

68Employment−Population Ratio


Employment and Labor Force

2006 2008 2010 2012 2014 2016 201898

100

102

104

106

108

110

112

114

Nonfarm Employment, 2010=100

2006 2008 2010 2012 2014 2016 201897

98

99

100

101

102

103

104

105

106Labor Force, 2010=100

USWI


Aging of the Population


Net Outmigration

Has declined in latest Census data: -15,130 in 2015, -11,439 in2016, -2,086 in 2017


Differences in Sector Shares and Growth

Real GDP by State by Industry

Industry2016

Share2011-16 Growth

2016 Share

2011-16 Growth

All industry total (billion) 16,259$ 10.5 273$ 7.4 Private industries 88.0 12.3 89.1 8.9 Construction 4.0 19.7 3.9 21.8 Manufacturing 11.7 5.3 18.6 4.3 Wholesale & Retail trade 12.1 13.2 12.0 12.1 Information 5.5 23.2 3.8 24.5 Finance and insurance 6.3 4.3 7.0 11.0 Real estate and rental and leasing 13.5 11.2 12.5 2.9 Professional, scientific services 7.4 17.6 4.3 13.6 Health care and social assistance 7.5 14.5 8.8 8.4 Government 12.0 -0.7 10.9 -3.2

United States Wisconsin


Urban Concentration: Wisconsin vs Minnesota

2000 2005 2010 20150.29

0.295

0.3

0.305

0.31Share of WI Emp in MKE

2000 2005 2010 20150.66

0.665

0.67

0.675

0.68Share of MN Emp in MSP

2006 2008 2010 2012 2014 2016

100

105

110

115Employment, 2010=100

MilwaukeeMinneapolis−St. Paul


Wildcard: Foxconn

Foxconn investment deal announced in July, legislation inSeptember, contract ongoing, planned opening 2019-20.Planned investment of up to $10 billion, initial employmentof 3,000 increasing to up to 13,000State subsidies of $2.85 billion over 15 years tied to scale:15% of investment, 17% of payroll.At full operation, we estimated 32,000-39,000 total directand indirect jobs including Foxconn’s supply chain andother induced activityEven if all output produced by Foxconn except direct laborincome went out of state, cumulative multiplier of 3.9 onthe state’s subsidy costs.Recent studies have shown large plant openings can havebig spillovers on incumbent companies especially inproductivity. But wide variation in outcomes.


Illinois-Wisconsin Worker flows

There were many popular concerns that Foxconn openingwould benefit largely Illinois workers.Relatively few workers from Illinois commute to SoutheastWisconsin, more Wisconsin workers go the other way.Now that we know plant will be in Racine area, thecommuting issue is less severe.


Large Plant Openings: Heterogeneity

Significant heterogeneity, two examples:- BMW in South Carolina: 1992 promise of 2000 jobs. By2014 employing over 7600, with estimated 22,000 inducedand indirect jobs- Mercedes in Alabama: 1993 promise of 1500 jobs. Within5 years lost more than 800 supplier jobsEY study on Foxconn used a multiplier of 2.7.Multiplier estimates in the literature range from 1.5 tomore than 3. Those most relevant to this case are in the2.5-3.0 range, which suggests with 13,000 direct jobs, anadditional 19,000-26,000 indirect and induced jobs. Butmuch variation on either side of that estimate.


Economic Forecasts

Recently at CROWE we have constructed an empiricalmodel for the US and WI economiesWe adapt an approach that was used the Federal ReserveBank of Minneapolis to forecast the U.S. economy.Our approach uses the relationships among 28 variables: 17national and 11 at the state level. State-level variablesdepend on national but not vice versa.We estimate the model and then use it to project over thenext two years.


National Forecast: GDP Growth


Wisconsin Forecast: Unemployment Rate


Wisconsin Forecast: GDP


Wisconsin Forecast: Employment


Wisconsin Forecast: Manufacturing Employment


Economic Performance in Wisconsin since the GreatRecession: A County-Level Analysis

The discussion so far has been based on state-level data,but not all parts of the state have done equally welleconomically.While there has been talk about areas left behind, inforthcoming report I find strong evidence of convergencein living standards.Counties that had the highest unemployment rates, povertyrates, lowest incomes before the recession have seen thelargest improvements in the following decade.Counties which suffered the most during the recession havehad the largest improvements during recoveryBut divergence in overall size: counties that had largeremployment, labor force, or population before the recessionexperienced faster average growth in those measures


Unemployment by County

March 2018

Wisconsin County Unemployment Rates

Not-Seasonally Adjusted Unemployment Rates for Wisconsin Counties

WI Dept. of Workforce Development, Labor Market Information 4/25/2018DETI-17241-P (R. 4/2018)

US WI

Not-Seasonally Adjusted

SeasonallyAdjusted

Dane 2.2%Lafayette 2.4Ozaukee 2.4Calumet 2.6Eau Claire 2.6Sheboygan 2.6Washington 2.6Waukesha 2.6Fond du Lac 2.7La Crosse 2.7Winnebago 2.7Monroe 2.8Brown 2.9Dodge 2.9Green 2.9Marathon 2.9Outagamie 2.9Columbia 3.0

Sauk 3.0%Je�erson 3.1Richland 3.1Grant 3.2Iowa 3.2Walworth 3.2Kewaunee 3.3St. Croix 3.3Trempealeau 3.3Waupaca 3.3Portage 3.4Rock 3.4Shawano 3.4Vernon 3.4Clark 3.5Milwaukee 3.5Dunn 3.6Juneau 3.6

Kenosha 3.6%Lincoln 3.6Manitowoc 3.6Pierce 3.6Jackson 3.7Racine 3.7Bu�alo 3.8Marquette 4.1Oconto 4.1Price 4.1Wood 4.1Chippewa 4.2Green Lake 4.2Taylor 4.2Waushara 4.2Barron 4.3Florence 4.3Pepin 4.3

Langlade 4.4%Crawford 4.5Douglas 4.5Marinette 4.6Oneida 4.7Polk 4.7Menominee 4.8Rusk 4.8Washburn 4.8Ashland 5.0Door 5.4Adams 5.5Forest 5.5Sawyer 5.5Burnett 5.6Vilas 5.6Bay�eld 6.5Iron 6.8

4.1% 4.1%3.2 2.9

< 2.9%3.0% - 3.43.5% - 3.9

4.0% - 4.4 4.5% - 4.95.0% - 5.45.5% - 5.96.0% - 6.46.5% - 6.9

7.0% >


Unemployment by CountyFond du Lac: 4.2% in 2007, 7.4% 2010, 2.4% in 2017

1 2 3 4 5 6 7

−11

−10

−9

−8

−7

−6

−5

−4

−3

Change in Unemployment Rate: 2007−2010

Cha

nge

in U

nem

ploy

men

t Rat

e: 2

010−

2017

Unemployment Changes in Wisconsin by County

4 6 8 10−5.5

−5

−4.5

−4

−3.5

−3

−2.5

−2

−1.5

−1

−0.5

Unemployment Rate in December 2007

Cha

nge

in U

nem

ploy

men

t Rat

e 20

07−

2017

Unemployment Changes in Wisconsin by County


Poverty Rate by CountyFond du Lac: 8.4% in 2007, 11.6% 2010, 7.7% in 2017

−4 −2 0 2 4 6−8

−6

−4

−2

0

2

Change in Poverty Rate: 2007−2010

Cha

nge

in P

over

ty R

ate:

201

0−20

16

Poverty Changes by County

5 10 15 20 25 30 35

−6

−4

−2

0

2

4

Poverty Rate in 2007

Cha

nge

in P

over

ty R

ate

2007

−20

16

Poverty Changes by County

All CountiesExcluding Menominee

All CountiesExcluding Menominee


Labor Force by CountyFond du Lac: -3.1% in 2007-10, 1.6% 2010-17, -1.5% 2007-17

−15 −10 −5 0 5 10

−10

−5

0

5

10

Growth Rate of Labor Force 2007−2010

Gro

wth

Rat

e of

Lab

or F

orce

201

0−20

17

Labor Force Changes in Wisconsin by County

8 10 12−20

−15

−10

−5

0

5

10

15

Log Labor Force in 2007

Gro

wth

Rat

e of

Lab

or F

orce

200

7−20

17

Labor Force Changes in Wisconsin by County


an outlook for the wisconsin economy - crowe

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