Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 1 Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development November 9, 2012 Sizing up Today’s Economy Wisconsin Economics Association
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy ECONOMIC OUTLOOK
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 3 THE ECONOMY HAS CHANGED AND SO MUST YOU
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 4 4 ECONOMIC RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 5 JOBS RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 6 WHY HAS THE RECOVERY BEEN SO SLOW
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 7 Source: BEA, OEA BUSINESS CYCLE SEVERE IT TOOK NINE QUARTERS TO RECOVER Recovered
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 8 REAL EARNINGS ARE FLAT
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 9 INTEREST INCOME TAKE HIT WITH LOW INTEREST RATES
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 10 HOUSEHOLD DEBT DELEVERAGING Source: Fed flow of Funds
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 11 HOME EQUITY WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 12 Source: Federal Reserve Board of Governors REVOLVING CREDIT WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 13 NO SAVINGS – WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 14 It is difficult to increase consumption when 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.
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 15 CORPORATE PROFITS AT NEW RECORDS MOSTLY DUE TO COST CUTTING
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 16 CORPORATE PROFITS BUILDING CASH HOARD
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 17 INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION Source: BEA, OEA
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 18 MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 19 Source: Federal Reserve Board, Data Download Program EXTENDING CREDIT BANKS ARE RETICENT TO LEND FUNDS
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 20
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 21 Recovery is self-sustaining. Employment breach in 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 CONCLUSION CONTINUED RECOVERY
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 22 IN REVERSE ORDER THE UGLY, THE BAD, AND THE GOOD
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 23 “Fiscal Cliff” – $580 million in changes Could decrease GDP growth by four percentage points Federal deficit and debt Dampers on growth, current models not sustainable Entitlements – Medicare and Social Security Not sustainable in the long run State and local benefits burden Health care and pension liabilities European fiscal crisis – global affect U.S. dollar affects, export demand, wealth lost BEGINNING WITH THE UGLY
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 24 Slow down in manufacturing Production, exports Sub-par employment growth Job growth not keeping up with labor force growth Macro tools having limited impact Low interest rates, fiscal stimulus, QEs, twist ADDING IN THE BAD
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 25 Housing markets finally moving higher Little happening in non-res construction Motor vehicle sales are moving higher Perpetuating sector growth SLOW PROGRESS THE GOOD
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy WORKFORCE OUTLOOK
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 27 Breach May 2015 JOBS RECOVERY OUR BEST ESTIMATES PUT THE BREACH AT MAY 2015
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy WORKFORCE PEAKED NO RECOVERY AFTER RECESSION, NONE EXPECTED
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 29 WISCONSIN’S WORKFORCE GROWTH BECOMES FLAT Source: Bureau of Labor Statistics, OEA
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy WORKFORCE PARTICIPATION TRENDS DWARF FLUCUATION
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy POPULATION PARTICIPATION FUNCTION OF RECESSION SEVERITY
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy IT’S THE YOUNG THAT ARE DELAYING ENTERING THE WORKFORCE
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy CHANGING LFPR GREATLY ALTERS WORKER AGE MIX
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 34 … the number of unemployed persons (12.8 million) and the unemployment rate (8.3 percent) … have shown little movement thus far in BLS, July 2012 employment report, August 3, 2012 US Employers post the most jobs in 4 years; by Christopher S. Rugaber, AP economics writer, Posted: Aug 07, :42 AM CDT State manufacturers have jobs, need workers; postcresent.com; by Holly Hartung, Grace Edquist and Matt Oleson, Wisconsin Center for Investigative Journalism, August 1, 2012 Marinette Marine struggles to attract young workers, Training, dozens of positions available, but applicants are few By Rick Barrett of the Journal Sentinel, June 16, 2012 WAIT, WHAT HOW CAN YOU HAVE BOTH?!
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 35 We have: 1.223,600 people unemployed 2.43,400 job openings on JCW 3.UI benefits running out We also have: Lack of correct skills fit People looking for their old job Crust of chronically unemployed WHAT’S THE PROBLEM NUMBER AND MIX OF JOBS NOT ALIGNED
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 36 IS IT CYCLICAL OR STRUCTURAL
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 37 DOROTHY
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 38 A little economic theory
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy Supply Theory Tells Us More Pay Yields More Work
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy $100 per day yields 3 days work (total earnings = $300) Area = $300
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy Increased pay translates into increased work (increased earnings)
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy Well, the guy only shows up for two days. This gives what we call a backward-bending supply curve.
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy At new wage, it only take 2 days to make $300 = S`
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 44 We face a serious quantity challenge We face a serious quality challenge We need to break into the crust of the chronically unemployed Many are not prepared technically or civilly Backward-bending supply curve for labor. THINGS HAVE CHANGED BREAKING NEW GROUND
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 46 Questions ?
Wisconsin is Open for Business November 9, 2012 Sizing Up Today’s Economy 47 Dennis Winters Phone: Website: OEA website: CONTACT INFORMATION