1. November 6, 20091 A Perspective on the Wisconsin Economy: Past, Present, and Future This presentation is based on information supplied by the U.S. Bureau Of the Census, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, Federal Housing Finance Authority, Federal Reserve Board of Governors, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of New York, Wisconsin Department of Workforce Development, various divisions of the Wisconsin Department of Revenue. National forecasts are provided by Global Insight, Inc. Wisconsin Economics Association November 6, 2009

2. 2 About Us Who We Are –Division of Research and Policy Analysis consists of 12 professionals: economists, information technology professionals, and policy analysts What We Do –Analyze the State and National Economy Wisconsin is one of only seven states with a dedicated econometric model to forecast –Results are published quarterly –Metropolitan forecasts annually Prepare specialized reports of interest on the state’s economy –Estimate the State’s General Fund Revenues –Prepare background analysis on state taxes and local finance –Cost and analyze state and local tax proposals Over 300 separate legislative bills Nearly 75 budget proposals Many more proposals that survive the “what-if” stage Find Our Reports Here –http://www.revenue.wi.gov/report/e.html#economyhttp://www.revenue.wi.gov/report/e.html#economy

3. November 6, 20093 Today’s Discussion 1)The Bad News: The financial crisis brought the US economy to near collapse. 2)The Good News: Recovery is underway. 3)The Bad News: The drop was so deep that full recovery will take years. 4)The Good News: Wisconsin will match or exceed US growth in 2010. 5)Wisconsin fares better than some critics realize.

4. The US Was In the Midst of a Long Hard Recession That Was Then…

5. November 6, 20095 U.S. At The End of A Very Long, Deep Recession Source: Actual--Bureau of Economic Analysis.Shaded area indicates period of recession Actual

6. November 6, 20096 Current Recession is Longest Since the Great Depression Source: National Bureau of Economic Research

7. November 6, 20097 In the Beginning, Job Losses Lighter in 2007-09 Recession than the Two Prior Recessions Source: U.S. Department of Labor, Bureau of Labor Statistics

8. November 6, 20098 Then This Happened: Financial Crisis Increased Interest Rates Despite Fed Efforts to Cut Rates Source: Federal Reserve Board of Governors

9. November 6, 20099 Financial Crisis Comparable to Great Depression Hits Late 2008

10. November 6, 200910 Recession On Top of A Recession After Eight Months, Employment Losses Took a Nasty Drop Beginning October 2008 Source: U.S. Department of Labor, Bureau of Labor Statistics

11. November 6, 200911 Wisconsin Lost a Decade of Job Growth in Six Months Source: U.S. Bureau of Labor Statistics

12. November 6, 200912 Wisconsin Unemployment More than Doubled Source: U.S. Bureau of Labor Statistics

13. November 6, 200913 Wealth Losses From Equities About the Same at a Comparable Stage of the Great Depression Source: National Bureau of Economic Research, Standard and Poors

14. November 6, 200914 Household Net Worth Losses Nearly $14 Trillion from Peak Source: Federal Reserve Board of Governors

15. November 6, 200915 Lost Decade: Industrial Production Drops to 1998 Levels Production Dropped 15% Over 6 Quarters Source: Federal Reserve Board of Governors

16. November 6, 200916 Record Drop in Manufacturing Activity Source: Institute for Supply Management

17. November 6, 200917 Non-Manufacturing Dropped Faster Than Manufacturing Source: Institute for Supply Management

18. November 6, 200918 Kick Them While Their Down Housing Falls 55% in Seven Months Source: U.S. Bureau of the Census, Construction Statistics

19. November 6, 200919 Retail Sales Lost Four Years of Growth in Just Four Months Source: U.S. Bureau of the Census

20. November 6, 200920 Wisconsin’s Sales Collections Drop for the First Time Ever in FY2009

21. November 6, 200921 Consumers Paying Down Credit Cards For the First Time, Revolving Credit is Dropping

22. November 6, 200922 Household Debt Service Down to 2001 Levels

23. November 6, 200923 Saving More

24. November 6, 200924 Wisconsin’s Income Taxes Drop for 1 st Time Aside from an ATB Tax Cut Yellow Bars are years of income tax rate reductions

25. Wisconsin Was Not the Epicenter of the Recession

26. November 6, 200926 10 States Set Unemployment Records in 2009 But Not Wisconsin Source: U.S. Bureau of Labor Statistics

27. November 6, 200927 Wisconsin Economy Grew in 2008 Source: U.S. Bureau of Economic Analysis

28. November 6, 200928 2008 Economic Growth Wisconsin Only Great Lakes State to Expand in 2008

29. November 6, 200929 Wisconsin Has Moved Up to the Great Lakes Average in GDP Source: U.S. Bureau of Economic Analysis

30. November 6, 200930 And Nudged Ahead of the Great Lakes Average in Income Source: U.S. Bureau of Economic Analysis

31. November 6, 200931 Wisconsin Housing Prices Declined Only Slightly Source: Federal Housing Finance Authority

32. November 6, 200932 Wisconsin Housing Prices Weakness In SE Corner and North of Highway 29

33. This is Now… The Recovery Has Started

34. November 6, 200934 Substantial Growth In Third Quarter Source: Actual--Bureau of Economic Analysis; Forecast--Global Insight, Inc.Shaded area indicates period of recession Actual Forecast

35. November 6, 200935 Industrial Production Up Three Straight Months First Time Since 2007 Source: Federal Reserve Board of Governors

36. November 6, 200936 Manufacturing Moves To Recovery Source: Institute for Supply Management

37. November 6, 200937 So Does Non-Manufacturing Source: Institute for Supply Management

38. November 6, 200938 Equity Markets Have Recovered from Early Year Losses Source: Standard & Poors

39. November 6, 200939 Household Net Worth Increased in 2009 2nd Quarter Source: Federal Reserve Board of Governors

40. November 6, 200940 Housing Crawling Out of the Bottom Source: U.S. Bureau of Labor Statistics

41. November 6, 200941 Retail Sales On the Rise Source: U.S. Department of Commerce, Bureau of the Census

42. November 6, 200942 Wisconsin Employment Stabilizing Source: U.S. Bureau of Labor Statistics

43. November 6, 200943 Wisconsin Unemployment Improves Relative to US Source: U.S. Bureau of Labor Statistics

44. November 6, 200944 Still Below Historic High Unemployment During Wisconsin’s Two Worst Post-War Recessions Source: U.S. Bureau of Labor Statistics

45. November 6, 200945 Impact of Recession Varies Substantially by County

46. It Will Be A Long Road Back

47. November 6, 200947 Financial Crisis Still In The Background

48. November 6, 200948 Full Recovery Will Not Be Complete Until 1 st Qtr 2011 Sources: US Bureau of Labor Statistics, Current Employment Statistics (CES); US Bureau of Economic Analysis Actual Forecast 2007Q4 Real GDP

49. November 6, 200949 Job Recovery Takes Even Longer Employment Losses More Severe Than Output Losses Sources: US Bureau of Labor Statistics, Current Employment Statistics (CES); US Bureau of Economic Analysis, Global Insight Actual Forecast

50. Wisconsin will Match or Outpace US growth in 2010.

51. November 6, 200951 GDP: Wisconsin Matches US in 2009 Outperforms in 2010

52. November 6, 200952 Wisconsin Employment Prospects Improve in 2010

53. November 6, 200953 Net Hiring Resumes Early 2010

54. November 6, 200954 Employment Growth in Metropolitan Areas of Wisconsin

55. November 6, 200955 Regional Unemployment Rates 2008-2010

56. November 6, 200956 Personal Income Growth By MSA, 2009-2010

57. Wisconsin Better Off Than Its Critics Realize

58. November 6, 200958 Wisconsin Among States with an Unemployment Rate Significantly Below US Average

59. November 6, 200959 Wisconsin Unemployment Rate Lowest in the Great Lakes Region

60. November 6, 200960 BLS Reports Wisconsin in Top Half For Median Wage Rates

61. November 6, 200961 Wisconsin Ranks 18 th in Median Household Income Source: US Bureau of the Census

62. November 6, 200962 Wisconsin Per Capita Income In a Consistent Range Source: U.S. Bureau of Economic Analysis

63. November 6, 200963 Regional Price Parities (RPP) Wisconsin Personal Income Nearly Identical to U.S. Once Differences In Regional Prices are Recognized Source: U.S. Bureau of Economic Analysis, Survey of Current Business, Nov. 2008

64. November 6, 200964 Health Insurance Coverage Wisconsin Ranks 4th in the Nation Source: US Bureau of the Census

65. November 6, 200965 Wisconsin Ranks 30 th in Population Growth Source: US Bureau of the Census

66. November 6, 200966 Wisconsin Has Net In-Migration Source: US Bureau of the Census

67. November 6, 200967 Wisconsin Ranks 18 th in Business Taxes Below the US Average Source: Ernst & Young, Total State and Local Business Taxes: 50 State Estimates for Fiscal Year 2008, January 2009 U.S. Average 4.9%