PIECING TOGETHER OUR PUZZLING ECONOMY

Wisconsin is Open for Business

November 1, 2013

Piecing Together Piecing Together Our Our

Puzzling Puzzling EconomyEconomy

PIECING TOGETHER OUR PIECING TOGETHER OUR PUZZLING ECONOMYPUZZLING ECONOMY

First Friday Forum

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

November 1, 2013


November 1, 2013



2

“If you don’t read the newspapers, you are uninformed.

If you read the newspapers, you are misinformed.”

– Mark Twain

SOME PEOPLE KNOW HOW TOBRING CLARITY TO A SITUATION


November 1, 2013



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


November 1, 2013



INDUSTRIAL PRODUCTION RISES FOR FOURTH MONTH• Industrial production in the U.S. unexpectedly rose in August,

signally 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


November 1, 2013



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

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

Oil hits $115, highest since May, on supply concern; Reuters, Alex Lawler, London, Mon, Aug 13, 2012, 11:01 am EDT

Oil falls on new signs of slowing global economyBy The Associated Press, Aug. 13, 2012 11:10 AM ET

CONFUSED? NO WONDERTHEY DON’T EVEN GIVE YOU A CHANCE


November 1, 2013



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

9.2%

0%

5%

10%

15%

20%

25%

30%

1949 1954 1958 1960 1970 1975 1980 1982 1991 2001 2009

Real GDP Growth Sixteen Quarters into Recovery

66

ECONOMIC RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES


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77

RECESSION COMPARISONSLAGGING ACROSS ALL INDICATORS

19.421.4

26.7 27.5

38.3

14.1

5.3 6.3

0.5

15.1

3.1

-1.7-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

GDP Consumption Investment Exports Imports Government

Percent change

Average '60 - '012007 Recession

Source: William Testa, Federal Reserve Bank of Chicago


November 1, 2013



135.0

140.0

145.0

150.0

155.0

160.0

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Actual

100 / Mo.

200 / Mo.

300 / Mo.

Thousands5.5%

6.5%

7.5%

8.5%

9.5%Q1 ‘15

Q1 ‘17

Unemployment rates assume a participation rate of 63.5%

JOBS GROWTH SCENARIOSCONTRAINTS ON ECONOMY

Source: William Testa, Federal Reserve Bank of Chicago


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99

WISCONSIN JOBS RECOVERYVERSUS PREVIOUS CYCLES

y = 0.0009x - 0.0822

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Perc

ent

Job

Lose

s S

ince

Rec

essi

on D

ecla

rati

on

Number of Months Since Recession Declaration

Wisconsin: QCEW Total Employment Change in the Last Three Recessions(QCEW data seasonally adjusted using the U.S. Census X12 program)

1990s recession2001 recession2007-2009 recession2010-Linear (2010-)

Estimated breach: July 2015


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He said,

She said.


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HE SAID,HEY BABE, LOOK THE ECONOMY IS GROWING NICELY


November 1, 2013



12

SHE SAID,WE STILL HAVE A WAYS TO GO, DEAR


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13

HE SAIDLOOK HONEY, HOUSING MARKET IS UP NICELY


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14

SHE SAIDSWEETHEART, WE’RE NEVER GETTING BACK THERE


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15

HE SAID,SUGAR, JOBS ARE CLIMBING

thou

sand

s


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16

SHE SAID,DARLING, DON’T PISS OFF YOUR BOSS


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HE SAID, LOVE, THEY’RE JACKING UP WAGES EVERYWHERE

• The minimum wage will increase in 10 states on January 1, 2013.

• Employers to be more generous with pay raises next year, CNNMoney.

• An improving job market is boosting wages, Herald and News.

• SHRM consensus is for an average budget increase of 3 percent.

• Hay Group says 3 percent salary increases in 2013.


November 1, 2013



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SHE SAID, JIM, GET A GRIP


November 1, 2013



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HE SAID, DREAMBOAT, WE’RE GONNA BE RICH

INCOME GROWTH(Q1:2010 – Q3:2012)

Source: BEA, OEA


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SHE SAID,WILL YOU WAKE UP AND SMELL THE COFFEE


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MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND


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Forgive me,A little economic theory


November 1, 2013



$0

$50

$100

$150

$200

1 d

ay

2 d

ays

3 d

ays

4 d

ays

Supply

Theory Tells UsMore Pay Yields More Work


November 1, 2013



$0

$50

$100

$150

$200

1 d

ay

2 d

ays

3 d

ays

4 d

ays

$100 per day yields 3 days work(total earnings = $300)

Area = $300


November 1, 2013



$0

$50

$100

$150

$200

1 d

ay

2 d

ays

3 d

ays

4 d

ays

Increased pay translates into increased work

(increased earnings)


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$0

$50

$100

$150

$200

1 d

ay

2 d

ays

3 d

ays

4 d

ays

Well, the guy only shows up for two days. This gives what we call a backward-bending supply curve.


November 1, 2013



$0

$50

$100

$150

$200

1 d

ay

2 d

ays

3 d

ays

4 d

ays

At new wage, it only take 2 daysto make $300

=

S`


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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

PIECING TOGETHER OUR PUZZLING ECONOMY

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