Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics...

Wisconsin is Open for Business

November 4, 2011

Sizing up Sizing up Today’s Today’s

EconomyEconomy

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Wisconsin Economics Association

Dennis WintersChief, Office of Economic Advisors

Department of Workforce DevelopmentNovember 4, 2011

Sizing up Today’s EconomySizing up Today’s Economy



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EconomyEconomy

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FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN’S ECONOMY


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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


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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


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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


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• GDP

• DJIA

• JOBS

HOW DO YOU SPELLRECOVERY?


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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%


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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


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RETAIL SALES CLIMBINGWE’RE BACK


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RETAIL SALESUSING THE APPROPRIATE ADJUSTMENTS


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THE GOOD NEWS FOR CONSTRUCTIONSETTING A BOTTOM (?)


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INTEREST IS LESS DISMALBUT STILL CONTRACTING


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CORPORATE PROFITS LOOK HEALTHYMOSTLY DUE TO COST CUTTING


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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


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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


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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


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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


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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


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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


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IS THE PHILLIPS CURVE BACK?IF YES, THEN FED HAS LEEWAY


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HISTORICAL COMPARISONS CAN BE INSIGHTFUL and DISCONCERTING


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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


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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


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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


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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


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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

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics...

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