Wisconsin is Open for Business October 20, 2011 Stateof Wisconsin’s Economy Wisconsin Freight Rail...

Wisconsin is Open for Business

October 20, 2011

StateStateof of

Wisconsin’s Wisconsin’s EconomyEconomy

1

Wisconsin Freight Rail Day

2011

Dennis WintersChief, Office of Economic Advisors

Department of Workforce DevelopmentOctober 20, 2011

State of Wisconsin’s EconomyState of Wisconsin’s Economy


2011


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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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TIMINGIS EVERYTHING

“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.


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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; Eight positive quarters, Q2 up 1.3%


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Real Gross Domestic Product

$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

Bill

ions

Source: BEA, OEA

BUSINESS CYCLE SEVERESTILL NOT RECOVERED AFTER EIGHT QUARTERS

Source: http://seekingalpha.com/article/115525-the-scariest-chart-ever?source=article_sb_popular


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Source: Wisconsin Department of Revenue

RETAIL SALESUSING THE APPROPRIATE ADJUSTMENTS


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HOUSING STARTS FLAT AT BEST

US Housing Starts(1000 x monthly single unit SAAR)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Source: U.S. Census, OEA


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RAIL MOVEMENTS EVEN WITH LAST YEAR


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WHAT IS RECOVERY?DJIA; UP 77% SINCE MARCH 9, 2009

Source: http://moneycentral.msn.com/investor/charts/chartdl.aspx


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CORPORATE PROFITS LOOK HEALTHYMOSTLY DUE TO COST CUTTING


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MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND


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PRODUCTION CAPACITY PEAKED?


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Private Nonresidential Fixed Investment

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1980-I 1983-I 1986-I 1989-I 1992-I 1995-I 1998-I 2001-I 2004-I 2007-I 2010-I

($ b

illio

ns)

Nonresidential Structures Equipment and software

INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION

Source: BEA, OEA


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Source: Federal Reserve Board, Data Download Program

Reserves of Depository Institutions(billions of dollars)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Jan

2008

Apr

200

8

Jul 2

008

Oct

200

8

Jan

2009

Apr

200

9

Jul 2

009

Oct

200

9

Jan

2010

Required Reserves

Total reserves

EXTENDING CREDITBANKS ARE CONSTRICTED TO LEND FUNDS


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WHAT IS RECOVERY?JOBS; STILL DOWN 120,000

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

Source: Bureau of Labor Statistics, LMI, OEA


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JOB RECOVERY WILL TAKE TIME, BUT THINGS ARE TURNING UP

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, Spring 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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Recovery is self-sustaining, but fragile. 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, BUT FRAGILE


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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

Wisconsin is Open for Business October 20, 2011 Stateof Wisconsin’s Economy Wisconsin Freight Rail...

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