Good morning everybody, I’m just gonna give us a few key points on where we are and where
we might be headed over the coming year.
I decided to start with a big question: What is the probability of a recession in 2020?
The Wall Street Journal asked about 60 economists this question, and their answers are displayed
in the bar chart.
And you see quite a bit of variation, so some economists saying slim to no chance, and then
clear up upwards of 60% chance of a recession, but on average these economists said about
a 24% chance of a recession in 2020.
If you were here last year, that’s about the same.
Compared to 2 years ago, this is almost double the chance.
So, we do see this sort of increase over time, but some relative confidence and another year
of stability.
In terms of GDP growth, these same economists were asked for their projections
of what might be happening at the quarterly level over 2020.
In general, they predicted the economy to grow at about 1.9% each quarter in 2020.
So, that’s a little lower than where we were in quarter 2 and quarter 3 of 2019,
but still a slow and steady growth.
In terms of what that means for Wisconsin, I’m showing you here some historical GDP
trends.
We have Wisconsin in red, and the United States in orange.
Wisconsin generally sits a little bit below the U.S. average, so if these predictions
are on track for 2020, we might expect still positive growth for Wisconsin, but relatively
slow or lagging compared to the country as a whole.
One thing that I like to highlight here is when we’re talking about Wisconsin and how
Wisconsin is doing, I think it’s important to keep in mind that it depends, it depends
on where you live, there’s actually quite a bit of variation within the state.
This is sort of beta version data from the BEA, they started to release GDP growth at
the county level.
I suspect they are still working out the kinks.
At the same time I think this map is useful to keep in mind that variation within the state.
Some places are doing quite well, thank you very much, and other places are struggling.
What I will point out now here is the color scheme.
On average, counties in Wisconsin from the most recent year 2017-2018 grew between 4-5%.
Those counties are represented kind of in the middle at grey.
So I’m showing you the average in the middle.
So even some the counties in red still had positive growth, they’re just below that
county-level average.
All of the counties in blue are those above average.
So again, quite a bit of variation within the state.
So I’ll turn from GDP to employment growth.
So coming back to those national-level predictions and what those economists at the Wall Street
Journal think.
So, they were asked Where will be going at the quarterly level in 2020?
They predict around 150,000 jobs added monthly through the first half of 2020, but then declining
over time.
So by the end of 2020, those predictions were closer to 100,000 jobs in that monthly job
report that we have our eye on.
So I want to make what I think is an important connection between employment growth and entrepreneurship.
So in Wisconsin for the most recent year available, which is 2016, 3.2 out of every 10 new jobs
came from a new business.
From an entrepreneur starting a new business.
Entrepreneurs are disproportionately responsible for job growth.
The remaining 6.5 jobs you see would come from expansions.
Often times we lose those because they are off-set when existing businesses close or
contract or lay off a few workers.
So those jobs we are getting from new businesses are especially important in terms of sustaining
and enhancing job growth going forward.
When we think about the bigger picture, we’ve had a fairly slow jobs recovery since the
last recession, particularly in our rural area.
Some of our rural areas are just recently getting back to pre-recession levels.
And so again, I think that understanding entrepreneurship and that link to job growth is really important.
If we want to have sustained job growth, understanding this decline and the establishment birth rate
per 1,000 employees I think is important.
In terms of the research we’re seeing, entrepreneurial strategies tend to hold a lot of promise in
terms of sustained job growth going forward.
So the flip side of that, these economists again thinking about the predictions for the
coming year show a kind of slow and steady uptick in the unemployment rate at the national
level.
So starting here a bit more recently with 3.5% and upwards of 4% by 2022, so slow increases
in unemployment.
So, it kind of all fits together.
Perhaps kind of slow and steady but slightly declining GDP growth, slow but steady slightly
declining employment growth, then these slight increases in unemployment.
With those in mind, I want to also remind us of this relatively tight labor market we’re
seeing.
Here this graph is the ratio of the unemployment population to job openings.
So the peak of the graph is the recession.
In the recession we had upwards of 7 people available or looking for work for every one
job opening.
So workers were competing for job at that point.
Where we are now in the midwest, and unfortunately this isn’t available for Wisconsin specifically,
where we are now in the midwest is less than one worker available per job opening.
So, I suspect to continue to hear about employers having a hard time finding employees or finding
workers over the coming year.
The tables have turned, now we hear about employers competing for workers, rather than
workers competing for jobs.
It’s a different scenario.
One of the factors that is keeping pressure on the labor market is the aging demographic
in Wisconsin.
So here I’m showing you the prime age share of the population in Wisconsin based on population
projections going forward.
So starting with 2015 and ended in 2040.
I’m focusing on the prime age share because that’s really the meat of our labor force.
From ages 25-54, that’s the largest share of the labor force, that’s when labor force
participation rates are highest.
So, as our retirees exit the labor force, we really don’t have the population coming
in behind them to replace those workers, so expect to see that factor continue to put
some pressure on the labor market.
With that in mind, I continue to hear employers pursuing strategies of recruiting employees
in different ways.
Several of my Extension colleagues are involved in different efforts to think about new labor
pools.
So Wisconsin has pretty highly reinforced participation rates so there’s not a lot
of slack in the economy in terms of getting new workers into jobs.
There’s not a lot of people sitting on the sidelines.
We’re starting to think about where are different potential labor pools that we maybe
haven’t thought of before.
So there have efforts in terms of working with the previously incarcerated.
Thinking about reentry, how do we more fully incorporate these folks into the labor force.
I talked to one employer that can’t find the workers that he needs in his city, so
he’s looking at opening a kind of remote work center in a rural area.
As long as they have internet, he can employ them from long-distance and get the workers
he needs that way.
One of the efforts that I want to highlight is about childcare, just because it’s been
related to some of the work that we’ve been doing in Extension.
Here, what I’m showing you is the labor force participation rate in Wisconsin by age
and gender.
So the prime age categories are kind of in the bolder colors, that 25-54.
What you see is that for women, their labor force participation rate is lower in all of
those age categories.
Research suggests that this has a lot to do with childbearing, and the availability of
childcare.
Certainly it affects families, men and women alike, but it does seem to affect women more
acutely.
So in terms of thinking about childcare as a workforce development strategy, that seems
to have some merit.
So, it’s not the case so don’t expect that all of the women who aren’t working
would be with childcare.
But if those red lines were all even with the black lines, that’s about 70,000 more
women in the labor force, so a fairly large pool that we’re talking about where I think
that childcare and raising children is part of their calculus in terms of getting to work.
So a few just summary key points.
The economy seems to be performing at a slow and stead pace, but there’s lots of variation
within the state.
Job growth is expected to slow, and the unemployment rate expected to rise.
I think higher rates of entrepreneurship are going to be important to new job growth.
We still have a tight labor market in the state.
Our workforce is aging and our employers are definitely starting to think about different
potential labor pools are where they might get more workers.
Thank you.