I am here to just give a little bit of background and context about the Wisconsin economy in
general, to inform the conversation about agriculture and dairy more specifically.
So first I'm showing a GDP growth index for the United States in the dotted line
and then Wisconsin in the solid black line, using 2012 as my base level. You can
see that the economy is growing in Wisconsin just as for the United States
just not quite as robustly coming out of the recession so they're essentially
still visible there with the dip in 2009 but we have had pretty consistent growth
the strongest growth is in our western states the strongest growth is in
California Oregon Wisconsin and in general with companies I on track with
the rest of the Midwest region however I
also wanted to look within the state while it's true that Wisconsin's been
growing it's not true that it's been growing equally everywhere within the
state so this is new data just came out a few months ago from the Census it's
preliminary but I wanted to share it with you because it shows the variation
in growth from 2013 to 2015 at the county level so this is new data like I
said kind of GDP at the county level we could call it we're growing in general
in particular for example Kewanee County is the the dark gray the darkest gray
then a nuclear power plant closed in 2013 and you see the way that that
affected their growth over this this particular period that I'm showing you
so again keeping in mind that things are equally good everywhere
this is thinking about where of GDP is headed over the coming years through
2018 and 2020 I told the Wall Street Journal survey of economists so they
survey about 70 economists and they asked them to project you know what's
going to be happening with the economy over the next few years
and what they said on average is that they expect growth to stay at about 2%
through 2019 and eventually declined to just below 2% at one point seven percent
or so into 2020 the Congressional Budget Office released a report yesterday they
were relatively consistent with what we're seeing here projecting about 2.2
percent for 2018 and two tenths of a percentage point four quarter one of
2019 I was noticing when I was reading the news that I was seeing estimates
that were a little higher than that upwards of 0.4 for example and it's just
a matter of whether we're looking at the level of GDP or the annualized growth
rate so in the coming quarters we should see for example relatively
high growth reporter 2 of 2018
probability of a recession so you see the kind of wide variation in opinions
on this when's the next recession going to be in how likely is it for this year
last year on average the economists said about thirteen point one percent
probability of a recession in 2018 you see that that's cooped up here for 2019
on average about 25 percent chance of a recession Mark Zandi is an economist for
Moody Analytics like they have quoted in the news a lot and he basically said
well if not this year probably next year and that's a sentiment that I keep
seeing show up so I expect if I'm back up here next year we'll see that line
move again with an even higher probability of a recession so turning
now to employment similar to the flora have the employment growth index using
the track of the recession in 2009 is my base year
you see again pretty consistent growth for both Wisconsin and the United States
did not quite as robust here in Wisconsin as it has been for the US more
generally we've kind of already touched on our labor shortage and I can't help
but wonder and have had this discussion with my colleagues you know what's going
on here could it be the case with a different labor situation might we see
higher employment growth for example so it could be possible that we have a
slight constraint on growth because of our labor situation
so here we have the unemployment rate for the US the Midwest and Wisconsin and
again I'm kind of speaking to how tight the labor market is right now we see
that Wisconsin's below the US as well as low for the region
BLS if I remembering right said we have the 11th lowest unemployment rate in the
country right now just in Minnesota and Iowa for example
in our region are are below us so really low unemployment I think it was the
lowest in June at two point nine percent this year July steady at 3%
ever since again I wanted to highlight the regional variation that we're seeing
in the state just because things are you know unemployment is low doesn't mean
it's equally low everywhere you see that in northern Wisconsin for example this
is preliminary data for November 2018 so it could be revised but I expect
variation where it's things in the north side of unemployment just doesn't come
down as much as it has here in the rest of the day we also see that southeast
Wisconsin a relatively high unemployment compared to the rest of the state but
maxing out at 4.8%
so I wanted to come in a little bit more on the potential for a labor shortage
and these data are not available for Wisconsin specifically so what I'm
showing you is for the Midwest region and what I've done is taken the
unemployment data so how many unemployed people do we have how many people do we
have that would like to have a job but do not and taking that has a ratio
against how many job openings do we have so is it in fact the case that we have
more job openings than we do people willing to fill those openings so what
this shows is that during the recession 2009 or so we had upwards of 8 people
looking for a job for every opening we had this ratio bottomed out in August of
2018 0.74 so we from this big year for the Midwest we did have more openings
than we did workers looking for those positions and the tables have really
turned in 2009 we had a large labor pool we had workers that were having to
compete against each other for positions now that's really changed where our
employers are competing against each other for workers so it's a very
different labor market today of course than several years ago
if employers are competing for workers one place we might expect to show up is
in wages what I'm showing you for 2008 Phoenix is based on quarter one and
quarter the others are what's going on there did memberships health care
benefits for example flexibility childcare maybe that's the way that
workers are competing or assuming that employers are competing for workers now
it could be the case that because we have commodity and commodity like
industries that there's really only so high wages can go in order to maintain
margins so this could be a constraint based on our industry and it could be
it's very simply that the data is not there yet it could be that once we have
quarter three quarter four come out that it is our revise but they'll actually
see them come up and we'll have you know an additional data point in terms of are
we dealing with the labor shortage
another place we might look if we're trying to think about do we have a labor
shortages average weekly hours worked so the workers think you have to work and
average weekly hours work I think about what might be going on here we're
switching forth automation that we're using other
methods of production and that's why it's not showing up here put some more
context in some more things to think about when we're trying to understand a
labor shortage in general I wanted to give you the unemployment projections
very similar to the GDP put projections these are coming from The Wall Street
Journal when they show unemployment continuing to decline in 2019 but
eventually coming back up close to 4.2 percent in 2020 which I think makes
sense alongside these figures that we expect the economy to slow down a little
bit in a non proprietor growth index so this is a way of thinking about who
stopped employed in the economy so not just wages and salary workers but who's
creating a job for themselves I mean this growing people are growing pool of
people who are in fact creating a job for themselves even though they don't
have hired employees we see the proprietorship is growing both in the US
again part of what explains just not quite as a robust growth when it comes
to proprietorship
another way of thinking about entrepreneurial activity in the
Wisconsin economy is to look at establishment birds so proprietorship
gives us a sense of who's self-employed what is their stock of self-employed
people establishment birth is looking at how is entrepreneurial activity
fluctuating from year to year for themselves but it's also capturing
slightly larger ventures for others by opening again so again coming from this
Wall Street Journal sure they have a common target of two percent over the
next two years and then last is interest rates so here I'm showing you the
federal funds rate where we've been in 2000 then and this comes to ripple
through the economy to show up in our commercial and industrial interest rates
as well so as if the straits come up we would expect to see that across the
economy with inflation holding you might be
asking you know why why isn't the federal funds rate coming up typically
we would expect the federal funds rate maybe to be used to control inflation
but inflation seems relatively study and I expect that this is partly to preserve
a policy to LaForest when we have a recession we tend to lower interest
rates is one of our tools for stabilizing the economy but there is
recession and interest rates look so low that we kind of eliminated that tool for
us to ourselves so as the interest rate comes back up you might have a little
bit of room to use interest rates should we find ourselves in another recession
in the coming years