piecing together our puzzling economy
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PIECING TOGETHER OUR PUZZLING ECONOMY. First Friday Forum. Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development. November 1, 2013. SOME PEOPLE KNOW HOW TO BRING CLARITY TO A SITUATION. “If you don’t read the newspapers, you are uninformed. - PowerPoint PPT PresentationTRANSCRIPT
Wisconsin is Open for Business
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Piecing Together Piecing Together Our Our
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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
Wisconsin is Open for Business
November 1, 2013
Piecing Together Piecing Together Our Our
Puzzling Puzzling EconomyEconomy
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
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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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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
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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
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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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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
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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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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
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SHE SAID,WE STILL HAVE A WAYS TO GO, DEAR
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HE SAIDLOOK HONEY, HOUSING MARKET IS UP NICELY
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SHE SAIDSWEETHEART, WE’RE NEVER GETTING BACK THERE
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HE SAID,SUGAR, JOBS ARE CLIMBING
thou
sand
s
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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.
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SHE SAID, JIM, GET A GRIP
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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
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$0
$50
$100
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$200
1 d
ay
2 d
ays
3 d
ays
4 d
ays
Supply
Theory Tells UsMore Pay Yields More Work
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$0
$50
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$200
1 d
ay
2 d
ays
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ays
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ays
$100 per day yields 3 days work(total earnings = $300)
Area = $300
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$0
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1 d
ay
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ays
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ays
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ays
Increased pay translates into increased work
(increased earnings)
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$0
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ay
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ays
Well, the guy only shows up for two days. This gives what we call a backward-bending supply curve.
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$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