— As Wisconsin’s unemployment rate is estimated to exceed 20 percent based on initial unemployment claims, rural northern parts of the state are seeing a larger impact.
Noah Williams, director for UW-Madison’s Center for Research on the Wisconsin Economy, said during a UW Now webinar yesterday that Menomonee County has seen 27 percent of its labor force file for unemployment in the last six weeks. That’s on top of an existing 26 percent poverty rate from 2019.
He noted the state’s unemployment rate was around 3 percent in early March, with businesses’ main concern over the past several years being the available workforce. Now, mass unemployment presents a different set of challenges for the economy.
“Lower paid sectors are facing higher unemployment, also poorer areas tend to be facing harder economic times,” he said. “This is consistent with what we often see in recessions … [they] often hit hardest on those who are least able to deal with the crisis.”
Ananth Seshadri, a UW-Madison professor and a chair in the university’s economics department, said COVID-19 represents “an extremely large shock” to supply and demand.
“It’s going to induce a recession as a consequence the likes of which we’ve never seen,” he said during yesterday’s webinar, noting that the current pandemic is different from the types of recessions and economic shocks seen in the past.
Crucially, he said the expected COVID-19 recession won’t be the result of “organic decisions” made by individuals. Instead, he noted the virus represents an “external shock” on the global economy.
Because of this disruption, many consumers are “hunkered down” due to increased economic uncertainty. And both Williams and Seshadri noted that the government response to shut down certain businesses can only account for a piece of the overall economic downturn. Rather, they said a large part of the economic impact was “voluntary” as consumer confidence plummeted.
Brad Tank, chief investment officer and managing director of Neuberger Berman Funds, said the current quarter is expected to be the worst financially of 2020. After an initial larger contraction, he said analysts predict the U.S. economy to end up about 5 or 6 percent smaller in 2020 than it was in 2019.
“Our forecast at Neuberger Berman has the recovery continuing into 2021 and probably takes until about 2022 to get the U.S. economy back to where it was,” Tank said.
See earlier recordings of UW Now episodes: http://www.allwaysforward.org/uwnow/