Noah Williams
Executive Summary:
I use two private data sources to analyze the labor market and consumer spending in the state of Wisconsin. I first analyze labor market data from a sample of mostly small businesses. With the onset of the COVID-19 pandemic, by midApril 2020 48% of these businesses were closed, with employment down 59%. A sharp recovery followed, which flattened out in the summer, and tailed off in the fall of 2020 with the spike in virus activity. After months of relative stability from November 2020-April 2021, employment has grown sharply over the past three months. Employment has largely returned to pre-pandemic levels, after increasing 18 percentage points since mid-April. While employment has grown, open locations have leveled off, with roughly 1 in 6 small businesses closing permanently since March 2020.
The food and drink sector had a larger 72% employment drop in April 2020, as locations remaining open had minimal staffing. As these establishments reopened, they brought back more workers. However this sector’s recovery stalled earlier and employment suffered a larger decline during fall 2020, which stabilized into 2021. This sector also saw strong growth over the last three months, but employment still remains 13% below pre-pandemic levels. There were also more permanent closures: roughly 1 in 4 food and drink businesses in Wisconsin closed permanently since March 2020.
I also analyze transactions data on consumer spending, which had a sharper and more sustained recovery than the labor market. After plummeting in April 2020, spending in Wisconsin recovered rapidly, with year-over-year gains from May throughout the rest of the year. Consumption was supported by income growth, and changes in consumption patterns cushioned the impact of the pandemic. Consumption has seen strong growth during the spring of 2021, fueled both by recovery from the pandemic and usual cyclical factors. Relative to mid-July 2019, the two-year cumulative growth is 8.2% in Wisconsin and 5.6% nationally.
During the pandemic, consumers shifted away from social spending toward spending at home, but in recent months many of these trends have reversed. Spending on groceries soared while restaurants plummeted during the pandemic. But restaurants have seen strong growth in 2021, with spending now up 30.1% from pre-pandemic levels while grocery spending has cooled but is still up 9.6%. During the pandemic, consumers spent less on events and travel, and more on home goods. But events and travel have seen strong growth in 2021, now surpassing pre-pandemic levels. After spiking early, online spending has remained high (up 28.9%), while in-store have surpassed pre-pandemic levels (up 21.9% and 8.7% above 2019 levels) after a sharp fall in the pandemic. Recent weeks have seen a return of in-store sales and a cooling of online activity as virus activity in the state abated and remaining health restrictions have eased.