Current Economic Analysis

On this page we collect pieces by CROWE researchers focusing on economic issues and trends in Wisconsin and around the world.

UPCOMING EVENTS

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PAST EVENTS

  • Jan 26, 2021: The UW Now Livestream and Q & A 
    “Outlook for the U.S. Labor Market”
    : Talks by two leading UW economists, Erica Groshen and Noah Williams, about their predictions for economic recovery, moderated by Mike Knetter, president and CEO of the Wisconsin Foundation and Alumni Association. 
     Watch on YouTube 
  • Jan 11, 2021: Thompson Center: Virtual event 
    “Jobs, Skills and the Prison-To-Work Transition”
    : Staff economist Junjie Guo shared key findings from a Thompson Center research grant on the prison-to-work transition. Co-researchers included Dr. Ananth Seshadri and Dr. Chris Taber. 
     Watch on YouTube Read Full Report
  • Jan 4, 2021: American Economic Association: Virtual event 
    Prof Noah Williams gave a presentation at the American Economic Association’s ASSA 2021 Virtual Annual Meeting. His talk focused on “Consumer Responses to the COVID-19 Pandemic”. View slides

Feb 26, 2021

Business Formation and Employment Dynamics During the COVID-19 Pandemic

Abstract
One of the few economic bright spots during the COVID-19 pandemic was the emergence of renewed business dynamism in the second half of 2020. Applications for new Employer Identification Numbers (EIN) exceeded levels in previous years by significant margins and the trend has been sustained in the first few weeks of 2021. The extent of job creation associated with business formation, on the other hand, is not yet well-established. In this report we connect Business Formation Statistics (BFS) data to the Census Bureau’s Business Employment Dynamics (BDM) in order to explore whether and how this renewed business dynamism will eventually contribute to a broader labor market and employment recovery. Based on historical evidence, we are cautiously optimistic that business formation will translate into a rise in plant openings and ultimately job gains. In future updates to this initial data brief we will continue to track the evolution of EIN applications, entry of new establishments, job gains associated with new plants, and broader labor market developments.

Read the Full Data Brief

Employment Dynamics in Wisconsin: Gross flows for the first two quarters of 2019 and 2020
Employment Dynamics in Wisconsin: Net flows for the first two quarters of 2019 and 2020

Feb 18, 2021

Job Openings and Labor Market Tightness During the COVID-19 Pandemic

Abstract
After dropping by about 20% in the second quarter of 2020, the number of job openings per capita in both the U.S. and Wisconsin recovered quickly and reached their respective pre-pandemic levels around September 2020. However, the latest data suggest the
number of job openings declined again in the last two months of 2020. With the unprecedented level of unemployment caused by the pandemic, the number of job openings per unemployed worker, a standard measure of labor market tightness, dropped by about 70% in the second quarter of 2020. With unemployment still at an elevated level, by the end of 2020, labor market tightness was still more than 25% below its pre-pandemic level. Not surprisingly, there are some significant differences across sectors. For hardest hit sectors such as leisure and hospitality, the number of job openings dropped by over 40% in April and May of 2020, and it was still about 20% below the pre-pandemic level by the end of 2020. On the other hand, for least affected sectors such as health care and social assistance, the number of job openings dropped modestly by about 20% in April and May, and it had exceeded the pre-pandemic level by the end of 2020. Overall, although job openings have recovered substantially, there is still a lot of slack in the labor market, and the latest data suggest the recovery was slowing down or even reversed in the last two months of 2020.

Read the Full Data Brief

Job Openings per capita
Labor Market Tightness

Feb 12, 2021

State and Local Government Revenue During the COVID-19 Pandemic

Abstract
While the early months of the COVID-19 pandemic put stress on the budgets of state and local governments around the country, their tax revenues have since rebounded. In addition, the federal government has already allocated substantial aid to these governments, which has more than offset the losses they have suffered. In particular, after nationwide state and local tax revenue fell by over 17% from the first to the second quarter of 2020, it bounced back strongly in the second half of the year and ended 2020 up 1.3% over 2019 – roughly constant in real terms. In addition, during 2020 the federal government sent $280 billion in transfers to these governments, and has already allocated an additional $120 billion in aid. These federal transfers led to growth of 8.9% in real revenue for state and local governments. In this brief, I document the recovery in state and local government total revenues and tax revenue, as well the distribution of revenue growth across states and discuss other sources of state fiscal support.

Read the Full Data Brief

Note: The material in this brief formed the basis for the City Journal article, “Their Cups Runneth Over

State and local government revenue: total current receipts (blue line) and current tax receipts (red line). The data are 4 quarter averages, indexed so 2020:Q1=100. (Source: BEA and author’s projection.)
Distribution of state tax revenue growth rates, 2020:Q1-Q3 over 2019:Q1-Q3. (Source: Census Bureau.)

Updated Feb 5, 2021 (first July 24, 2020)

Wisconsin’s labor market and COVID-19

This brief reports labor-market indicators for Wisconsin to demonstrate the effects of COVID-19 on labor supply and demand. This report is part of a larger effort at CROWE to document and analyze the economic fallout of the COVID-19 pandemic.

Read the Full Data Brief

Weekly initial unemployment claims in Wisconsin. Kim Ruhl, Feb 5, 2021.
Unemployment rates in Wisconsin. Kim Ruhl, Feb 5, 2021.
Daily initial unemployment claims in Wisconsin. Kim Ruhl, Feb 5, 2021.
Measures of job loss. Kim Ruhl, Feb 5, 2021.

Jan 29, 2021

Industry Concentration and Local Labor Market Dynamics

Abstract

In recent years, a growing literature has analyzed the effects of various shocks and policies on local employment growth. One area that has garnered considerable attention among both researchers and policymakers is the role of international trade and globalization in local labor markets. The rise in imports of light manufactures from China in the wake of the country’s accession to the WTO and its effects on manufacturing jobs in the United States has been the subject of a growing literature in recent years. In this report we explore a plausible alternative explanation for local employment dynamics. In contrast to earlier work, we focus on total employment rather than manufacturing jobs and we hypothesize that counties with a less diversified industry mix tend to exhibit lower employment growth. We use county-level employment data from the County Business Patterns (CBP) for the years 1992-2016 together with detailed import statistics and we find that local variation in a standard concentration index can account for an economically and statistically significant share of local employment growth. Industry concentration matters more than exposure to the rise in Chinese imports. More diversified local economies are better able to absorb external shocks. Although trade exposure plays a somewhat more significant role in Wisconsin compared with the rest of the country, it does not diminish the economic or statistical significance of industry diversification for labor market outcomes.

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5-Year Change in Imports per Worker 1997-2002 (US$)
5-Year Employment Change 1997-2002 (Percent)

Jan 19, 2021

Forecasting the U.S. and Wisconsin Economies in 2021

Abstract
This paper provides forecasts for the United States and Wisconsin economies in 2021. The economic disruptions caused by the COVID-19 pandemic have made forecasting difficult. To deal with the volatility caused by the shutdowns and reopening requires modifying standard procedures. For each economy, we first estimate a mixedfrequency vector auto-regression model using data before the pandemic started in March 2020, and then use estimated model to forecast each variable forward by taking the data since March 2020 as given. We forecast that both economies will continue to recover in 2021. However, the recovery will be slower than it was in the second half of 2020, and most economic indicators may not reach their pre-pandemic levels by the end of 2021. For the U.S. economy, we forecast that the year-over-year growth rate of real GDP will reach about 2.9%, personal consumption expenditures will grow by about 4.5%, inflation will remain below 2%, the  unemployment rate will drop to about 5.7%, the economy will add about 3.3 million nonfarm jobs, and the average hourly earnings will increase by about 2.4%. For  the Wisconsin economy, we forecast that the year-over-year growth rate of real GDP will reach about 3.0%, the unemployment rate will drop to about 4.2%, and the economy will add about 122 thousand nonfarm jobs. We project that the manufacturing sector will experience a faster recovery than the overall economy, and both economies face significant uncertainties. There is a significant chance that both economies will grow by 5% or more, but also a significant chance that both economies will grow by 1% or less.

Read the full report

Real GDP (gdp) in the U.S., in billions of dollars. The red vertical line indicates December 2020. The black curve reports the actual values when available and median forecasts otherwise. The yellow shaded area reports the 67% forecast intervals.
Nonfarm Employment Level in Wisconsin (Thousands of persons). The black curve reports the actual values when available and median forecasts otherwise. The yellow shaded area reports the 67% forecast intervals.
The unemployment rate (ur) in the U.S. The red vertical line indicates December 2020. The black curve reports the actual values when available and median forecasts otherwise. The yellow shaded area reports the 67% forecast intervals.
Unemployment Rate in Wisconsin. The red vertical line indicates December 2020. The black curve reports the actual values when available and median forecasts otherwise. The yellow shaded area reports the 67% forecast intervals.

In the Media

Feb 22, 2021: Professor Williams discusses budget tax proposals with WisBusiness
Evers’ budget tax proposals total a $1 billion increase
The net impact of Gov. Tony Evers’ budget tax proposals would be a $1 billion increase over the biennium, according to his office.

The biggest chunk of that would come from matching state tax laws to the provisions of a tax bill former President Trump signed in December 2017. The combined impact of the numerous changes would be an increase of $540.1 million.

UW-Madison economics Professor Noah Williams said in general, “federalizing” the state tax code makes sense as it simplifies the combined tax code.

“I also can’t help but point out that the state standard deduction is a great candidate for federalizing,” said Williams, founding director of the conservative Center for Research On the Wisconsin Economy. “As it is now, the phase-out of the deduction means that families a bit below the median income have the highest state marginal income tax rates. Continue Reading

Feb 19, 2021: Kurt Bauer, president & CEO of Wisconsin Manufacturers & Commerce cites CROWE report in Milwaukee Business Journal
Sales tax increase would slow economic recovery

“While state and local revenue projections initially plummeted at the beginning of the pandemic, by the end of 2020 local government tax receipts have generally returned to their pre-pandemic levels, according to a report from the Center for Research on the Wisconsin Economy”. Read the full story here or here (Read the CROWE Report)

Feb 15, 2021: Sheboygan Press quotes Professor Williams
Despite the pandemic, Sheboygan County still saw an increase in sales tax revenue in 2020. Here’s why.

“Not surprisingly, travel and tourism are all way down. Goods spending overall has increased, but they’re spending on home goods, sporting goods, and home entertainment,” Williams said. “People aren’t going out as much or on vacation, so they’re spending to make life at home better.” Read the full story

Feb 11, 2021: City Journal features an article by Prof Noah Williams
Their Cups Runneth Over
State and local government revenues have recovered from the pandemic, and further federal aid is unnecessary 

“California is not only poised for recovery, but we’re seeing real signs of recovery in our state,” Governor Gavin Newsom announced in early January, as he unveiled a state budget with record spending fueled by a $15 billion budget surplus. Yet two weeks later, Newsom sent a letter to President Biden expressing support for his plan to give an additional $350 billion in aid to state and local governments.

Similar stories have played out in other states. “We’re going to need a robust federal support system to help our states and economies recover beyond the federal CARES funds that expire at the end of the year,” said Wisconsin governor Tony Evers in November. Yet within weeks, the state was projecting a budget surplus, and by January it had revised that estimate up to $1.8 billion. Rather than drawing on these reserves, Wisconsin added to its “rainy day” fund, the balance of which is expected to hit nearly $1 billion this year. Continue Reading

Feb 8, 2021: Green Bay Press Gazette quotes Prof Williams
Sales tax increased $1 million despite a pandemic 
GREEN BAY —A well-timed U.S. Supreme Court ruling and related legislative action helped Wisconsin and Brown County avoid drops in revenue as consumer spending habits shifted due to the coronavirus.
In fact, governments that receive sales tax distributions saw some significant year-over-year gains in 2020 thanks to an increase in overall consumer spending.
……… The increases might seem counterintuitive at a time when retailers, restaurants, bars, entertainment venues and tourist attractions across the state continue to struggle, hoping to eke through the pandemic.
But macroeconomic data shows consumer spending, which dropped sharply in March and April, quickly recovered in May and grew 5-10%, said Noah Williams, director of the University of Wisconsin-Madison’s Center for Research on the Wisconsin Economy. Read the full story here  or here is a Link to the PDF Version

Feb 3, 2021: Talk Radio, Janesville
Do you think minimum wage should be raised? If so, to what amount?
Prof Noah Williams joins the talk radio program, Janesville, to discuss $15 minimum wage, the fiscal health of Wisconsin, financial issues facing the state during COVID and how we move forward. Tune in to the discussion

 

Jan 27, 2021: CROWE Director Prof Noah Williams spoke about the minimum wage on WMTV NBC15.
How beneficial would a $15 minimum wage be for Wisconsinites?
The impacts of a higher wage floor may vary greatly across the state, Wiliams adds, from rural to urban areas. He suggests in Madison there may not be much change because many low-wage jobs already start at $15/hr. Read more and watch video