Current Economic Analysis

Events

CROWE Events and Outreach July 2021 - Present

Date Event Speaker(s) Presentation Title/Topic Presentation materials and Links
April 27 Spring Lecture Dr. Arthur Laffer The Failure of Bidenomics: How Free-Market Policies Can Save America View Event Recap
Nov 30 The UW NOW Livestream Prof Noah Williams Inflation Trends and Predictions Watch video View Prof Williams' slides
Oct 12 The UW NOW Livestream
Kim Ruhl, CROWE Associate Director
moderated by Mike Knetter
Understanding the Labor Shortage Watch video View Prof Ruhl's slides
Sept 30 WCCE Annual Conference & Retreat September 28-30 Prof Noah Williams Wisconsin Economic Update View Prof Williams' slides
Sept 22 4th Annual Economic Update Prof Noah Williams Wisconsin’s Economy Today View Prof Williams' slides
Aug 10 The UW NOW Livestream
Mike Stohler
moderated by Mike Knetter
Outlook for the U.S. Labor Market Watch video View Prof Williams' slides

Events from Jan 2021 – June 2021 are posted here

In the Media

2022

May 12: Article by Prof Williams in City Journal discussing the CROWE tax reform proposal
May 6: Prof Williams comments on the April 2022 Jobs Report in Manhattan Institute
May 4: Statement from Prof Williams in Manhattan Institute

April 13: Article by Prof Williams in City Journal: The Costs of Wishful Thinking on Inflation
April 1: Prof Williams comments on the March 2022 Jobs Report in Manhattan Institute

March 28: Prof Williams quoted on WKOW.com: It’s really unprecendented: Breaking down the biggest tax changes in Pres. Biden’s budget
March 4: Prof Williams comments on the February 2022 Jobs Report in Manhattan Institute

Feb 15: Prof Williams’ research report mentioned on Madison.com: Chris Reader: With big surplus, Wisconsin should eliminate its income tax
Feb 13: Prof Williams’ research report mentioned on Madison.com: GOP bill looks to phase down, eventually eliminate, state income tax
Feb 9: Prof Williams co-authored article in The Dispatch: Price Controls are Disastrous. Just Ask South America
Feb 4: Prof Williams comments on the January 2022 Jobs Report in Manhattan Institute

2021

Dec 21: Press release on Prof Williams’ research report in Wisbusiness.com: Tax Reform Coalition: Eliminate state income tax for massive middle class and small business tax relief
Dec 19: Video on Prof Williams’ research report on Upfront, the weekly public affairs program on WISN-TV (Channel 12): Economist proposes tax changes
Dec 17: Article about Prof Williams’ research report in Wisconsin State Journal: Wisconsin unemployment rate ties record low of 3%
Dec 17: Article about Prof Williams’ research report on Wisconsin Spotlight: Eliminating the Income Tax
Dec 16: Coverage of Prof Williams’ research report on Institute for Reforming Government website: Eliminating the Income Tax
Dec 16: Article on Prof Williams’ research report on Americans for Tax Reform website: New Report Touts Benefits of Income Tax Elimination in Wisconsin
Dec 16: Article on Prof Williams’ research report on APG Wisconsin: Former Gov. Walker, UW economist propose eliminating Wisconsin income tax
Dec 16: Article about Prof Williams’ research report in Forbes: New Report Touts Benefits Of State Income Tax Repeal As Governors & Lawmakers Jockey To Become Nation’s 10th No-Income-Tax State
Dec 16: Article about Prof Williams’ research report in Washington Examiner: Walker and Wisconsin lead bid to eliminate income tax

Nov 10: Prof Williams is a guest speaker on an episode of The Bradley Foundation’s We the People
Nov 5: Prof Williams quoted on Marketplace: Good news in the latest jobs reports: Wages are up, especially in low-paying sectors
Nov 5: Prof Williams provides October 2021 Jobs Report for the Manhattan Institute
Nov 3: Prof Williams segment on Capital City Sunday quoted in WKOW.com article:
New Marquette Poll: Evers approval slips, Biden tops Trump in ’24 rematch
Nov 1: Article about CROWE in Economics Matters newsletter: CROWE Research Helps Explain the Economic Impact of COVID-19 in Wisconsin

Oct 31: Prof Williams presented a segment on WKOW.com’s Capital City Sunday
Oct 29: Prof Williams quoted on WKOW.com: Baldwin “disappointed” family leave out of deal, hopeful prescription drug changes will make it in
Oct 25: WXOW News 19 recaps Prof Ruhl’s appearance on The UW NOW Livestream “Understanding the Labor Shortage
Oct 21: Prof Ruhl quoted in the Wisconsin State Journal:
Wisconsin’s unemployment rate remains at 3.9% for the sixth month in a row
Oct 21: Article and podcast of Prof Williams’ interview in World: Help Wanted
Oct. 19: Prof Williams quoted in Badger Institute:
A welfare spasm to dwarf the Great Society
Oct 14: Wisbusiness.com summarizes Prof Ruhl’s appearance on The UW NOW Livestream “Understanding the Labor Shortage
Oct 13: Prof Williams quoted on NBC26:
Businesses struggle to fill entry level positions amid ongoing workers shortage
Oct 13: Article by Prof Williams in National Review: When Unemployment Begets Unemployment
Oct 8: Prof Williams provides September 2021 Jobs Report for the Manhattan Institute
Oct 7: Prof Williams explains unemployment benefits in podcast from The Catholic Current
Oct 1: CROWE report cited in Empower Wisconsin: Finally, Evers responds to unemployment crisis

Sept 30: CROWE report cited in Institute for Reforming Government: Policy Solution: Reemployment Assistance from DWD
Sept 10: CROWE report cited in Empower Wisconsin: Relief coming for employers hit hard by Evers’ failure to act
Sept 9: CROWE report cited in Forbes: Unemployment Bonuses Slowed Labor Market Recovery
Sept 7: Prof Williams quoted in Wisbusiness newsletter
Sept 5: Wisconsin State Journal article
Enhanced unemployment benefits ending, but workforce challenges expected to persist quotes Prof Williams’ City Journal article
Sept 3: Prof Williams writes a commentary about today’s job report for Manhattan Institute
Sept 1: Mercatus Center’s Policy Brief cites Prof Williams’ work
Sept 1: Yahoo news quotes Prof Williams’ City Journal article

Aug 26: Opinion piece in Washington Examiner: Shocking study: People work less when you pay them not to work on Prof Williams’ recent City Journal article
Aug 26: CROWE report cited in Green Bay Press Gazette: Ending expanded unemployment benefits may raise employment levels
Aug 24: Article by Prof Williams in City Journal:
The Results of the Labor-Market Experiment Are In
Aug 8: Prof Williams quoted in Kenosha News’ Top Story on Post Pandemic Employment: Worker shortage likely to continue, long-term trends seen as likely in play as well
Aug 6: Prof Williams quoted in MarketWatch: ‘It’s been a while since we’ve had this many vacancies’: Education is one category where the July jobs report still gets a tough grade
Aug 6: Prof Williams quoted in The Bond Buyer: Muni benchmarks rise, but outperform the jump in UST yields
Aug 1: Prof Williams interviewed on Channel3000: Prof Williams discussed his recent report about ending the extra federal unemployment benefit early.  Watch on Youtube

July 30: Prof Williams quoted in The Dispatch: U.S. Economy Back to Sea Level
July 29: CROWE report cited in Empower Wisconsin: Evers fails to address unemployment fraud concerns
July 27: Prof Williams quoted on CNBC: Wages are rising, but inflation may have given workers a 2% pay cut
July 22: Prof Williams interviewed and quoted on NBC15: Housing assistance bill introduced: How it may address labor supply strain
July 15: Prof Williams interviewed and quoted on CBS 58: Wisconsin’s unemployment rate remains stagnant as debate over labor shortage continues
July 3: Politifact: “40% of jobs in this country pay less than the average unemployment check of $750/week.” Espaillat’s claim has some truth to it, though average benefits likely lower
July 2: Commentary by Prof Williams: MI Responds: June 2021 Jobs Report


Media mentions from Jan 2021 – June 2021 are posted here

Recent CROWE Data briefs: Quick Reads

November 11, 2021

The Wisconsin State Sales Tax

Abstract
In addition to income taxes, which were discussed in my previous brief, the other main source of general purpose revenue for the state of Wisconsin is the general sales tax. The state sales tax rate has been set at 5% since 1982, with the majority of counties in the state levying an additional 0.5% tax. The general sales tax exempts most services and a number of goods from taxation. Some of these goods, like gasoline, are subject to their own dedicated tax, while many, like groceries, are untaxed. I estimate that currently just under half of consumption in the state is subject to the general sales tax, a share which has increased in recent years with the taxation of online shopping. In recent years, state general sales tax revenue has been less than 2% of personal income in the state, averaging around $1,800 annually per household. While income taxes in Wisconsin remain on the higher end of the distribution of state tax rates across the country, Wisconsin sales taxes are on the low end. This is especially true when considering combined state and local sales taxes, where according to the Tax Foundation, Wisconsin ranks 43rd highest in the United States.

Read the full data brief

Wisconsin general sales tax base as a percentage of personal consumption expenditure (left panel), and Wisconsin personal consumption percentage of total state personal income (right panel).
Wisconsin sales tax collections as a percentage of all state tax collections (left panel) and as a percentage of total state personal income (right panel), including state general sales tax (blue) and total sales taxes (red), which include selective sales.

November 4, 2021

The Wisconsin State Income Tax

Abstract
The state of Wisconsin has the oldest continuously operating state income tax in the United States. In this brief I discuss some of the history and background of the state income tax, as well as the current distribution of taxes and effective tax rates. The state has a progressive income tax system, with statutory marginal tax rates that increase with income. In recent years, the state income tax has accounted for about 45% of Wisconsin’s state tax revenue, and amounted to around 3% of total personal income. In 2019, over 3.1 million taxpayers filed state returns, paying on average $2,639 in state income taxes, at average effective rate of 4.32%. Across the distribution, average effective tax rates increased from 1.3% to 5.6%. The progressive nature of the tax system, along with the skewed distribution of income, means that most state income taxes are paid by high income filers. In 2019, the bottom 40% of filers, with incomes less than $26,600 paid only 1.5% of all state income taxes, while the top 20% of taxpayers, who had incomes over $85,330, accounted 72.6% of income tax revenue. Accounting for exemptions, deductions, and tax credits, the filers that accounted for the vast majority of all income tax revenue paid effective marginal tax rates around 5.8%.

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Wisconsin income tax collections as a percentage of all state tax collections (left panel) and as a percentage of total state personal income (right panel).

August 20, 2021

More Early Evidence on the End of Expanded Federal Unemployment Benefits

Summary
Beginning in May a number of states announced that they would be ending participation in the federal enhanced and expanded unemployment benefit programs instituted during the COVID-19 pandemic. In total, 26 states decided to end their participation in these programs before their scheduled expiration in September. This note uses data from the Bureau of Labor Statistics monthly household and payroll employment surveys, which now includes data through July. Due to this data limitation, I focus on the 22 states that ended federal benefits in June.

Most of these states announced the end of the enhanced federal unemployment benefits at least one month prior to their expiration, with the earliest announcements starting in mid-May. Since the reference week for the BLS surveys is the calendar week including the 12th of the month, I take the May survey as the baseline. Grouping the states into those terminating benefits in June and the rest of the US, I then compare the growth rates of various employment indicators over the two months following May to that of the preceding two months.

While caution should be exercised given the very short data sample, the results suggest that ending enhanced benefits had a positive impact on the labor market. Across all indicators I find that the terminating states experienced improved labor market outcomes relative to the rest of the US. Employment growth accelerated by more in these states in both the household and payroll surveys, and the labor force grew more rapidly. The relative gains in private employment were even more than total employment, and employment growth in the leisure and hospitality sector was especially strong in the terminating states. This is notable since this sector was hit hard by the COVID-19 pandemic recession, and due to its low average wages, was likely most affected by disincentive effects of the enhanced unemployment benefits.

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Table 1: Growth rates in the two months before and after the first announcements of the end of the federal enhanced unemployment benefits, along with the differences, and difference in differences.

Mar-May Growth May-Jul Growth Difference Diff in Diff
Household: Employment
Terminating
Rest of US
0.11
0.39
0.61
0.39
0.50
0.00
0.49
Household: Unemployment
Terminating
Rest of US
-2.04
-6.08
-1.35
-2.80
0.69
3.28
-2.59
Household: Labor Force
Terminating
Rest of US
0.00
-0.05
0.51
0.19
0.51
0.24
0.27
Employment: Total
Terminating
Rest of US
0.17
0.52
1.13
1.10
0.95
0.57
0.38
Employment: Private
Terminating
Rest of US
0.18
0.59
1.15
0.95
0.97
0.36
0.61
Employment: Leisure and Hospitality
Terminating
Rest of US
1.60
3.96
3.80
4.34
2.20
0.38
1.81
Employment : Retail Trade
Terminating
Rest of US
-0.28
-0.19
0.61
0.29
0.89
0.48
0.41
Leisure and hospitality employment during 2021 in the states terminating enhanced federal benefits in June. Indexed so March 2021=100. Also shown is the level if the March-May growth rate had continued.

July 30, 2021

Early Evidence on the End of Expanded Federal Unemployment Benefits

Summary
Beginning in May a number of states announced that they would be ending participation in the federal enhanced and expanded unemployment benefit programs instituted during the COVID-19 pandemic. In total, 26 states decided to end their participation in these programs before their scheduled expiration in September. Due to limited data, this report focuses on the first four states that ended benefits on June 12, and the additional eight states that ended them on June 19.

Data on continued claims, counting the total number of workers claiming unemployment benefits on the regular state unemployment insurance programs, is available through July 17, four or five weeks after expiration of the enhanced benefits in these states. I find that the first four states experienced a substantial drop of 26.3% in continued unemployment claims since June 5, the next eight states saw a decline of 15.1%, and the rest of the US dropped only 0.1%. Moreover, Alabama (in the group of eight) had an anomalous spike in benefits the week after expiration, which has since faded. Excluding Alabama, the other seven states in the second group saw a 21.3% drop. Since the week ending May 8, the week before program most of the terminations were announced, the first four states saw a 31.4% drop in continued claims, the next eight had a decline of 27.3% (31.3% excluding Alabama), and the rest of the US dropped by 10.2%.

Initial results suggest that the announcement and expiration of expanded unemployment benefits were accompanied by a decline in initial unemployment claims, followed by a decline in continued claims. Thus, in addition to the direct impact of reducing unemployed claimants on the enhanced and extended federal benefits programs, the terminations also reduced the number of unemployed workers filing for the regular state unemployment insurance programs, whose effective benefits were cut but whose eligibility was unaffected.

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Continued unemployment claims in the states ending unemployment benefits on June
12 (red) and June 19 (blue) along with the rest of the United States (black). Indexed so May 8,
2021 = 100. The vertical line in the right panel is May 8, the week before the terminations were
announced.

March 3, 2022

Wisconsin’s economy: March 2022

Executive summary

By many indicators, the Wisconsin economy has recovered to pre-pandemic levels or beyond, while inflation has run high both in absolute terms and relative to the rest of the United States.

Employment: Most indicators point to a tight labor market. Initial unemployment claims have returned to their 2019 levels. The December 2021 state unemployment rate stands at 3.1 percent. In the December data, Wisconsin has the 10th-lowest unemployment rate among U.S. states. Among Wisconsin metropolitan areas, Madison has the lowest unemployment rate (1.4 percent, not seasonally adjusted) and Racine the highest (2.4 percent, not seasonally adjusted).

Retail trade: Total retail trade growth in Wisconsin has returned to pre-pandemic levels. We continue to see strong growth in the sporting goods and hobby, building materials, and gasoline retail sectors.

Inflation: Midwest-region inflation rates remain elevated at 6.9 percent (year over year) in January 2022. Inflation is positive in all sectors of the economy, with transportation inflation at 22
percent in December. Food prices continue to rise and the food-and-beverage sector inflation rate is currently 7.5 percent.

Share prices: The index of publicly-traded firms headquartered in Wisconsin had caught up to the S&P 500 in early 2021, after lagging the major index for all of 2020. Beginning in May
2021, the Wisconsin index has fallen behind the S&P 500 and remains below the benchmark index.

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Initial unemployment claims have returned to their pre-pandemic levels.
Wisconsin’s unemployment rate is the 10th lowest in the nation.
Midwest-region inflation rates have leveled off but remain elevated. National inflation rates continue to grow.

Updated: February 10, 2022 (First posted: Feb 18, 2021)

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

Abstract

This data brief reports the current status and the evolution of job openings and labor market tightness in the U.S. and Wisconsin. The latest data suggest that the number of job openings per capita is 4% in the U.S. and 4.5% in Wisconsin, significantly higher than their pre-pandemic levels of around 2.7% and 3.4%, respectively. The same is true for the number of new online job postings, which increased by about 26% between January 2020 and January 2022 in the U.S., and by about 20% in Wisconsin. In comparison, the number of unemployed workers in the U.S. dropped by about 8% between January 2020 and December 2021, and it dropped by about 43% in Wisconsin. Together, the numbers suggest the labor markets in both the U.S. and Wisconsin are much tighter now than it was before the pandemic. However, there are some heterogeneities both across states and across sectors within a state. For example, the number of job openings per unemployed worker has not recovered to its pre-pandemic level in 8 states, including Colorado and Hawaii, and the increase in the number of new online job postings in Wisconsin between January 2020 and January 2022 is much larger for the manufacturing sector than it is for leisure and hospitality.

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July 28, 2021

Employment Effects of Ending of Expanded Federal Unemployment Benefits

Summary

Beginning in May a number of states announced that they would be ending participation in the federal enhanced and expanded unemployment insurance (UI) benefit programs instituted during the COVID-19 pandemic. In this brief, I focus on the first 12 of these: the four states who ended benefits on June 12, and the additional eight states ending on June 19. I use private data from Homebase, which provides daily employment records for a sample of mostly small businesses with hourly workers, largely concentrated in accommodation and food services. This sample was hit hard by the COVID-19 pandemic recession, and due to its lower average wages, would likely be most affected by disincentive effects of the enhanced UI benefits.

I find a notable, but modest, employment impact of the enhanced unemployment benefit termination. Shortly after the states announced they would be ending the federal UI enhancements in mid-May, employment in the terminating states began increasing relative to the rest of the United States. Two weeks after the announcements, employment among these lower wage hourly workers increased by about 1.5% on average in the terminating states relative to the rest of the US. After this two week adjustment period, the employment gap was relatively stable over the rest of the sample, apart from closures for the Independence Day holiday. While employment has continued to recover in this sector across the US, the termination of the enhanced federal unemployment benefits seems to have provided a modest employment boost.

Employment in the first 12 states ending enhanced federal unemployment benefits (red), along with the rest of the United States (black) and the difference between them (right panel). Weekly average data, indexed so May 6, 2021 = 100. The vertical line is May 6, the Thursday before the first terminations were announced.

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Media Coverage

Channel 3000

July 22, 2021

Current Private Indicators on the Wisconsin Economy: Small Business Employment and Consumer Spending

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.

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Total spending in Wisconsin and the rest of the United States, indexed levels
Total spending on events & attractions (red line), travel & transportation (blue line), and home goods (black line) in Wisconsin, indexed levels.
Total spending online (red line) and in-store (black line) in Wisconsin, indexed levels.
Changes in employees working, locations open, and hours worked at small businesses in Wisconsin. 7-day averages of daily data

Updated Sep 3, 2021 (First posted Feb 26, 2021)

Business Formation and Employment Dynamics During the COVID-19 Pandemic

Abstract

This update includes a summary of the most recent weeks of applications for Employer Identification Numbers (EINs) in Wisconsin and five additional Midwestern states. Two trends have emerged more clearly since our July 30, 2021 update: (1) Weekly business applications have been gradually declining since early April, not just in Wisconsin, but across the Midwest and the nation. (2) The flow of applications in the second semester of 2021 so far is significantly lower than in 2021. Together, these two trends suggest that the forces behind the surge in business applications during the COVID-19 pandemic may be losing some steam.

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Weekly applications for Employer Identification Numbers (EINs) fall below one-year-before levels for first time in third quarter of 2021.
Weekly applications for Employer Identification Numbers (EINs) fall below one-year-before levels for first time in third quarter of 2021.