Koskinen: Economy rebounding but state needs two years of growth for job recovery
With 30,000-plus jobs added since January, Wisconsin is well on its way to economic recovery, says John Koskinen, chief economist at the state Department of Revenue.
Still, he adds, it will take two more years of solid growth for the Badger State to regain the 190,000 positions lost during what some are calling the Great Recession.
“That just shows how bad things got, even with substantial gains we are seeing now,” he says. “But I’m pleased to say that we are having a pretty decent year in 2010. Our employment has gone up by about 1.3 percent since it bottomed out in December, outpacing the national figure of 0.8.”
He also says he doesn't believe a so-called double-dip recession looms on the horizon.
“I don’t see that in the cards,” he says. “We would need some external event for that to happen. I don’t want to say it can’t happen, because could be some unknown thing. But I consider it a fairly low probability.”
WisBusiness audioKoskinen says Wisconsin’s historic strength – its manufacturing base – is the reason for the rebound.
“This is primarily a manufacturing recovery,” he says, pointing to upward trends in industrial production and reports from the Institute for Supply Management. “Wisconsin is the most manufacturing-intensive state now in terms of employment. Much of our employment gain has been in durable manufacturing.”
Though the business and professional service sectors are bouncing back – with solid gains in temporary hiring – he says retail continues to lag. There also have been small gains in education and health, but the financial and information sectors are flat, he says.
Koskinen says Wisconsin’s seasonally adjusted unemployment rate failed to make it to 10 percent, topping out last year at 9.5 percent.
“And now we are down to 8.2 percent, significantly below the national rate of 9.5 percent,” he says. “And we are dropping at a rate that is faster than the U.S. So in terms of employment growth, we are in the top quarter nationally this year.”
Koskinen says he expects employment gains to temper somewhat.
“A lot of the manufacturing growth is because manufacturers clearly had to rebuild inventories,” he says. “I’d love to say the pace of the first two quarters will continue, but we aren’t anticipating that. We are expecting the growth rate will slow down from 4 to 5 percent to the 2.5 to 3 percent range.”
Pent-up demand for family travel and a rebound in business travel are helping Wisconsin’s hospitality and leisure sectors, he notes.
“A lot of business travel plans were canceled outright because of economic uncertainty,” he says. “And as the economy is getting footing again, family and business travelers are coming back.”
The housing market remains soft, but Wisconsin was fortunate not to go through what Koskinen calls the “gut-wrenching” double-digit price declines experienced by states such as Arizona, Florida, Nevada and California.
“Our prices have held up because we did not overbuild or have a lot of speculation,” he says. “We saw an average of 2 percent price decline over past five years.”
And according to Primary Mortgage Insurance, which rates housing markets by risk, Koskinen says nearly all of the Wisconsin’s regions are rated at low to minimum risk for continuing price declines. Only in markets where the state has double-digit unemployment are there problems, he notes.
Koskinen credits the federal stimulus program for keeping state unemployment low “because of how it was structured by U.S. Rep. Obey (D-Wausau) and Gov. Doyle.
“There was a lot of investment in basic infrastructure and education,” he says. “Things would have been far worse here without that.”
Though many of the jobs saved were in the public sector, Koskinen says private employers benefited, too.
“State and local governments are major purchasers,” he says. “And with investment in infrastructure, it is rare that public employees are doing the work. Public agencies contract with private contractors to get the work done.
“Construction employment is higher now than it was in December – on a seasonally adjusted basis,” he says. “Despite the fact that housing fell apart, major construction held up. And more infrastructure projects are still working their way through the pipeline.”
Koskinen also says the billion-plus dollars that will be spent on high-speed rail and related projects will be a major boost to the state’s economy.
“A billion dollars in construction is always a good shot in the arm,” he says. “The more important thing is as you improve high-speed rail transport, you help integrate the state’s two largest economies and that is a (bigger) long-term gain than any gain from instruction itself.”
-- By Brian E. Clark