Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 1 Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 2 FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN’S ECONOMY

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 3  G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus The New York Times, July 31, 2008  U.S. Economy Grows at Solid Pace in 2nd Quarter Washington Post, July 31, 2008  Yes, Virginia, It is a Recession Business Week, July 31, 2008  Still on the right road – The American economy has often defied predictions of its demise. It has done so again. The Economist, July 31, 2008 CONFUSED? NO WONDER WHO DO YOU BELIEVE

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 4 CONFUSED? NO WONDER WHICH DO YOU BELIEVE Home price dip extends to 4th month 9:20am: Case-Shiller index declines 0.4% in January as market recovery appears to have stalled. CNN, March 30, 2010 Home Prices in 20 U.S. Cities Unexpectedly Climb 0.3%, Case-Shiller Says Home Prices in 20 U.S. Cities Unexpectedly Climb 0.3%, Case-Shiller Says,Home prices in 20 U.S. cities unexpectedly rose in January, indicating the housing market is stabilizing as the economy expands. Bloomberg, March 30, 2010

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 5 INDUSTRIAL PRODUCTION RISES FOR FOURTH MONTH INDUSTRIAL PRODUCTION IN THE U.S. UNEXPECTEDLY ROSE IN AUGUST, SIGNALING MANUFACTURING WILL SUPPORT THE WORLD’S LARGEST ECONOMY. Bloomberg, September 14, U.S. JOBLESS CLAIMS ROSE TO HIGHEST SINCE JUNE APPLICATIONS FOR U.S. UNEMPLOYMENT BENEFITS UNEXPECTEDLY ROSE LAST WEEK TO THE HIGHEST LEVEL SINCE THE END OF JUNE, UNDERSCORING THE RISK OF FURTHER WEAKNESS IN THE LABOR MARKET. Bloomberg, September 14, CONFUSED? NO WONDER WHAT DO YOU BELIEVE

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 6 GDP DJIA JOBS HOW DO YOU SPELL RECOVERY?

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 7 Source: Bureau of Economic Analysis, OEA WHAT IS RECOVERY? GDP; Nine positive quarters, Q3 advanced up 2.5%

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 8 Source: BEA, OEA BUSINESS CYCLE SEVERE FINALLY RECOVERED AFTER NINE QUARTERS

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 9 RETAIL SALES CLIMBING WE’RE BACK

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 10 RETAIL SALES USING THE APPROPRIATE ADJUSTMENTS

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 11 THE GOOD NEWS FOR CONSTRUCTION SETTING A BOTTOM (?)

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 12 INTEREST IS LESS DISMAL BUT STILL CONTRACTING

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 13 CORPORATE PROFITS LOOK HEALTHY MOSTLY DUE TO COST CUTTING

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 14 WHAT IS RECOVERY? DJIA; UP 85% SINCE MARCH 9, 2009 Source:

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 15 MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 16 INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION Source: BEA, OEA

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 17 INDUSTRY EXPANSION SLOWING Source: St. Lous Fed, OEA

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 18 WHAT IS RECOVERY? JOBS; STILL DOWN 130,000 Source: Bureau of Labor Statistics, LMI, OEA

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 19 JOBS RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 20 JOB RECOVERY WILL TAKE TIME Source: BLS, OEA

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 21 Source: BLS, DOR, OEA ♦ Blue is history (CES SA, December 2010 is benchmark, 2,317,200). ♦ Orange is DOR forecast (quarterly then annual, Fall 2011 Outlook). ♦ Yellow is 250,000 goal for December 2014 (2,567,200).

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 22 REAL EARNINGS ARE FLAT

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 23 IS THE PHILLIPS CURVE BACK? IF YES, THEN FED HAS LEEWAY

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 24 HISTORICAL COMPARISONS CAN BE INSIGHTFUL and DISCONCERTING

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 25  Recovery is self-sustaining.  Employment may breach in  Strength of recovery subject to consumer income and wealth uncertainty. Risks  High unemployment dampens income growth.  Prolonged high gasoline prices sap consumption.  European Union fiscal problems wash over the global financial markets. IN CONCLUSION CONTINUED RECOVERY

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 26 "We hope to become manifestly, aggressively, stunningly bullish of equities," Dennis Gartman, hedge fund manager and author of The Gartman Letter, said in his Monday commentary. "Until then, we are sellers of rallies.“ – USA TODAY, October 8, SUMMING UP WHERE IS THE SMART(?) MONEY

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 27 Questions ?

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 28 Dennis Winters Phone: Website: OEA website: CONTACT INFORMATION

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 29 HOUSEHOLD DEBT DELEVERAGING Source: Fed flow of Funds

Wisconsin is Open for Business November 4, 2011 Sizing up Today’s Economy Wisconsin Economics Association 30 HOUSEHOLD DEBT SHEDDING OF WEALTH Source: Fed flow of Funds