1. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development February 8, 2013 WISCONSIN’SCONSTRUCTIONOUTLOOK 2013 Winter Convention

2. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 2 FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN’S ECONOMY

3. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 3 THE ECONOMY HAS CHANGED AND SO MUST YOU

4. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 44 ECONOMIC RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES

5. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 5 JOBS RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES

6. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK ECONOMIC OUTLOOK

7. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 7 Source: BEA, OEA BUSINESS CYCLE SEVERE IT TOOK NINE QUARTERS TO RECOVER Recovered

8. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 8 REAL EARNINGS ARE FLAT

9. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 9 INTEREST INCOME TAKE HIT WITH LOW INTEREST RATES

10. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 10 HOME EQUITY WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING

11. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 11 Source: Federal Reserve Board of Governors REVOLVING CREDIT WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING

12. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 12 NO SAVINGS – WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING

13. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 13 It is difficult to increase consumption when you: 1.have stagnant income, 2.are losing wealth, 3.paying down debt, 4.increasing savings, 5.and are paying more for food and gas.

14. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 14 CORPORATE PROFITS AT NEW RECORDS MOSTLY DUE TO COST CUTTING

15. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 15 MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND

16. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 16 CORPORATE PROFITS BUILDING CASH HOARD

17. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 17 INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION Source: BEA, OEA

18. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 18 Source: Federal Reserve Bank of St. Louis, Economic Research; OEA EXTENDING CREDIT BANKS ARE RETICENT TO LEND FUNDS Reserves of Depository Institutions (billions of dollars)

19. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 19

20. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 20 Breach May 2015 JOBS RECOVERY OUR BEST ESTIMATES PUT THE BREACH AT MAY 2015

21. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 21 VEHICLE SALES CONTINUE STRONG

22. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 22 HOUSING STARTS TRENDING HIGHER

23. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 23 Wisconsin Housing Starts (thousands) Source: U.S. Census WISCONSIN HOUSING STARTS HOPEFULLY NOT A HEAD FAKE

24. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 24 ARE THE GOOD DAYS GONE FOREVER?

25. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 25 ARE THE GOOD DAYS GONE? PROBABLY FOR RESIDENTIAL Source: U.S. Census

26. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 26 20062011$ Change% Change Wisconsin$12.545$3.846$8.698-69.3 M7 Region$4.572$1.085$3.488-76.3 OUCH ! Source: Wisconsin Department of Revenue, Real Estate Value Data Total New Construction Spending ( $ billions )

27. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 27 Source: BEA, OEA

28. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 28 PeakTrough% Change Total Jobs2,889,3002,713,700- 6.1 Construction130,10083,200- 36.0 Milw MSA33,90017,200- 49.2 * Peak Wisconsin construction employment in July 2004, trough in March 2012 OUCH ! AGAIN Source: U.S. Bureau of Labor Statistics, QCEW Wisconsin Employment Through Recession

29. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 29

30. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 30 PeakTrough% Change Residential4,0883,125- 23.4 Non-residential811655- 19.2 Heavy Cnstructn967800- 13.3 Trades12,1199,705- 18.5 * Peak Wisconsin construction establishment in 2003, trough yet uncertain OUCH ! YET AGAIN Source: U.S. Bureau of Labor Statistics, QCEW Wisconsin Construction Establishments Through Recession

31. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 31 Source: U.S. Census; CPS-MORG CHANGE IN REPRESENTATION UNION v. MERIT SHOPS

32. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 32 So, what will be the biggest socio-economic policy challenge in the next 20 years?

33. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 33 ELDERLY NUMBERS WILL SWELL WIDEN THE SIDEWALKS WILL YA !?

34. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 34 OR PERHAPS THE MORE INTERGENERATIONAL VERSION

35. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 35 QUANTITY

36. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 36 WISCONSIN’S WORKFORCE GROWTH BECOMES FLAT Source: Bureau of Labor Statistics, OEA

37. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 37 BLS RAISED LFPR FOR THE FUTURE PARTICULARLY FOR OLDER COHORTS Source: Bureau of Labor Statistics, Bureau of the Census, OEA

38. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 38 WISCONSIN’S WORKFORCE HIGHER LFPRs OFFER LIMITED GAINS Source: Bureau of Labor Statistics, OEA

39. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 39 LITTLE CHANGES EVEN WITH HIGHER LFPR RETIREMENTS SWAMP PARTICIPATION Source: Bureau of the Census, DOA, OEA

40. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 40 NURSING WORKFORCE IN WISCONSIN DEMOGRAPHICS AT WORK Source: Office of Economic Advisors

41. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK POPULATION PARTICIPATION FUNCTION OF RECESSION SEVERITY

42. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK WORKFORCE PARTICIPATION TRENDS DWARF FLUCUATION

43. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK IT’S THE YOUNG THAT ARE DELAYING ENTERING THE WORKFORCE

44. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK CHANGING LFPR GREATLY ALTERS WORKER AGE MIX

45. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 45 QUALITY

46. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 46 "The days are over when you could walk into a paper mill with a high school diploma and run one of the machines." – Patrick Schillinger, former Wisconsin Paper Council President, Center will teach paper-industry technology, Milwaukee Journal Sentinel, JS Online, October 21, 2004. NEW ECONOMY NEED FOR SKILLS

47. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 47 TURN YOU LOOSE ON THIS BABY I DON’T THINK SO

48. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 48 NEW ECONOMY SCARCITY OF SKILLED WORKERS Former Federal Reserve Chairman Alan Greenspan voiced his concern about a growing earnings gap between highly skilled and unskilled workers. "It's a problem caused basically by our skill mix not keeping up with the technology that our capital stock requires," the Fed chairman said....

49. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 49 WORKFORCE TRENDS ARE:  Unprecedented – we have never faced a declining workforce before;  Assured – demographics will change little;  Largely unalterable – demographics and migration patterns do not change abruptly.

50. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 50 RAMIFICATIONS OF WORKFORCE TRENDS ARE:  Potentially devastating – without sufficient productivity gains the state’s economy will stagnate;  Necessitating a focus on talent – large investments in education and training are needed;  Requiring match – talent supply and industry demand must be matched or you lose both.

51. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK

52. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 52 Questions ?

53. Wisconsin is Open for Business February 8, 2013 WISCONSIN’SCONSTRUCITONOUTLOOK 53 Dennis Winters Phone: 608-267-3262 Email: dennis.winters@dwd.wisconsin.gov Website: www.dwd.wisconsin.govwww.dwd.wisconsin.gov OEA website: www.dwd.wisconsin.gov/oeawww.dwd.wisconsin.gov CONTACT INFORMATION