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Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development

Sizing up Today’s Economy. Wisconsin Economics Association. Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development November 9, 2012. ECONOMIC OUTLOOK. THE ECONOMY HAS CHANGED AND SO MUST YOU. ECONOMIC RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES.

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Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development

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  1. Sizing up Today’s Economy Wisconsin Economics Association Dennis Winters Chief, Office of Economic Advisors Department of Workforce Development November 9, 2012

  2. ECONOMIC OUTLOOK

  3. THE ECONOMY HAS CHANGED AND SO MUST YOU

  4. ECONOMIC RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES 4

  5. JOBS RECOVERYHOW IS THIS ONE NOT LIKE THE OTHER ONES

  6. WHY HAS THE RECOVERY BEEN SO SLOW

  7. BUSINESS CYCLE SEVEREIT TOOK NINE QUARTERS TO RECOVER Recovered Source: BEA, OEA

  8. REAL EARNINGS ARE FLAT

  9. INTEREST INCOME TAKE HIT WITH LOW INTEREST RATES

  10. HOUSEHOLD DEBT DELEVERAGING Source: Fed flow of Funds

  11. HOME EQUITY WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING

  12. REVOLVING CREDIT WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING 12 12 Source: Federal Reserve Board of Governors

  13. NO SAVINGS – WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING 13 13

  14. It is difficult to increase consumption when you: have stagnant income, are losing wealth, paying down debt, increasing savings, and are paying more for food and gas.

  15. CORPORATE PROFITS AT NEW RECORDS MOSTLY DUE TO COST CUTTING

  16. CORPORATE PROFITS BUILDING CASH HOARD 16

  17. INVESTMENT GROWTHIS IN PRODUCTIVITY, NOT EXPANSION Source: BEA, OEA

  18. MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND

  19. EXTENDING CREDIT BANKS ARE RETICENT TO LEND FUNDS Source: Federal Reserve Board, Data Download Program

  20. Recovery is self-sustaining. Employment breach in 2015. 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 CONCLUSIONCONTINUED RECOVERY

  21. IN REVERSE ORDERTHE UGLY, THE BAD, AND THE GOOD

  22. “Fiscal Cliff” – $580 million in changes Could decrease GDP growth by four percentage points Federal deficit and debt Dampers on growth, current models not sustainable Entitlements – Medicare and Social Security Not sustainable in the long run State and local benefits burden Health care and pension liabilities European fiscal crisis – global affect U.S. dollar affects, export demand, wealth lost BEGINNING WITHTHE UGLY

  23. Slow down in manufacturing Production, exports Sub-par employment growth Job growth not keeping up with labor force growth Macro tools having limited impact Low interest rates, fiscal stimulus, QEs, twist ADDING INTHE BAD

  24. Housing markets finally moving higher Little happening in non-res construction Motor vehicle sales are moving higher Perpetuating sector growth SLOW PROGRESSTHE GOOD

  25. WORKFORCE OUTLOOK

  26. JOBS RECOVERYOUR BEST ESTIMATES PUT THE BREACH AT MAY 2015 Breach May 2015

  27. WORKFORCE PEAKED NO RECOVERY AFTER RECESSION, NONE EXPECTED

  28. WISCONSIN’S WORKFORCE GROWTHBECOMES FLAT Source: Bureau of Labor Statistics, OEA

  29. WORKFORCE PARTICIPATION TRENDS DWARF FLUCUATION

  30. POPULATION PARTICIPATION FUNCTION OF RECESSION SEVERITY

  31. IT’S THE YOUNG THAT ARE DELAYING ENTERING THE WORKFORCE

  32. CHANGING LFPR GREATLY ALTERS WORKER AGE MIX

  33. … the number of unemployed persons (12.8 million) and the unemployment rate (8.3 percent) … have shown little movement thus far in 2012.BLS, July 2012 employment report, August 3, 2012 US Employers post the most jobs in 4 years; by Christopher S. Rugaber, AP economics writer, Posted: Aug 07, 2012 9:42 AM CDT State manufacturers have jobs, need workers; postcresent.com; byHolly Hartung, Grace Edquist and Matt Oleson, Wisconsin Center for Investigative Journalism, August 1, 2012 Marinette Marine struggles to attract young workers, Training, dozens of positions available, but applicants are few By Rick Barrett of the Journal Sentinel, June 16, 2012 WAIT, WHAT HOW CAN YOU HAVE BOTH?!

  34. We have: 223,600 people unemployed 43,400 job openings on JCW UI benefits running out We also have: Lack of correct skills fit People looking for their old job Crust of chronically unemployed WHAT’S THE PROBLEM NUMBER AND MIX OF JOBS NOT ALIGNED

  35. IS IT CYCLICAL OR STRUCTURAL

  36. DOROTHY

  37. A little economic theory

  38. Theory Tells Us More Pay Yields More Work Supply

  39. $100 per day yields 3 days work (total earnings = $300) Area = $300

  40. Increased pay translates into increased work (increased earnings)

  41. Well, the guy only shows up for two days. This gives what we call a backward-bending supply curve.

  42. At new wage, it only take 2 days to make $300 S` =

  43. We face a serious quantity challenge We face a serious quality challenge We need to break into the crust of the chronically unemployed Many are not prepared technically or civilly Backward-bending supply curve for labor. THINGS HAVE CHANGED BREAKING NEW GROUND

  44. Questions ?

  45. CONTACT INFORMATION • Dennis Winters • Phone: 608-267-3262 • Email: dennis.winters@dwd.wisconsin.gov • Website:www.dwd.wisconsin.gov • OEA website: www.dwd.wisconsin.gov/oea

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