Heading into another election season, Republicans and Democrats are talking about Wisconsin’s economic health as if they lived in different states.
Gov. Scott Walker and Republican legislators laud “the Wisconsin comeback,” touting low unemployment, a high labor participation rate and positive reviews of the state’s business climate from the nation’s CEOs.
Meanwhile, Democrats focus on job creation and wage growth trailing the national average, big layoff announcements from companies such as Oscar Mayer and indications of weak startup activity.
“The reality is the Wisconsin economy is getting a little better slowly,” said Tom Hefty, a former Blue Cross/Blue Shield of Wisconsin CEO and economic adviser to both Republican and Democratic governors.
Assembly Minority Leader Peter Barca, D-Kenosha — who argued in a recent opinion column that for many communities, families and businesses “the ‘comeback’ never came” — acknowledged in an interview with the Wisconsin State Journal that the state economy is growing, but emphasized it lags the national and regional economies. He said the state needs “aggressive, bold, creative ideas to try and rebuild our middle class and boost the economy.”
Assembly Speaker Robin Vos, R-Rochester, who recently asserted in a column that Wisconsin’s economy is strong, also agreed in an interview that economic growth in Wisconsin has been slow, but said the fundamentals of the economy are solid.
“Almost everywhere I drive there are ‘Help Wanted’ signs,” Vos said. “To the average person that’s an indicator people are hiring, which is good for the economy.”
In recent months, Walker has touted the “Wisconsin comeback” by juxtaposing two statistics — the workforce participation rate is one of the 10 highest in the country and the total number of people working is at an all-time high. As of the latest comprehensive quarterly data, there were more than 2.8 million people employed, a 1.2 percent increase from the previous year.
It’s true employment levels are at historic highs (so is the state’s population), but the state’s labor force participation rate last year was the lowest since 1986. The state ranked ninth nationally, which is its average rank on that measure over the past 40 years.
Walker, who declined an interview request, also notes in his appearances around the state Wisconsin was one of 10 states that had lower unemployment in 2015 than it did in 2007 before the Great Recession.
John Koskinen, chief economist for the state’s Revenue Department, said Wisconsin is approaching “full employment,” a strong sign that Wisconsin’s economy is healthy. Sluggishness in the state’s economy reflects the trend at the national level.
“You can’t escape a national picture,” Koskinen said. “Because of our diversification, we’ve been able to keep going forward at a very good pace, even if we have some of these bumps in the road of some of these industries.”
Wisconsin has been growing the number of private sector jobs in recent years, but Marquette University economist Abdur Chowdhury noted at the national and state level many are in low-paying, low-skilled sectors such as hospitality and recreation. Job growth in the high-paying, high-skilled areas such as manufacturing, construction and financial services has not been as strong as lower-wage sectors, and as a result wages have not shot up, he said.
Between September 2010 and September 2015, per capita personal income in Wisconsin grew 17.5 percent compared with 18.4 percent nationally. A Pew Charitable Trusts report last year found Wisconsin’s middle class saw the largest percentage point drop between 2000 and 2013 of any state.
Walker has pointed to monthly job numbers showing the state created 34,100 manufacturing jobs from when he took office through April, placing it in the top 10.
Looking at the most recent national numbers from the Quarterly Census of Employment and Wages, which Walker has called the “gold standard” for measuring job creation, Wisconsin ranked 11th in manufacturing job creation between September 2010 and September 2015. Wisconsin’s 7.1 percent growth in manufacturing jobs over that period ranks 24th.
Updated QCEW figures comparing all states through the end of 2015 are due out in early June.
Layoffs spike in 2015
Democrats have highlighted the number of layoffs in 2015 as signs of economic distress.
Layoffs did spike last year after five years in which the number of workers affected by layoffs held relatively consistent, according to the Department of Workforce Development. There was a more than 50 percent increase in the number of workers affected by layoff notices last year (9,630) compared with the prior five-year average (6,377). So far in 2016 there have been 3,356 employees affected by layoff notices.
Whether last year’s spike can be attributed to action or inaction by the state is less clear, according to Marc Schaffer, an assistant economics professor at St. Norbert College in De Pere.
“(Private sector) business investment has been weak,” Schaffer said. “A lot of that has to do with the global economic conditions right now. Manufacturing is one of our biggest sectors and we do a decent amount of exports. Anything we’re producing here that we’re sending to other countries just got weaker with the strong dollar.”
The recent spike in layoffs could reflect a high concentration of manufacturers adversely affected by China’s slowdown and a strengthening U.S. dollar, low oil prices dampening the U.S. energy boom, and a national “skills gap” dilemma hitting Wisconsin harder than other states.
“It’s been kind of a rough patch here,” said Bill Testa, an economist with the Federal Reserve Bank of Chicago. “It has been a little disconcerting to see some of their losses lately, but I don’t think it’s an indication that Wisconsin has done anything wrong.”
Closing the skills gap
Walker promised to create 250,000 jobs in his first term, but fell short by half. More recently he has emphasized the so-called “skills gap” as a reason job creation has stalled.
Mark Immekus, president and chief sales officer of Brookfield-based QPS Employment, the state’s largest staffing company, said businesses have reported increasing demand for their products, but they are unable to fill the jobs necessary to produce them because of a lack of qualified workers.
“In certain cases we’re seeing it impede growth,” Immekus said. “You can imagine how frustrating that is for certain businesses.”
Immekus said the job skills gap is a national problem, though Wisconsin has perhaps been harder hit than the majority of other states given its manufacturing base.
A recent QPS survey of the company’s clients in Wisconsin found 68 percent considered finding qualified employees a top concern, up from 28 percent in 2011. Those who say the economy is a top concern has declined from 65 percent to 43 percent.
In response, employers are adapting their qualifications for certain jobs, reducing the number of years experience required and, particularly in the past six months, increasing salaries, Immekus said.
Vos said one approach lawmakers might consider to address the skills gap is differentiating college tuition for students enrolling in high-demand career fields. He also emphasized the importance of making sure all able-bodied adults are working.
Barca said the state should increase funding to technical colleges, which is down 22 percent from where it was in 2010 (excluding aid that was used to reduce property taxes). Democrats also proposed spending an additional $49 million on workforce training grants this past session.
Walker has pledged more resources to education and job training, though the state’s tight financial situation has made it difficult to enact major initiatives. He has put more than $65 million into the Fast Forward and Blueprint for Prosperity grant programs to help train skilled workers.
Democrats point out that job creation has trailed the national average in every quarterly report from the Bureau of Labor Statistics since Walker took office.
Noah Williams, an economics professor at UW-Madison, noted Wisconsin’s population has also grown very slowly — from 2010 to 2015 Wisconsin grew 1.5 percent while the country grew 3.9 percent.
Looking at per capita gross domestic product, Wisconsin has seen 4.1 percent growth over the past five years compared with 3.9 percent growth nationally.
“Overall the trends are positive,” Williams said. “Longer term there’s been a slowdown in new business formation and startups. Wisconsin hasn’t done as well on that.”
Walker and Republicans have emphasized the state’s business climate being ranked 11th in the most recent Chief Executive Magazine survey, up from 41st in 2010.
However, a report from the Kauffman Foundation, which studies entrepreneurship, ranked Wisconsin last in entrepreneurial activity in 2015.
Wisconsin created a $30 million venture capital fund in 2014, though it has taken time for the fund to get up and running. Ken Johnson, who oversees the fund for Fitchburg-based Kegonsa Capital Partners, said he expects to finalize contracts with regional fund managers in the coming weeks, which should spur the creation of startups over the next year.