Wisconsin Governor Walker: “We are heading in the right direction.”

That statement is from Wisconsin Governor Scott Walker’s State of the State address. Here are some additional remarks:

Tonight I’m happy to report that after three years of losing 150,000 jobs Wisconsin actually added thousands of new jobs in 2011. New business formations are up by over 2 percent. And our unemployment rate is down from a year ago.
In fact, Wisconsin’s unemployment rate is not only lower than the national average but much better than our neighbors to the south in Illinois.

Figure 1 provides a comparison of Wisconsin’s performance, in terms of economic activity, using data released on Thursday by the Philadelphia Fed.
walker_on_wisc1.gif

Figure 1: Log coincident index for Wisconsin (WI, bold blue) and US (bold black), and other state indices associated with the Federal Reserve District 7 plus Minnesota, all rescaled to 2011M01=0. Vertical line at 2011M01. Source: Federal Reserve Bank of Philadelphia and author’s calculations.

Figure 2 provides the private nonfarm payroll series for Wisconsin (in contrast to the civilian employment series stressed at certain points by the Governor).
walker_on_wisc2.gif

Figure 2: Wisconsin private nonfarm payroll employment from BLS (blue) and projections from Wisconsin Economic Outlook (red), in 000’s. NBER defined recession dates shaded gray. Vertical line at 2011M01. Sources: BLS, October Wisconsin Economic Outlook and NBER.

Nonfarm payroll employment also exhibits a similar pattern. See [1].

While it is true that civilian employment (which includes self-employment, farm employment, government employment) has risen, it has risen more slowly than the national series. The US series is 1% above 2011M01 levels, while the Wisconsin series is 0.7% above (in log terms); moreover, the Wisconsin civilian employment series remains 0.2% below the May 2011 levels.

 

Further, while unemployment rates have fallen in both Wisconsin and in the US, it’s important to recall the unemployment rate is the ratio of two variables (employment, measured labor force), and hence can move as a result of either variable moving. The labor force has shrunk noticeably (half a percentage point) in Wisconsin over the last six months, while it has risen in the US slightly. In this sense, the unemployment rate is a less informative indicator than some others.

 

Returning to the macroeconomic indicators for Wisconsin, the Philadelphia Fed provides this map identifying three month trends:
walker_on_wisc3.gif

Source: Federal Reserve Bank of Philadelphia, “State Coincident Indexes: December 2011″ (January 26, 2012).

According to this map, Wisconsin is indeed moving in a direction.

 

Other Wisconsin news: [2] [3] [4]

StumbleUponLinkedInReddit

17 thoughts on “Wisconsin Governor Walker: “We are heading in the right direction.”

  1. Bruce Hall

    This is nearly a repeat of a post several days ago. While the data are correct, there is the question of interpretation.
    For example, Fig. 1 shows phenomenal improvement for Michigan during the second half of 2011. I’m sure Gov. Rick Snyder is laying the foundation for better things to come, but you’d probably object to categorizing what has been done as significantly better than surrounding states. I’d argue that Iowa does not belong in Fig. 1 if you are attempting to find comparable midwest states, but rather belongs with the likes of the Dakotas and Nebraska given the demographics and the urban/rural split.
    The U1 through U6 data for Wisconsin:
    2011
    Wisconsin
    4.2 4.3 7.8 8.2 9.0 14.2
    Michigan
    6.1 6.0 10.2 11.1 12.3 18.8
    United States
    5.4 5.5 9.2 9.8 10.7 16.2
    2/10-1/11
    Wisconsin
    4.6 4.7 8.3 8.8 9.4 14.5
    United States
    5.6 5.8 9.4 10.1 10.9 16.5
    3/10-2/11
    Wisconsin
    4.6 4.6 8.3 8.8 9.6 14.7
    United States
    5.4 5.6 9.3 9.9 10.7 16.3
    4/10-3/11
    Wisconsin
    4.4 4.5 8.1 8.6 9.4 14.7
    Michigan
    6.4 6.4 10.7 11.6 12.8 19.2
    United States
    5.4 5.5 9.2 9.8 10.7 16.2
    Obviously, there has been some significant improvement in Wisconsin with the elimination of 2010 data or the BLS data for 2011 is suspect.
    Regardless, Wisconsin’s trend of new layoffs in downward as is the U.S. and about the same magnitude. If you compare the full year 2011 data to the 2/10-1/11 data, that same comparison holds.
    Wisconsin has not made significant inroads into unemployment through all metrics, but the total U.S. has not either. You can some variation among states and expect variations with the national average, but by-and-large, there is little in these numbers except to point out that Wisconsin, overall, is in better shape than most states and Michigan, if it is making steep improvements in Fig. 1 is doing so from a far lower starting point making such improvement unsurprising.

  2. Menzie Chinn

    Bruce Hall: The differences are (1) in the post eight days ago, I only referred to labor market indicators, (2) I present an aggregate indicator of economic activity, which contains new data relative to the post eighteen days ago; I confirm the negative gradient for Wisconsin, which continues to diverge from the US overall trajectory.

    By the way, the fixed effect for Wisconsin vis a vis US unemployment is about 1 percentage point. Hence, the fact that Wisconsin UE is lower than the US by 1.4 ppts doesn’t tell me much.

  3. jonathan

    The problem I have with any political arguments is this: there is little difference in what I’ll think of as economic outcomes between rule by one or the other party.
    The difference between what the GOP does and what the Democrats do is not that large. The difference between what we in the US do versus what France or Germany does is not that large. By “large”, I mean generating vastly different economic growth and vastly different overall income levels. One has to look to Maoism or Stalinism to find systems that work much worse. (Or to anarchy, like Somalia, or perhaps to dictatorship, as in Iraq under Saddam.)
    The arguments over “socialism” obscure the truth that in the Western world there isn’t much “socialism” – defined as state ownership of the means of production. All Western economies have enough market exposure that they generate generally similar economic results.
    But the rhetoric is outsized.
    There are differences between economies but not in terms of economic growth or even jobs – once you get into how the societies function. Spain has always had a lot of part-time employment, but their version of that is not the same as in the US. Why? Because they are a different country. They’ve prospered. They have problems now but so do we and when you get past their capital flow issues they may be in better long term shape.
    I’ve never understood the importance of the arguments. We in the US get very little vacation, have overall lousy health benefits – many don’t even have that – and have generally poor pensions compared to Europe. We have a higher standard of living than some other rich countries like Japan. We are better in some ways, worse in some ways. We overall grow maybe a little bit better than Europe over time. Not by much and it’s hard to tell exactly how to compare. They have historically had more long-term unemployment but then they have more of a societal safety net. They don’t work nearly as many hours in a week and usually get more than 6 weeks of vacation a year. Why is one better? These are all versions of the same basic, largely market economy. Our version is somewhat crueler, somewhat more flexible and generates roughly the same results.

  4. Babinich

    Despite early criticism from city officials, new figures show Milwaukee will gain more than it will lose next year from the state’s controversial budget and budget-repair legislation.

    http://www.jsonline.com/news/statepolitics/127269673.html

    Many Wisconsin school districts now can bid for medical care on the open market. Lets hope they make the right choices.

    WEA expects to win back many districts it lost because competing insurance providers “priced aggressively to win business,” but won’t be able to sustain the lower rates, and will have to raise them in two to three years, Mark Moody (president and CEO of WEA Trust) said.

    Some districts, he said, “take their chances on getting the best rates now, and roll the dice for the next year.”

    WEA Trust did adjust its rates as competition heated up, Moody said.

    http://www.jsonline.com/news/education/126151423.html

    Tyler nails it.

    http://www.zerohedge.com/news/fa-hayek-great-utopia

  5. CoRev

    This is what Walker campaigned upon: “Later, I had no problem recalling his two key messages. First, he said he’ll solve the budget deficit while pursuing all options – except by raising taxes. Second, his priorities once in office will be helping Wisconsin companies create jobs and trying to attract companies outside the state to Wisconsin to create jobs. He also made it clear by repetition what the news story would be from the event – that state union workers were going to help solve the budget crisis by some sort of cutbacks.”
    Menzie completely ignores Walker’s success in achieving his number one goal while emphasizing and perhaps exaggerates his slower success on his second goal. Worse, Menzie ignores the impact on WI employment that constant and strident political attacks on Scott have on his efforts to improve WI employment.

  6. Bruce Hall

    Menzie,
    I understand the trajectory arguments and that recently Wisconsin has had some less than stellar results while Michigan, for example, has had stellar results [fig. 1 and Fed. map].
    Let’s frame this differently.
    The Green Bay Packers had a regular season record of 15-1 while the Detroit Lions had 10-6. Last year the Green Bay Packers had a regular season record of 10-6 while the Detroit Lions had 6-10. Overall, the Packers improved slightly versus the Lions.
    Last year, the Packers won the Super Bowl while the Lions failed to make the playoffs. This year, the Packers lost in the first round of the playoffs, while the Lions made it to the playoffs also losing in the first round. The Lions improved significantly versus the Packers.
    Overall, the performance trajectory for the Lions was much better than the Packers, indicating that the Packers are being lead poorly by Aaron Rogers while the Lions are being led superbly by Matt Stafford.
    ***********
    Trajectory versus position….

  7. Jeffrey J. Brown

    I remain focused on the ongoing decline in Global Net Exports of oil (GNE), and in Available Net Exports (ANE, or GNE less Chindia’s net oil imports).
    And the ongoing decline in GNE and ANE suggest to me that it is not if, but when, that we see (or in some cases continue to see) substantial and probably ongoing declines in spending at virtually every level of government.
    It’s really not a left versus right issue. It’s a question of recognizing the realities of resource limits, and the relentless math behind net export declines.

  8. Menzie Chinn

    Bruce Hall: Figure 2 pertains to the level of employment. Figure 3 of this post that you commented on is also on levels. You can access the levels data on the coincident indices, which are scaled to GDP, to do your own comparisons. While your point re: Michigan is relevant, I think the interpretation regarding Wisconsin’s relation to the other District 7 economies remains unchanged.

  9. Bruce Hall

    I agree that Wisconsin has seen a slight dip in employment, but that is not that significantly different from the U.S. in rates [see previous comment on U1-U6 - 4Q/10 to 3Q/11 versus average 2011].
    ∆s are great when comparing consistent starting points; not so great when the basic conditions are different. Have to look at potential upside… and more than just most recent which can be attributed to many things other than Aaron Roger’s performance… er, Gov. Walker’s performance.
    Still, without the breakout of private versus public sector jobs, it is difficult to say whether the recent downturn is a result of recent policy changes or longer-term issues.
    As a former corporate business planning analyst, I learned early on that correlation was only one aspect of analysis and not a quick determinant of causality.
    http://lacrossetribune.com/news/retirements-not-layoffs-likely-behind-june-dip-in-government-employment/article_a3387de2-3da3-11e1-818d-001871e3ce6c.html

  10. Menzie Chinn

    Bruce Hall: Figure 1 pertains to private sector employment.

    Regarding your assertion that employment trends have not differed between the US and Wisconsin, a regression of the US-Wisc differential in log-difference growth rates of private employment over the past six months indicates a statistically significant constant. In other words, I can easily falsify your hypothesis, and disprove your assertion.

  11. Jake formerly of the LP

    I’d like to thank Menzie for bringing truth while out-of-staters bring spin when it comes to the economic performance of Scott Walker. As someone who also lives here, it is indisputable that Walker’s policies have taken Wisconsin from a position of better results than the rest of the nation from 2009-2011 to one that has badly trailed a U.S. economy that has been recovering over the last 12 months.
    And Menzie is soft-selling it, because he fails to mention how Wisconsin has gone from gaining 4,000 private sector jobs a month in 2010 to losing 6,000 private sector jobs a month since Walker’s budget took effect in June 2011. Especially egregious when merely keeping up with U.S. growth would have netter around +20,000 jobs instead of losng 35,600.
    While I appreciate Bruce’s analogy of Packers vs. Lions, it’s really more like the Indianapolis Colts’ performance in 2010 vs. 2011. 2010, the Colts were 10-6 and made the playoffs, while in 2011, it had a key component of how the system operated was taken away (for the Colts, Peyton Manning, for Wisconsin, collective bargaining rights for public employees), and the Colts crashed to the worst record in the league, much like how Wisconsin has crashed to the worst jobs record in the U.S. And much like the Colts replacing Manning with Andrew Luck to rebuild and start in a new direction in 2012, so will Wisconsin once it boots Walker out in Summer 2012.
    And W.C. Varones and other right-wing bubble boys shouldn’t cling to that poll that was released earlier this week, because most people that know statistics looked at that poll’s crosstabs and rightfully called it out for oversampling demographics that favor Scott Walker. In reality, Walker’s approval is in the mid-40s at best, but if you want to cling to a bad poll like a hillbilly clings to guns and religion, feel free. Those of us that are actually in Wisconsin know better.
    Lastly, Menzie isn’t even mentioning the 2 Walker aides charged this week for misconduct in office, and the fact that Walker is quoted in said criminal complaint “we can’t have something like this happen again,” and it wasn’t because he thought it was wrong…. He will be gone.
    Them’s the facts, and you bubble boys that want facts to be optional don’t get to tell us what they are.

  12. Bruce Hall

    Thanks for the clarification on the data. Let’s see how things go for the next 6 months. If the trends continue to diverge over that period, we can be sure it is not just random variation or something that is a short-term, one-time occurrence.
    I’ll presume the U1-U6 data are incorrect or move differently for other reasons.

Comments are closed.