Earlier this week, the BLS released new estimates of state employment, based upon Quarterly Census of Employment and Wages (QCEW) data through September 2012. The figures for Wisconsin have been substantially revised upward. As indicated in previous posts [1] [2] , census data had indicated substantially higher nonfarm payroll employment than that derived from surveys.
The Upward Revision in Context
Figure 1 depicts the data, pre-benchmark, the most recent release, what I had previously estimated as employment, based upon an estimated relationship that held before the implementation of new estimation methods by the BLS (see this post), and finally, the level of nonfarm payroll employment implied by Governor Walker’s promise to create 250,000 jobs by the end beginning of 2015.
Figure 1: Nonfarm payroll employment in Wisconsin, December 2012 release (blue), January 2013 release (red), estimated relationship using Quarterly Census of Employment and Wages (QCEW) (see this post) (green), and path of nonfarm payroll employment promised by Governor Walker (promised private employment plus actual government employment) (purple). Source: BLS and author’s calculations.
It is interesting that the estimates I generated based upon a historical relationship between nonfarm payroll employment series and the QCEW roughly fits the revised BLS series. That being said, employment remains 2.1% (log terms) below the path promised by Governor Walker. In fact, two years into the Walker Administration, employment is only 1.6% above where it began.
Revisions across the Country
Wisconsin is not alone in terms of the revisions. As the BLS observes:
For March 2012, 46 states revised nonfarm payroll employment upward, while 4 states and the District of Columbia revised payroll employment downward. (See Table 2. or Graph 1.) For March 2012, 17 states had revisions greater than –0.5 percent and less than 0.5 percent; 14 states had absolute percentage revisions of 1.0 percent or greater. (See Table 2. or Graph 1.)
For December 2012, 15 states had revisions greater than –0.5 percent and less than 0.5 percent; 18 states had absolute percentage revisions of 1.0 percent or greater. (See Table 2. or Graph 2.)
Graph 2 from the BLS report summarizes the extent of the revisions across states:
Wisconsin in Context
Since the neighboring states’ employment series were also revised upwards, it is no surprise that Wisconsin continues to lag those neighbors in terms of progress since 2011M01.
Figure 2: Log nonfarm payroll employment for Wisconsin (blue), Minnesota (red), IL (green), Michigan (purple), and United States (black bold), normalized to 2011M01=0. Source: BLS, March 18 release, and author’s calculations.
Wisconsin’s cumulative employment growth deficit since 2011M01 relative to the United States overall is 1.7% (log terms), and relative to Minnesota is 2.1% (interesting considering the Governor’s remarks regarding Minnesota’s economic policies [3]). The growth deficit relative to hard-hit Illinois is 0.7%. Moreover, in January, Wisconsin employment declined, by 2.6% on an annualized basis (in absolute value, slightly more than the standard deviation of growth rates over this sample).
So Walker’s experiment in state wide austerity (mixed with crony capitalism) is not working. Economies like this do not work well, except for a few. Walker will have a hard time using this record as his springboard to the national stage. Not that he won’t try to do so, mixed in with a lot of miss leading rhetoric. Gee whiz, even his campaign to take jobs from Illinois is not working.
Professor Chinn,
How does Wisconsin’s forecast compare to the forecast made by the Obama administration economic advisors that was supposed to result from stimulus spending?
AS: If you recall, Governor Walker committed to 250,000 new jobs, not jobs created or saved. The CBO assessments (as well as private sector analyst estimates) are in line with the Bernstein-Romer projections relative to baseline.
To me, it’s not the content of the promises but that such promises are made repeatedly and bought by the public. That raises an interesting question: does the supply create its own demand? Is it the endless pandering by politicians which makes the public dumb? Or is it that politicians supply what the public demands?
Under Democrat Governor Jim Doyle Wisconsin lost 150,000 joba. Even Minzie admits that Governor Walker has turned this around and has created 40,000 jobs. That is a net swing of 190,000 jobs.
Now Minzie wants to hold Governor Walker to his goal of creating 250,000 but he twists himself into a pretzel excusing the Obama administration.
After two years of fighting the job destroying Wisconsin teachers and public employee’s unions you would think that the people of Wisconsin would be jubilant. But then Progressives are naturally negative, masters at finding the worst in events so the have an excuse to expand government’s power.
Just remember you will know when Wisconsin is finally creating jobs at the level Governor Walker set as a goal when Menzie becomes eerily silent on the subject.
Let’s look at a few numbers simply. In March 2013 Wisconsin added 12,400 jobs and previous months were revised upward.
Now let’s look at the “promise” Scott Walker made.
His statement was that he would “get government out of the way of employers … who will then help Wisconsin create 250,000 jobs by 2015…”
If the state of Wisconsin only adds jobs at the same number as March that means that Wisconsin will add 250,000 jobs in a little more than 20 months, less than two years. So if the businesses of Wisconsin do not grow any more and only add what has been added in March Wisconsin will add 250,000 jobs by November or December of 2014.
Oh, and that does not include the fact that the state has already added 40,000 jobs. If there is no improvement in Wisconsin Governor Walker’s goal should be met by the summer of 2014.
Why is Menzie whining?
Jonathan,
That’s something I can’t understand either. As here in Wisconsin, as you see your schools and other public goods being degraded, your family and neighbors losing their jobs or moving somewhere more promising, why would you keep supporting more of the same policies? I think it is the rhetoric of envy, which is very seductive. As the descent to the lowest level of degradation occurs, the 1% demand that you fight it out with the person standing next to you for the smallest crumb.
To quote Michael Lind’s recent Salon series http://www.salon.com/2013/03/21/private_sector_parasites/
“Without invoking a conspiracy, we can identify a Rentier Agenda that is harmful both to productive business and ordinary wage earners but promotes the policy goals of many of America’s large and influential rentier interests, particularly those in finance. The Rentier Agenda has three broad components: low taxes on rentiers, privatization of natural monopolies, and a macroeconomic policy driven by fear of inflation.”
This agenda is cloaked in a rhetoric that implies why you are failing to be a “Master of the Universe” is because you are not sufficiently like them and are not grabbing at the crumbs with the same intensity.
Ricardo: Yes, if the pace given by preliminary estimates for January hold up, then you’re right. That value is about 2.5 standard deviations above the mean increase over the 2011M01-2013M01 period, so it seems unlikely to be sustained. Of course, if we take the average over the last three months, 6.8 thousand/mo, then it’ll take a bit over three years, in 2016, to hit the 250 thousand target…
Menzie, Walker doesn’t have to hit the 250K total since he has already raised ~40K jobs as Ricardo claims above. If he can maintain the past 3 month’s average then it is ~31 months. 31 months from today is at the end of 2015, his target year. If he is able to raise that monthly average then the total time is collapsed.
What’s your problem? He is on target at this point.
CoRev: Take the change since 2011M01 of 67 thousand private sector jobs. This leaves 183 thousand jobs to create by January 2015 (I don’t know where you get end of 2015 – he said by the end of his term). At the 3 month rate of 6.8 thousand per month (which is more than one standard deviation in excess of what has been the average over the last two years), then it will take 27 months to hit the target. So in order to hit the target by the time he indicates he would, he will need to have private employment growth substantially (more than one standard deviation) in excess of the mean rate thus far, month after month after month for the next 27 months. You can tell me if this seems likely to you.
Menzie, you are pleased that the Obama economic growth isn’t reaching WI? Moreover, you seem to be rejoicing in that and blaming Walker. Which Walker policy(s) are holding back WI growth. Can they be contrasted the growth against that past Dem Governor?
I’m just curious what is your point with these continuous articles.
CoRev: Just data. Why should that irritate you?
Menzie is correct. If Gov. Walker were to return to the policies of Gov. Doyle the improvement in the employment conditions in Wisconsin would slow and possibly reverse. This could also be the case if the state employee unions should win any significant court cases stopping Gov. Walker’s reforms.
So far this does not seem to be the case so with the current trend it appears that Wisconsin will easily meet the goal set by Gov. Walker.
As a very long time resident of this state, I must say Minnesota has been very good to me. I have been very successful and honestly some of that is due to what you might call Northern European Socialism. I have done well both financially and personally. The problem is if I stop working I won’t be able to afford it here. The cost is very very high for random workers such as myself in the upper income brackets with no social engineering deductions like a mortgage or a wife or a kid nor lobbyists to mitigate my taxes. So I will move (not to Wisconsin, don’t worry!)
Scott Walker is a nasty character. But lots of people agree that there are systemic problems with taxation and spending in even the best states that need to be fixed – and he is the messenger for this. I would not be so quick to count him out. We think he’s a creep but his message resonates with a lot of people.
Regards.
randomworker,
Wisconsin has a long way to go. It’s economy is still significantly government run. You should go to a state that is based on liberty and freedom like Texas.
Menzie, why do you think I’m irritated? I already explained: “I’m just curious what is your point with these continuous articles.” My curiosity is about your obsession. How many previous article cites were in just this article?
CoRev: There are cites to three previous posts; that doesn’t seem extreme to me, relative to other posts on other subjects — after all, isn’t the point of being an academic to be self-referential (just joking!). But there are serious questions here: First, apropos current events, is there such a thing as expansionary fiscal contraction under fixed exchange rates. Second, how to deal with estimation of employment with relatively small samples (and relatedly, the characteristics of state level BLS data). Third, are there regional shocks in employment in the US.
CoRev & Ricardo:
Let’s get back to why this is an issue:
On February 23, 2010 Scott Walker stated:
“I will develop strategies for creating 250,000 new jobs and 10,000 new businesses by 2015.
These goals will guide every decision made by my administration; every initiative that’s undertaken and every program that’s administered will be examined for its effect on jobs. Every decision must be considered in the context of what it means for job creation and economic recovery. Specifically, there are six things we must do to make Wisconsin economically competitive with other states: lower taxes, . . .eliminate red tape, . . .end frivolous lawsuits, . . . improve education of tomorrow’s workforce, . . . make health care affordable, . . . invest in infrastructure.”
This statement was made repeatedly by Walker and still is displayed prominently on his website. He recently doubled down on his promise and he has advanced initiatives in each of the six areas for the past two years, so it is not too out-of-bounds for Menzie, or anyone for that matter, to ask: So how is it going?
Ricardo you take the position that it could have been worse, but that is not the issue. Plus, since we are quite literally in the basement of job growth (42nd or 50th depending on the job survey), it couldn’t have gotten much worse. Co Rev seems to advance the view that since this is bad news that any attempts to bring attention to Walker’s original promise is sedition of some sort. If the jobs were there CoRev I’m certain that you’d let us all know–you can’t have a one-way rhetorical street, sorry.
Walker promised, iron clad, that following his program would make Wisconsin competitive among the states. But we see that, so far, Wisconsin is certainly not competitive regionally, and on a national basis is at or near the bottom, despite Walker victories on every single legislative initiative he has advanced, and since, as he stated, every single initiative he would propose was aimed at jobs, one simply has to state; where are they?.
If Walker is so tight with all the job creationists throughout the country, you’d think he’d adopt the simple expedient of asking them to create some jobs in Wisconsin, but apparently this simply isn’t done at all those fancy dinners and receptions.
So to even the most casual observer it apparent that the state lags behind all of its neighbors, even though many of them did not follow anything close to Walker’s program to create jobs–it does call the plan into question.
Ricardo You should go to a state that is based on liberty and freedom like Texas.
Well, I lived in Texas for a while. It was a godawful experience so I try not to dwell on it too much, but I didn’t see much evidence of “liberty and freedom” in Texas. The state and local governments were hopelessly entangled in all kinds of rent-seeking schemes for local oligarchs. One of the metrics I like to use on the economic freedom scale is how many “blue laws” you find in the local community. The Bible thumpers in Texas had all kinds of bizarre “blue laws” on liquor sales and store hours. This was not a problem in my good old hometown of Chicago, where just about everything was 24/7 and you could buy a fifth of rye whiskey on your way to church Sunday morning if you felt like it.
Menzie points out: “But there are serious questions here: First, apropos current events, is there such a thing as expansionary fiscal contraction under fixed exchange rates. Second, how to deal with estimation of employment with relatively small samples (and relatedly, the characteristics of state level BLS data). Third, are there regional shocks in employment in the US.” I noticed not one of the points used the name Walker. So why the obsession re: Walker?
The cites were mentioned as evidence of that apparent obsession.
CoRev Does Wisconsin have its own currency? Does a dollar in Wisconsin trade at a different value than a dollar in Minnesota or Illionois or Iowa? In other words, Wisconsin operates under a de facto as well as a de jure fixed exchange rate. Fiscal contraction under a fixed exchange regime just leads to economic contraction. Clueless Gov Walker’s appeal to expansionary fiscal contraction policies assumes a flexible exchange rate between countries, and by extension between states. Walker’s policies are a micro laboratory version of fiscal contraction policies in the Euro periphery. If you believe those policies will work in Europe, then presumably you also believe they should work in Wisconsin. Understand?
I have no idea how you missed the points about seasonally adjusted employment numbers and regional shocks. They could not have been more front and center.
Dr Morbius, why the snark? Where have I said or implied: ” Co Rev seems to advance the view that since this is bad news that any attempts to bring attention to Walker’s original promise is sedition of some sort. If the jobs were there CoRev I’m certain that you’d let us all know–you can’t have a one-way rhetorical street, sorry.”
I am curious why the repetitive articles re: WI job creation progress. What do you think are the specific Walker policies in need of change?
2slugs, then you must be able to answer my question over which specific Walker policies causing this endless set of articles.
CoRev Cutting public sector employment by 18,800 jobs during a weak recovery is a good example. Weakening public sector unions has the effect of giving local governments more monopsony power, which further reduces employment and wages below economically optimal levels. So that’s another example. Giving big tax cuts to businesses headquartered outside of Wisconsin was another boneheaded move…especially since Wisconsin didn’t get anything in return for the tax cut. All the benefits went to Gov. Walker’s fundraising and political ambitions.
There is very little that governors can do to improve a state’s economy during a macroeconomic recession. Basically governors are hostage to the fiscal policies set by Congress and the monetary policies of the Fed. But even though governors don’t have a lot of tools to improve things during a recession, there are plenty of stupid things that they can do to make matters worse. And that is Walker’s sin. He seems to have gone out of his way to make things worse by following contractionary policies.
The unemployment rate in Paul Ryan’s area is trending upward: Racine is now 9.8% and Janesville is 9.5%.
Straight out of the Business Journal today.
“Biotech startup Rapid Diagnostek, once a poster child for economic development boosters worried that promising Twin Cities startups were fleeing to Wisconsin, has returned to Minnesota.
The company quietly moved its headquarters from Hudson, Wis., to Plymouth last August, CEO Harry Norris said in an interview last week….
“The over arching thing was recruitment of talent,” he said. For instance, he tried to recruit someone from pharma giant Beckman Coulter’s Chaska operation, but the candidate didn’t want to drive 50-plus miles a day to get to Hudson.”
ANY QUESTIONS? And this’ll only get worse as Minnesota invests in its citizens and welcomes marriage equality, while Wisconsin regresses back into the 1900s.
Missing a goal is a failure it seems when looking only toward one political party, that is the problem with most issues in this nation; declaring policy based on political leanings is better.
It is hardly arguable that containing costs was needed. People might disagree with the method used but debating it wasn’t needed is hardly productive or an issue [today].
A true reasoned approach to the reason behind the data, not the numbers, is to find a conclusive reason for a trend; one way or the other.
One painful and obvious reason would be the indecisive business community, not knowing what legislation will really be law after all the political infighting through court actions. Many major business’ are sitting on capitol and this state is not viewed as a stabilizing area for investment. Keep up the finger pointing as the money moves where welcomed.