Wisconsin Economic Activity Forecasted to Lag

No catch-up in sight for Wisconsin with Minnesota [1] (or the Nation, for that matter)

In a previous post, I noted that the most recent revisions had widened the gap between Wisconsin and other economies. Recently released forecasts from the Philadelphia Fed indicate the gaps will persist.

wisccoin2a

Figure 1: Log coincident indices for Minnesota (blue), Wisconsin (red), Kansas (teal) and for the United States (black), all normalized to 2011M01=0. Source: Philadelphia Fed, and author’s calculations.

As noted previously, the MN-WI gap has been revised to larger in the latest dataset, and the newest set of leading indicators indicate no diminishment of the gap.

Also notable is the fact that Kansas is in something of a slump, at least according to the most recent reading on current economic activity and the leading indices (February reading -0.1%). [Some discussion of the efficacy of Kansas's fiscal policy measures here -- added 4/10 7:47AM].

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21 thoughts on “Wisconsin Economic Activity Forecasted to Lag

  1. Ricardo

    In 1980 Wisconsin’s disposable income was 99% of Minnesota’s. For the 20 years from 1990-2010 Minnesota had no Democrat governors while Wisconsin had 8 disastrous years of Democrat Jim Doyle as disposable income fell to 90%. Recently disposable income began falling in Minnesota and rising in Wisconsin with disposable income in Wisconsin now about 91% that of Minnesota. Hopefully the bleeding has stopped in Wisconsin.

    Minnesota’s pre-taxpayer burden has increased from $2,600 to $3,000 (15%) with their election of a Democrat governor while Wisconsin’s fell from $5,700 to $4,800 (-16%) due to Republican Gov. Walker’s tax cuts, but obviously the Wisconsin economy is still being pulled down by the greater tax burden while Minnesota is not yet feeling the impact of its higher taxes..

    Menzie does not understand Hazlitt’s ECONOMICS IN ONE LESSON so he does not understand that economic changes happen over time not in an instant.

  2. AS

    Professor Chinn,
    Any comments about what seems to be a long-term difference between Wisconsin and Minnesota, as described in a WTN News report from October 28, 2003. I find it interesting that this 2003 report indicates that a performance gap opened as early as 1979; ”since 1979, both neighboring Minnesota and U.S. economies have been achieving considerably better economic performance than has Wisconsin – opening gaps in personal per capita income that are threatening to widen even further”.
    http://wtnnews.com/articles/314/

  3. anon and lazy

    Menzie–maybe you should move to Minnesota since you’re so obsessed with the place. Surely, you could find a cushy job there too. Heck, you might even find a union to join.

  4. Menzie Chinn Post author

    anon and lazy: You might not recall, but Governor Walker originally made the comparison. Here are the references for your edification. I will add to the post.

    AS and Ricardo: Please consult the figure in this post. In the ten years preceding Governor Walker’s administration, growth in per capita output was comparable. The divergence occurs starting in 2011 going into 2012. Ricardo should have known better to assert what he asserted, as he commented on this post, but has conveniently forgotten or decided to ignore this information. (pre-tax nominal disposable income as a metric — huh?)

  5. baffling

    is it possible the poor economic performance of wisconsin in the past few years is do to economic policy developed by a college drop out?

  6. jonathan

    When I look at the reports generated by FRED – you know, the St. Louis Fed – if there was any relative decline by MN it was teensy because, bluntly, the states follow the same curves for population, income and a whole bunch of other stuff.

    If you dig into the economic numbers from the BLS, as in employment by sector by MSA in each state, you see the essence of WI’s problem is … hard to figure because you can’t see any area of growth outside of minimal fluctuation. Usually when I look at a state, I see something obvious like service employment is up and manufacturing is down or construction is up, etc. Nothing much jumps out about WI with a few small notes. You see that major MSA’s in WI, like Milwaukee, aren’t doing very well and that isn’t being made up elsewhere in the state. The most interesting note may be that the MSA’s which overlap with MN are doing as well as any in WI. If you look at the data more closely, like from the MN side, you don’t see any loss to WI. If there is a cross border effect, you’d see it there.

  7. AS

    Professor Chinn,
    So, is there any credence to the 2003 article discussing the long-term differences between WI and MN identified as early as 1979? I thought since the analysis of the differences seems to have been conducted by an esteemed panel including Dean Paul Piercy, UW-Madison-Engineering that there was some credibility of a long-term structural difference between WI and MN. I am not an apologist for Governor Walker, I am just trying to learn if perhaps WI’s lackluster economic performance predates Walker or if he is truly the “cause”.

    1. AS

      Professor Chinn,
      Looking at GDP per capita from 1979 to 1997 normalized to 1979 using GDP data from BEA, (SIC) and population data from FRED, it seems that MN’s GDP per capita grew by 189% compared to WI’s GDP growth of 171%. From 1979 to 1997 MN exceeded WI’s GDP growth per capita each year using 1979 as the base year. Am I totally “off-base” on this analysis?

  8. Ricardo

    Menzie wrote:

    “The divergence occurs starting in 2011 going into 2012. Ricardo should have known better to assert what he asserted, as he commented on this post, but has conveniently forgotten or decided to ignore this information. (pre-tax nominal disposable income as a metric — huh?) ”

    Huh? I thought that was what I said. 2011-2012 is not long term but short term. Minnesota’s current tax burden is less than Wisconsin’s. Sorry Menzie. I have no idea what you are talking about.

    1. Menzie Chinn Post author

      Ricardo: My error. Let me restate. Nominal disposable income as a metric?

  9. ottnott

    Re Menzie
    pre-tax nominal disposable income as a metric

    When there aren’t many cherries left on the tree, you have to pick from what’s left.

    Re baffling
    is it possible the poor economic performance of wisconsin in the past few years is do to economic policy developed by a college drop out?

    Unpossible. All one needs to formulate effective economic policy in a modern industrial state is a couple weeks of Econ 101 and to read [some of] Atlas Shrugged.

  10. Patrick R. Sullivan

    ‘Sorry Menzie. I have no idea what you are talking about.’

    Don’t feel bad, neither does he.

    Looks like some Seattleites who would be affected by a MW raise to $15, are also predicting bad times ahead (if Doctor Kshama gets her way);

    http://www.thestranger.com/seattle/im-in-favor-of-a-tip-credit/Content?oid=19233811

    ‘Tips will be replaced by higher prices, and the restaurant owners will keep that money—either for operational costs or profit.

    ‘My base wage will go up to $15, sure, but I make far more than $15 per hour now. Even if the restaurant owner raises wages for servers to $25 per hour, most servers, bartenders, busers, and even kitchen staff in Seattle will take a large cut to their income. As someone who has worked for several restaurants, I’m acutely aware of the slim profit margins in restaurants, and the price sensitivity of patrons. Do we really want to create a system of dining that can be enjoyed only by those who can afford the increased cost of restaurant food? Why would we want to create a restaurant infrastructure that can be enjoyed by only a small segment of the population? That is classist. Restaurants need a tip credit to (1) close the wage gap demanded by Sawant, (2) keep staffing levels up so restaurants can still provide good service even as costs rise, and (3) maintain affordability for all people regardless of income status.

    ‘Private restaurant owners aren’t exaggerating when they say they might close if the minimum wage rises too fast and doesn’t account for tips. Please listen to them. Doing away with solid middle-class jobs created by restaurants is not the way to fix the issue of low-wage workers in places like McDonald’s—a job I had in high school, by the way. And doing away with my great paying, flexible job is something this mom can’t imagine facing.’

    Workers of the world unite! You’re about to lose your change.

  11. baffling

    patrick,
    not sure about your town, but in every town i have ever lived there is a small minority of restaurant positions which create a “solid middle class job”-and i have lived in some very touristy places. the VAST majority of people working in the restaurant biz are not middle class unless they have another breadwinner in the family-at larger wages. sure you can find the occasional outlier who makes decent money-the maitre de at Antoine’s in New Orleans makes great money-but these positions are a small number of the overall restaurant population. not sure i want to build my policy around this constituent of workers.

    1. Patrick R. Sullivan

      baffling, I’m always baffled by people who assume it’s up to them to run other people’s lives.

      Did you read the part where this woman mentions that she started out in fast food?

      1. Menzie Chinn Post author

        Patrick R. Sullivan: Darn tootin’ If I want my children to work in factory why not! If I want to take heroin, why not! And why can’t I work in an asbsestos-laden workplace if I want to! And by the way, what’s wrong with a little mercury in the environment? Lead too? I am sick and tired of the government getting involved in my life!

        (Note: I am being sarcastic, for those of you who are humor-impaired)

  12. 2slugbaits

    Patrick R. Sullivan The fact that this woman believes that stuff does not make it so. And her nonsensical comment about most bartenders and servers making $25/hr is a little bit of a stretch. I’m sure that’s what she’s reporting on her 1040. You betcha. In any event, her comments are ersatz economics. If she graduated from the Univ of Washington with honors, then the school should recall her diploma and apologize too the Board of Regents.

    If most tip workers in the Seattle area already make as much as she claims, then why does anyone care if the wage goes up or not? My take is that she has worked in the job a long time and has found what is for her a very sweet deal and she doesn’t want a share any of her good fortune. If she’s half as self-centered as she sounded in that article, she doesn’t want anyone cutting in on her little piece of the action. That’s not exactly a strong argument. What she is claiming is false and she knows it.

    1. Patrick R. Sullivan

      Unfortunately for you, slug, I’ve known a few waitresses in my time, and her story isn’t unusual at all.

      Interesting outlook on life you have, where it’s ‘self-centered’ to live your life as you see fit. You would have loved Italy in the ’30s.

      1. 2slugbaits

        Patrick R. Sullivan Right. We’re supposed to believe that someone claiming to be waitress at a not particularly high end restaurant is making the median household income…and supposedly that’s typical. Sure. You betcha. What’s self-centered about her view is her belief that any policy that might make her slightly worse off (and even that claim is highly unlikely) must therefore make everyone else in a lower economic class worse off as well. It’s the fallacy of composition. Apparently she sees her personal fortunes as a bell weather for Seattle writ large. That my friend is the very definition of self-centered.

        You should also be very skeptical about the veracity of this story. Karl Rove and the Koch brothers and the Heartland Institute have been making so many fraudulent television commercials and misrepresenting op-ed pieces that I now just automatically assume anything written by a conservative is a fabrication unless proven otherwise. Notice that in the op-ed piece she failed to offer any actual economic argument that justified her position, just a heartfelt belief that it must be true. Reminds me a lot of the woman on Hannity’s show who refused to believe that Obamacare actually was going to cost her less than her old policy. She was just sure of it. And after appearing on the show we found out that she had never even visited the site…but she just knew it was going to cost more. Darn it, she just knew it. And after having been proven to be a fraud, Karl Rove & Co. made a second commercial with the same woman trying to deny that she was a fraud. Even after reporters proved to her that it would have cost less, she just refused to believe the numbers. I think we’re seeing a similar thing her with a lot of these fake stories appearing in the newspapers and television.

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