According to WI DWD statistics released today.
Figure 1: Wisconsin private nonfarm payroll employment (red), and linear trend implied by Governor Walker’s 250,000 net new private sector jobs pledge (gray). Dashed line at beginning of Walker administration. Governor Walker recommits to 250,000 net new jobs in August 2013. Source: WI DWD, Milwaukee Journal Sentinel, and author’s calculations.
Since average net job creation in Wisconsin under Governor Walker has been 3.3 thousand, with a standard deviation of 4.7 thousand, the likelihood that the target will be achieved is low.
But then, as a government official wrote to me on May 16, 2012: “The adminstration assumed that the jobs gains would be back loaded — ramping up with time.” So perhaps the ramp will be extremely steep this month!!!
Figure 2 presents a comparison of Wisconsin’s employment growth against that of the United States.
Figure 2: Log private nonfarm payroll employment in US (blue), and Wisconsin (red). Dashed line at beginning of Walker administration. Source: WI DWD, BLS, and author’s calculations.
Please put on an orange line for Illinois.
Another irrelevant post.
Hmmm. http://data.bls.gov/timeseries/LASST550000000000003?data_tool=XGtable
The old “eyeball” may be deceiving me, but Wisconsin appears to be approaching the pre-crash highs. Is the projected schedule wrong? Sure. Has Obama ever projected economic issues incorrectly? Obviously, never.
Wait, so a politician overpromised and underdelivered?
Reminds me of this:
http://www.aei.org/wp-content/uploads/2012/09/RomerBernsteinAugust1.jpg
Despite all, Walker won. He won several statewide elections, including a fierce recall.
Manfred. And your economic point is?
My economic point? It is that it seems that this over-promise of 250,000 jobs or whatever that Walker made, did not bother voters. If that had been so high on their list, they could have voted they guy out a few times already. But they didn’t. Menzie hammers this over and over and over, but voters at large do not seem to care as much.
Manfred- So did another Dubya. Didn’t mean his policies were right, or that voters knew the reality of the failure.
Unless you think the “Big Bang Theory” is truly the best show on TV due to its ratings, your point is very stupid.
Jake:
“Didn’t mean his policies were right, or that voters knew the reality of the failure.”
Really? So… you are the enlightened one (and Menzie). Voters are stupid, they voted for Walker a few times, including a fierce recall battle.
But, alas, voters are totally stupid, and only Jake and Menzie know exactly what voters need and what policies are right.
I can name a few heads of state in complete disrepute who thought to know “what voters wanted”.
I do not defend Walker. I am only going by the voting data. This is hard data, the data that Menzie likes so much.
My point is stupid? Really? Pointing out that Walker won a few elections? Voters knew exactly the promises he made. Voters knew exactly what they
got with Walker, and they voted for him, a few times, including (I say this again) a fierce recall battle.
We live a democracy. We vote. And voters are responsible for what they vote. That is the bottom line. And it seems voters in Wisconsin like what they get in
Scott Walker.
Manfred-Your point is that because just enough lesser-info voters decided to vote for Mr. Divide and Conquer, it somehow vindicates the substandard economic performance in Wisconsin. I suppose you felt the same way about Bush’s tax cuts and Iraq policy this time in 2005. And your point was stupid then and it is now.
Guess what, people like me and Dr. Chinn were proven right about Bush, and we’re being proven right about Walker. Wisconsin has badly lagged the Obama recovery on jobs over the last 4 years, and now it has $2.3 BILLION in budget deficits as a result of Walker’s policies.
Them’s the facts. Now if weak-minded people choose to ignore these facts because they don’t want to admit they’ve stuck with a failure…what else can we do?
Jake:
I know a certain well known politician that once promised “if you like your doctor, you can keep him”; that same politician also promised “an average of $2,500 reduction in health care premia”; that same politician also promised a “a red line in the sand” to a certain despot in the Middle East, and so on.
And this well known politician was elected and re-elected by the voters.
Politicians of all stripes and colors make promises that they cannot keep. And voters do elect and re-elect them. It happens on the right, the middle and the left.
Yes, Scott Walker may have overpromised – I do not dispute this. I do not defend the guy.
But it seems to me that voters have shown that they discounted that promise, and cared for other things that Walker is doing, in the same way that voters cared for other things that Obama is doing. They could have voted Obama out, but they did not. By the same token, Wisconsin voters could have voted Walker out, but they did not.
Evidently, Jake, this is very hard for you to chew on.
Manfred- oh, you mean the health care plan that you guys said would blow up the deficit and lead to death panels and government-run health care and not reduce the uninsured rate ? How are those predictions working out for you?
Outside of bubble-world, the ACA has done exactly what it was intended to do- lower the uninsured rate (significantly), slow the rate of increase in costs, while still keeping private insurers in the game, all while the deficit has gone down by 70% since 2009. THESE ARE FACTS, and your type has been wrong all the way through.
Likewise, we’ve been saying for months that Wisconsin would have lagging job growth and an exploding budget deficit due to Walker’s policies. AND WE WERE RIGHT. And just because a few rubes were snookered into supporting this guy doesn’t change the FACT that his policies have not worked.
I can only present facts and draw conclusions from data. I can’t fix weak-minded and stupid, and I can’t do all the work for a corrupt media that favors the people who pay its bills.
what a fascinating set of comments has come in already.
we have here a nice controlled experiment (comparable to the one brother brownback is conducting in kansas) about various pieces of right-wing economic myth. the myths are being exposed as fraudulent.
and various right-wing leaning commenters can’t stand it.
Howard, how can you have a “nice controlled experiment” comparing two different economies and ignoring so much economics?
It doesn’t seem easy to turn rust into steel, and attract the best from the rest of the country, and the world, to move to Wisconsin or Kansas.
Of course, here in California, there’s lots of money to shake out of people’s pockets, and the state, along with many city governments, are very aggressive.
That may help explain why much of the “middle class” is struggling in this “rich” state, or fleeing, unless they paid-off a home mortgage, refinanced (at lower rates and/or took out some equity); or work in a government, union, or private job in a growing or emerging industry.
The answer is economics isn’t science: this is as close as we get. We have the swaggering certainty of right-wing governors that lower taxes and/or union busting produce exemplary growth.
Then we have reality.
Wisconsin has a civilian labor force of 3.11 million, and unemployed of 162,000, representing an unemployment rate of 5.2%. Increasing unemployment by 93,200 would imply, ceteris paribus, an unemployment rate of 2.2%. Realistically, the best Wisconsin might hope for is 3.9% unemployment, representing an additional 40,000 jobs, all other things unchanged.
The unemployment rate in Kansas, by the way, is 4.3%.
The most interesting thing to note is how low unemployment rates are in much of the country. Here’s a list of states below 4.5%:
CT, HI, Idaho, Iowa, KS, MI, Nebraska, NH, OK, SD, Utah, Wyoming. Twelve states below 4.5%. Wow. By any traditional measure, those would be hot markets.
You know, Menzie, you could take the time to comment on Summers’ view of labor shortages driving secular stagnation.
http://www.bls.gov/news.release/laus.t03.htm
Speaking of Summers, here’s my view of Summers on fuel taxes: http://www.prienga.com/blog/2015/1/21/refuting-larry-summers-the-case-against-fuel-taxes
Geez, Steven, Walker projects unrealistically high numbers and he is a poor leader. Obama projects unrealistically high numbers and Republicans are obstructing him. The IPCC projects unrealistically high numbers and who cares, let’s tax.
Walker over-promised by any reasonable measure. But it’s politics. So what? If you live your life wrapped up in the promises of politicians, well, you’re not going to be a very satisfied person.
I think a more reasonable test is the relative performance of Wisconsin, which at 5.2% unemployment, would be ranked as very good, but not spectacular. (Minnesota is better, for example.) And employment has really surged in Wisconsin since…well, the price of oil fell. Just as we might expect as internal terms of trade of shift from oil producing to oil consuming states.
I’ll give Walker as much credit as I give Obama. It happened on their watch, so they can claim some credit.
Still, I am personally more interested in the interpretation of the unemployment numbers. 5.2% would traditionally count as ‘full employment’. Do we have full employment in Wisconsin or similar states? Personally, I don’t think so, but we should start having that conversation.
And we still haven’t had a post on Greece, by the way. The election is in two days: “Could Greece Survive a Grexit?”
I suppose I find it’s a big world out there, and I am less drawn to ideological debates. For example, my next three articles for the UAE’s National (where I appear to have a weekly column now) are “Remembering King Abdullah”, whose death I found strangely moving; “June’s Too Late”, arguing that OPEC must cut in April, if it is to cut at all; and “The Al-Naimi Doctrine”, which lays out the pre-conditions for OPEC production cuts. On the domestic front, I’d love to write “The Blue Collar Boom” and related, “The Coming Infrastructure Crunch.” Not to mention, “How will excess inventories affect oil prices?”.
There’s also a lot to write on labor markets, for example: “Ready or Not, Here They Come”, about a predictable resurgence of illegal immigration; and “How to Fix Labor Force Participation”, which discusses the changes in policy which caused US LFP rates to crater, and how to fix them.
So there’s a lot going on. There are lots of things to write about which, to my mind, might be more interesting that a politician’s exaggerated promises.
A question for you:
Prince Alwaleed said on CNBC that “oil will never see $100 again”. But, he denies this has anything to do with fracking.
He should know, but I don’t believe him on the latter point. It appears that the Saudi strategy is to drive marginal fracking (and drilling) out of the market. The reason oil will “never see $100 again” is that the Saudis (and others in OPEC) will ramp up production if it approaches that level again. This sounds bad for marginal producers, but very good for not only short-term but medium- and long-term economic prospects of most developed economies. What is your read?
http://www.cnbc.com/id/102363511#.
And to make matters more interesting, Venezuela’s Maduro said the same thing:
“Oil will never cost $100 again but God will provide. Venezuela will never do without.”
Is this coincidence, or did OPEC secretly set a ceiling?
Viv –
Here’s my short term view of the market. I consider it an important analysis, and firmly out of the consensus. On the other hand, you know me, the consensus is clearly conveyed as well. You can pick whichever version you prefer.
http://www.prienga.com/blog/2015/1/20/supply-minus-demand-explained
As for $100 oil.
On the demand side, China is still a big country, and it will comes back for some amazing increments of oil, and pretty soon, within the next five years, assuming the country stays more or less on track (which seems less certain under Xi). We will see $100 oil then at some point.
Near term, we could see it if the Saudis blow up the oil system and the global economy going into 2016, the odds of which I put at 50/50. That will get you $100 oil, easy.
In the medium term, on the supply side, we have a system at flux at present, at marginal cost is quite difficult to clearly ascertain. Of course it’s all about shale. (See the graph here: http://blogs.platts.com/2015/01/02/opec-call-price-collapse/)
Here are the considerations:
Shale: How much production can shale add at a given price? Right now, $80 WTI might be workable to keep the system producing an incremental, say 600-800 kbpd / year.
From this we need to subtract incumbent conventional production, which could be several million barrels (up to 8 mbpd). But we don’t know how much will roll off, really. I counted 2.4 mbpd this afternoon which could fall off in the next 12-18 months at current prices.
Then there are the incremental providers, the Brazilians and Iraqis, if we want to exclude the latter from OPEC. (http://www.thenational.ae/business/energy/a-guide-to-the-inner-workings-of-opec#full)
Now, the interesting question is what OPEC does next. We’ve generally assumed that OPEC was tapped out, either geologically or politically speaking. I’m not so sure. So OPEC may want to move to a volume strategy from the price strategy is has relied upon in the last decade (yet another article to write). Thus, we could see OPEC production start moving up, with essentially US shales setting the market marginal cost, and to oversimplify a bit, the US and OPEC splitting incremental production additions.
In that case, I would expect marginal cost to settle in the $85 Brent range, plus or minus. But of course, the history of OPEC is replete with drama, and of course, we’ll see major supply disruptions in the future, just as we have in the past. Put another way, we’ll see $100 oil again.
Thanks, Steven. Always interesting and insightful.
Not my area, but I have yet to hear mentioned the effect of the strong dollar on the oil price. Since oil is priced in dollars, I suspect that the strong dollar has contributed to the decrease in the dollar price. Saudis and other foreign producers may be willing to accept dollars that are more valuable in foreign trade in return for a lower dollar price per barrel. And, the recent increase in the dollar likely has little to do with the price of oil or the volume supply and demand for oil..
My thoughts:
“I suspect that the strong dollar has contributed to the decrease in the dollar price.”
Yes. However, take a look at the US current account, and it suggests a strong dollar, ie, principally resulting from increased US shale oil production, which has displaced imports. My thinking is here: http://www.prienga.com/blog/2014/12/6/oil-and-the-trade-deficit
“Saudis and other foreign producers may be willing to accept dollars that are more valuable in foreign trade in return for a lower dollar price per barrel.”
True, but what’s their choice?
“And, the recent increase in the dollar likely has little to do with the price of oil or the volume supply and demand for oil.” I disagree strongly. It has everything to do with the volume supply of oil. As I note at the link above, US shale oil production has displaced imports one for one. This improves our current account, on the one hand, and our economic performance, on the other. What’s the difference between the US and Europe or Japan? Well, take a look when the paths diverged: the second half of 2011. What happened then? Shale oil production really took off.
“Increasing unemployment by 93,200 would imply, ceteris paribus, an unemployment rate of 2.2%.”
if an unemployment rate of 2.2% was required to reach this goal, one should question the competency of the economists and models producing these numbers. kind of like the ryan and heritage budget assumptions.
Not sure what you’re saying, Baffs, I was suggesting that a promise of 250k jobs was probably unrealistic, given the available labor pool in Wisconsin. But it’s just politics, guy. Politicians make all sorts of crazy promises.
steven, sorry my comment was not meant to criticize you. i was reinforcing the important point you made. the promise was not probably unrealistic, it was simply unrealistic period. i think if a politician produces a number which historically has no precedent of occurring, then the politician, his advisors and his economic theories should be questioned. otherwise we get a repeat of a claim by paul ryan on how he will improve the deficit with unemployment numbers which have never been achieved in our modern economy. this is why scott walker should be challenged on his promises.
It is interesting to note that figure 1 indicates job creation has started to pick up in the second half of 2014. Maybe changes in policy take a bit of time to fully kick in.
Howard,
Right-wing economic myth is Fascism, or corporatism. That is central control of production and distribution to “make the trains run on time.” Our current economic system is significantly corporatism with big government regulating business activity. You appear to have a misperception of what right-wing economics is. There is a significant difference between corporatism and free market economics.
American right wing economics is tax cutting and union busting, with a side dish of entitlement reduction.
Period.
Howard,
I looked at your post again and maybe I am misunderstanding you. When you say right-wing are you talking about the Obama administration’s approach? If so, you may be right about those like Menzie who support corporatist, central planning economic policies. Sorry if I jumped to a conclusion.
Howard, please cite the posts where Menzies advocated central planning economic policy.
I have no idea what this is supposed to mean.
It is clearly a hiatus.
Get over it and blog about something interesting.
I so agree, Move On. Please Professor Chinn – give your local politics a break. Your side lost. Get over it.
Being a knee-jerk liberal is fine – good mainstream academic practice – but surely no one above the age of eight pursues politicians for failing to fulfill campaign promises? Or indeed for any form of dishonesty. All in the job description. We get what we deserve.
Red lines in Syria or ‘Ah did not have sex with that woman’ – best just to let the mouth drool roll over you and get another beer.
T Thompson: You left out the very best ones: “Mission Accomplished” and “Last throes of the insurgency”.
Or my favorites:
“Brownie, you’re doing a heck of a job.” –President Bush, to FEMA director Michael Brown, while touring hurricane-ravaged Mississippi, Sept. 2, 2005
“We’ve got a lot of rebuilding to do … The good news is — and it’s hard for some to see it now — that out of this chaos is going to come a fantastic Gulf Coast, like it was before. Out of the rubbles of Trent Lott’s house — he’s lost his entire house — there’s going to be a fantastic house. And I’m looking forward to sitting on the porch.” (Laughter) —President Bush, touring hurricane damage, Mobile, Ala., Sept. 2, 2005
Good to see that slope change that occurred about Sept/Oct of 2014. No matter what one thinks of the governor, it is good to see increased employment in WI. I hope that trend continues. I expect the change had a lot to do with the improving national economy. I Blame Obummers!!! Impeach Now!!!
Dilbert- I find the change in slope VERY interesting, especially because we saw the same thing this time last year, and the “gold standard” jobs report later came out and showed it not to be correct.
It makes me want to see the benchmark revisions that come out in early March, because something here doesn’t add up.
For the sake of the good folks of WI I hope the revisions confirm the increasing slope.
Menzie,
Many have suggested that you “move on” on this issue of Wisconsin’s employment rate. As Steve Kopits points out, the employment rate in Wisconsin is actually pretty good. Wisconsin ranks third in the Mid-west in Job creation behind North Dakota and Indiana.
Why don’t you take on the real basket case of the region, Illinois. I have economics friends sending me emails on the destruction of Illinois’ economy and it is appalling. For example I just received a report on Midwest job creation in 2014 and guess who is on the bottom?
1. North Dakota
2. Indiana
3. Wisconsin
4. Missouri
5. Minnesota
6. Ohio
7. Iowa
8. Michigan
9. South Dakota
10. Nebraska
11. Kansas
12. Illinois
Numbers attached to the list would be interesting. Maybe even some graphs showing changes over a series of years.
Here you have a personal description of how evil, vicious, and sick are the haters on the left toward effective politicians who put their lives on the line for our country.
Menzie: Is the point of this post to imply some sort of policy failure from Walker? If so, I think it would be helpful to state what level of WI job growth would you consider adequate.
I see the point of this post as not a critique of Governor Walker, but of his opponents. The forces opposed to Governor Walker failed to effectively show how unrealistic his economics are. The Governor should be commended for his political ability to produce votes even with anemic job growth and decisions sending Wisconites money out of the state to pay for other states expansion of Medicaid. Yet he prevailed on the voters of Wisconsin to choose him.
The Governor’s political acumen should be praised for his choices of not completely following the path of Kansas and Governor Brownback. He focused his policy goals and enacted them weakening his opposition by doing so. Yes, he is a very effective politician. His economic policies? Meh.
Seems it would be a lot easier for a state to cook the jobs numbers than a President.
My guess is any discrepancy would be pointed out by the BLS eventually. Now as I think of it there was a discrepancy between the numbers the Governor was using versus the BLS at one point. Sorry I don’t have the dates where this took place. I will search for those.