The Wisconsin manufacturing economy is resilient, with slower sustained growth expected. | So Good News
Wisconsin Department of Revenue Secretary; Peter Barca and John Koskinen, economist for the Wisconsin Department of Revenue, recently spoke with members of the WMEP Manufacturing Solutions team. “Impact on the Economy and Wisconsin Manufacturing.”
Secretary Barca’s presentation highlighted the strength of the Wisconsin economy as well as the state’s attractiveness to companies and workers, while Koskinen explored the capacity and potential of the Wisconsin manufacturing economy.
Barca said the tax burden for Wisconsin citizens has decreased significantly with $2 billion in individual tax relief over two years. He noted that 2.4 million Wisconsin taxpayers will receive tax relief. Wisconsin is currently ranked 23rd.rd Total state and local taxes as a percentage of personal income fell sharply from 4.th Rated in 1999.
“When Governor Evers signs all of the tax cuts into law, 86% of Wisconsin taxpayers will see a 15% cut in their income tax.”
Barca added that funding for education in the state of Wisconsin, a key Evers priority, has returned to 2/3, which translates into additional property tax relief for homeowners.
Barca explained that the state government also benefits from federal rehabilitation funds. As the relief effort was ready, the state pumped more than $100 million into the state economy from surplus funds from other states that were not yet ready.
DOR Chief Economist John Koskinen breaks down the Wisconsin manufacturing economy deeper. He discussed how Wisconsin Manufacturing experienced a 13-year recovery from the Great Recession of 2008, returning to peak production levels only to be hit by major economic disruptions caused by the COVID-19 pandemic.
To avoid an economic collapse, the Federal Reserve responded by providing the largest bailout in U.S. economic history.
Three stimulus measures enacted by the government kept the economy afloat. He noted that there was initially a major recession, but the stimulus did not see its full impact.
According to Koskinen, the stimulus has actually boosted personal income, which would have fallen significantly without it. One of the more impressive aspects observed was how small businesses were supported and survived through the effects of this unparalleled economic shock. Therefore, it was the shortest in economic history.
Koskinen then delves into the question of whether the U.S. economy is in decline or headed for a recession.
Koskinen explained that the National Bureau of Economic Research determines when the U.S. economy is in recession. These are real personal low income transfers (PILT); non-farm wage employment; actual personal consumption expenditures; Retail sales for price changes; Employment and industrial production as measured by household surveys.
Koskinen said that on all six of these measures, we are not currently in a recession.
“Manufacturing is positive,” he said. “If there’s any barrier to production right now, it’s parts and labor.”
Manufacturing orders remain high, reaching a record high in June 2022, he said.
Durable goods orders are up more than 10% year-on-year, he notes, and all sectors are increasing new orders year-over-year.
What is particularly important is that The backlog of unfilled orders is actually increasing, he said, providing some measure of downside protection for manufacturers.
However, while total manufacturing sales remain in record territory, net income is still relatively high, and declines are noted. This, he said, is due to rising consumption costs. He noted two industries where costs rose 17 percent year-over-year: construction and new cars and trucks. Both of those increases are at 50-year highs, he said.
As a result, manufacturing is seeing annual price increases of no more than 10%.
As those costs rise, investment in manufacturing facilities declines, but equipment replacement and automation continue to rise, making production more productive, he noted.
To no one’s surprise, the labor market is “really tight,” he said. He shared that total US job openings as of June 2021 exceed 10 million. U.S. Manufacturing job openings are running at 800,000 (nearly double previous levels). In Wisconsin, this translates to between 8,000 and 10,000 manufacturing jobs at any given time.
He said there are currently more than 218,000 job openings in Wisconsin, and a gap of more than 126,000 jobs than there are people to fill them. He said Wisconsin’s unemployment rate is now at an all-time low.
As a result, the rate of manufacturing layoffs in the United States is at a record high, he said. He said that employment opportunities will increase and wages will increase. He said the annual wage increase of 5.7 percent was the highest level in 21 years.
Koskinen said the US economic outlook is low growth; These include high prices and high interest rates. As a result, America’s economic growth potential has declined from very rapid growth to more sustainable growth.
“We don’t expect a decline in industrial production, but a slowdown in growth,” he said.
He believes the backlog of unfilled orders (some of which are out for 50 weeks or more) and the overall tightening of the labor market will provide safety valves that protect against recession.
Given the generally favorable indicators in Wisconsin and the way the state is recovering from economic disruptions, Koskinen expects Wisconsin’s growth to continue, but at more sustainable levels.