Much has changed since our last economic update. COVID-19 vaccination rates have steadily increased over the past two months but now appear to have plateaued. Businesses are now expressing more optimism regarding both their current viability and the overall pace of economic recovery. Communities are looking forward to a summer season filled with visitors and events. All of these are signs of a return to some sense of normalcy, even as we begin to realize that the pandemic will likely lessen as a fact of daily life.
We are also seeing signs of recovery throughout several key economic indicators. The two rounds of direct stimulus that have come in this quarter have spurred sharp increases in consumer spending. While this has caused some concern about inflationary pressure, fiscal and government policy points to even more stimulus spending to come. While we do not yet understand the details of the many proposals being considered, many have the possibility of bringing significant new spending and potentially fundamental changes to the economy.
The pace of economic recovery also continues to accelerate as the Bureau of Economic Analysis announced a preliminary estimate of 6.4 percent GDP growth in the first quarter. We are beginning to see the effects of this acceleration in local markets as several firms have announced positive earnings growth and others plan ambitious new expansions.
The indicators presented below demonstrate where we are seeing signs of recovery in Northeast Wisconsin as well as areas where familiar problems persist.
Annualized Employment Growth
January 2016 - March 2021
Source: Current Employment Statistics, U.S. Bureau of Labor Statistics, April 2021
- Industry employment contracted by 14.5% annually in April before rebounding over recent months. Employment remains more than four percent below December 2019 rates.
- Employment growth has accelerated in recent months as hiring has returned in many customer-facing industries, including retail sales and leisure and hospitality.
- Initial claims for unemployment insurance have also steadily decreased, suggesting that dislocations are slowing, and more candidates are re-entering the workforce.
Monthly Unemployment Rate
January 2010 - March 2021
Source: Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, April 2021
- Unemployment rates have decreased precipitously over the past five months after spiking at 13.8 percent in April 2020. The current rate of 4.3 percent is a point above March 2020.
- The regional unemployment trend has followed state and national patterns throughout the course of the pandemic and has dipped below both state and national rates through the end of 2020.
- Recent unemployment rates had started to tick downwards towards recent seasonal norms. This is both a function of increased economic activity and the continued impact of labor force constraints.
- Near-term forecasts suggest that the unemployment situation will remain relatively stable but will not fully recover until 2023. Growing optimism has increased the likelihood that the region will recover well before the nation.
Total Unfilled Job Vacancies - United States
January 2016 - January 2021
Source: Total Unfilled Vacancies, OECD, January 2021
- Unfilled vacancies had plateaued before the pandemic, with needs shifting towards essential industries.
- The index recovered quickly in the 3rd and 4th quarters as these same industries resumed hiring.
- Hiring is expected to increase significantly in Q2 as more customer-facing industries again staff up for a busy summer season and other large industry sectors, including construction and manufacturing continue to add capacity to fuel growth.
Weekly Economic Index
January 2020 - April 2021
Source: Lewis-Mertens-Stock Weekly Economic Index, Federal Reserve Bank of St.Louis, April 2021
- Index collects all economic indicators produced weekly.
- Recent observations show the inflection and depth of crisis impacts, with the economy contracting at more than 10 percent per week through May 2020 before beginning a sustained recovery.
- The rate of recovery spiked in early March due to the optimism of the American Recovery Plan Act and associated stimulus spending. This has plateaued in recent weeks as the full scale of that package is now known, and funds are being disbursed.
New Housing Starts
March 2021 YTD Annualized Change
Source: U.S. Census Bureau, April 2021
- New housing starts and total valuation increased significantly regionally and statewide over the year spurred by low interest rates and significant available credit.
- The disruption of COVID-19 has delayed most construction activity, suggesting that this trend will continue into 2021 as scheduled jobs are completed.
- Materials constraints in the industry have loosened but project backlogs continue to inflate prices. However, this has not had a noticeable impact on new housing starts as buyers may have been locked into long-term materials contracts.
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