The economic discourse that emerged over the third quarter 2021 reflected the ongoing concern that economists, bankers, and policymakers have about the ongoing risks to the economy and the durability of the current recovery. Concerns regarding inflation have been met with calls for patience as explanations ranging from pent up demand to disruptions in global supply chains have been offered to suggest that high prices may be temporary. Others contend that high inflation, constrained supplies, and lower-than-expected GDP and wage growth point to prolonged difficulties.
The Northeast Wisconsin economy continues to be defined by a tightly constrained labor market. Companies have responded by increasing wages, offering bonuses, and relying on employee referrals to recruit from their competitors. The expected rebounds that were anticipated this fall due to the expiration of federal expanded unemployment benefits and the return to in-person schooling for most students have yet to realize. Businesses have responded by reducing hours and lowering their expectations for the end of the year.
The pace of economic recovery has slowed as the Bureau of Economic Analysis announced a preliminary estimate of 2.5 percent GDP growth in the third quarter. Economists are now uncertain as to whether the fiscal spending anticipated in the Bipartisan Infrastructure Plan and Build Back Better Plan will have the same stimulative effect as previous rounds of spending have. Similarly, the Federal Reserve has also started to pare back its stimulative measures.
The winter will determine which of these trends persist even as the country continues to contend with the public health effects of the COVID-19 pandemic.
The indicators presented below demonstrate where we are seeing signs of recovery in Central Wisconsin as well as areas where familiar problems persist.
Annualized Employment Growth
January 2016 - September 2021
Source: Current Employment Statistics, U.S Bureau of Labor Statistics, October 2021
- Industry employment contracted by 14.5% annually in April 2020 before rebounding over recent months. Employment growth has decelerated in recent months in reaction to labor constraints.
- Hiring rates have returned almost universally, though companies are likely to have several unfilled positions. The demand for labor outstrips supply in many sectors as workers are more likely to shift roles or industries in the current market.
- Initial claims for unemployment insurance have also steadily decreased and stayed low nationally.
Monthly Unemployment Rate
January 2010 - September 2021
Source: Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, October 2021
- Unemployment rates have decreased precipitously over the past five months after spiking at 13.8 percent in April 2020. The current rate of 2.6 percent remains above March 2020 but is more reflective of current hiring conditions.
- 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 resumed 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 2022. Some lingering uncertainty remains regarding increasing wage pressures and the unknown net effects of the delta variant of COVID-19.
Total Unfilled Job Vacancies
January 2016 - September 2021
Source: Job Openings, U.S. Bureau of Labor Statistics, October 2021
- Unfilled vacancies have reached a national all-time high with more than 10.2 million positions open nationally.
- Hiring is expected to remain steady through the year as more customer-facing industries continue to attempt to staff to pre-pandemic levels and other large industry sectors, including construction and manufacturing continue to add capacity to fuel growth.
Weekly Economic Index
January 2020 - September 2021
Source: Lewis-Mertens-Stock Weekly Economic Index, Federal Reserve Bank of St. Louis, October 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 stabilized and declined in recent months as doubts regarding further spending have increased.
New Housing Starts
September 2021 YTD Annualized Change
Source: U.S. Census Bureau, September 2021
- New housing starts and total valuation increased significantly regionally and statewide over the year spurred by low interest rates and significant available credit. New housing starts locally are triple that of last year.
- Earlier disruptions have alleviated for several large projects and for clients with larger budgets. Supply chain constraints and labor availability continue to hinder most small and renovation projects.
- ICB Economic Update - Central WI: Winter 2021
- ICB Economic Update - Central WI: Spring 2021
- ICB Economic Update - Central WI: Summer 2021
Views provided in this article are general in nature for your consideration and are not legal, tax or investment advice. Investors Community Bank (ICB) makes no warranties as to accuracy or completeness of information, including but not limited to information provided by third parties, does not endorse any non-ICB companies, products, or services described here, and takes no liability for your use of this information. Information and suggestions regarding business risk management and safeguards do not necessarily represent ICB's business practices or experience. Please contact your own legal, tax or financial advisors regarding your specific business needs before taking any action based upon this information.