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 Northeast 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 accelerated to narrow the gap but has decelerated significantly in recent months.
  • Hiring rates remain high, but total employment has not moved significantly as companies are now hiring to replace the workforce that was depleted over the past year.
  • 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 2.5 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, September 2021

  • Unfilled vacancies have reached a national all-time high with more than 10.3 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, October 2021

  • New housing starts and total valuation increased significantly regionally and statewide over the year spurred by low interest rates and significant available credit.
  • 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.

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Written by Jeff Sachse 

Jeff is a passionate advocate for the innovation economy. He provide strategic insight to businesses and organizations throughout North America, staying in front of future trends in order to assist communities to anticipate pending challenges. Jeff is a skilled analyst, strategist, presenter and educator who believes that the currency of information comes in sharing with others. He is the founder of Rawley Point Economic Advising, Two Rivers.

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