Tuesday, January 24, 2012

Wisconsin Unemployment - Blame Gov. Walker


Over at Econbrowser, the politics and policies of Gov. Scott Walker have been taking a pasting from the liberal side [no real surprise there].  Gov. Walker has aroused more animosity in a short time than nearly any other governor due to his "take no prisoners" approach to state budgets and management.  While I agree with the notion that Gov. Walker has used a chain saw when a carving knife was more appropriate, I believe that the argument Wisconsin has suffered a slower decline in unemployment rates ... relative to other states ... is misleading.

From the site Department Of Numbers:

Wisconsin Unemployment
According to the BLS current population survey (CPS)the unemployment rate for Wisconsin fell 0.4 percentage points in November 2011 to 7.3%. The state unemployment rate was 1.4 percentage points lower than the national rate for the month. The unemployment rate in Wisconsin peaked in June 2009 at 9.2% and is now 1.9 percentage points lower. From a post peak low of 7.3% in April 2011, the unemployment rate has now grown by 0.0 percentage points. You can also seeWisconsin unemployment compared to other states.

Unemployment RateNovember 2011Month/MonthYear/Year
Note: All comparisons are made with November data as December state level unemployment data has not yet been released.
Unemployment Rate: WisconsinNationalWisconsin monthly unemployment rate chart from 1990 to November 2011

Note: Recessions shown in gray
Wisconsin Unemployed
The number of people unemployed in Wisconsin peaked in June 2009 at 285,095. There are now 61,262 fewer people unemployed in the state. Wisconsin job growth data is also available
Unemployed PersonsNovember 2011Month/MonthYear/Year

Unemployed PersonsDecember 2011Month/MonthYear/Year

The argument that Wisconsin employment is suffering is based on recent cutbacks in state government employees... not necessarily on rate comparisons with nearby states or the national rates.  Conveniently overlooked is the point that those government employee cutbacks were taken to help strengthen Wisconsin's fiscal situation which was looking increasingly difficult... and are occurring in other states and at the federal level.
That said, I'm not necessarily of fan of Gov. Walker's approach to laying a big chunk of the fiscal burden on the backs of teachers, many of whom have been driven into dangerous economic straits by changes in their benefits funding.  The argument was that teachers were paying little or nothing for their benefits... all true.  What hasn't been said is that many teachers, not all, have been paid a relatively low salary as an offset to those benefits and that taking a large chunk of their current salaries to now fund the benefits... as much as 25%... placed an enormous and inordinate burden on individual teachers. 
 An example of the manipulation going on: the premium pay for a Masters degree was less than $3.00 per hour... not enough to pay for the cost of degree, but absolutely required for some teaching positions... and now the premium pay is being taken away... but the requirements remain.  Try doing that in the private sector.
But back to the notion that Wisconsin's unemployment rate is out of line.  First, note [enlargement from above] that Wisconsin is not all that different from the national average except in the most recent period.  Also note that Wisconsin showed a temporary increase in unemployment about the same time [2011] that the national average reflected one.  Some of that may be statistical anomalies from the Seasonally Adjusted Annual Rates [SAARS] which are used to adjust actual rates based on past seasonal patterns.

Wisconsin recovered somewhat faster than the rest of the nation for about a year and then the national recovery began to close the gap.  So, the argument is that Gov. Walker caused the gap to close as opposed to the argument that some other laggard states, such as Michigan, were beginning to show improvements from far worse conditions which allowed for greater absolute improvement.

If you look at the fall in unemployment rates from the high point in 2009 rather than mid-2011, you'll see a movement in line with the nation... a relationship for the past decade... shown in the larger graph above.

Perhaps one might want to consider another argument: the recovery for the nation and Wisconsin might have been considerably faster if our President's economic policies were not so counterproductive.

2012 IS HERE


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Tracking Interest Rates

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SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)