May St. Croix Economic Dashboard Released

The UW- River Falls Center for Economic Research (CER) in partnership with St. Croix Economic Development Corporation (SCEDC) has released the May 2011 edition of the St. Croix Valley Economic Dashboard. The dashboard is a snapshot of the economic condition of the labor, consumer and housing markets in the three county St. Croix Valley. It presents the latest available data* in one convenient package and can be viewed on the CER's website at www.uwrf.edu/cer.

Download the Dashboard

The unemployment rate declined in the Valley for the first time since October ‘10, indicating that the recovery of the job market may be picking up steam. The unemployment was driven lower by the first increase in total employment since June ‘10. This combined with national employment number, the nation created 244,000 jobs in April ‘11, provide strong evidence that job market conditions will continue to improve. However, the unemployment rate in the Valley, at 7.9 percent, is still above the state unemployment rate of 7.4%.

Ironically, the lower unemployment rate is currently posing one of the biggest risks to the economic recovery in Wisconsin. As of April 16^th, Wisconsin claimants no longer qualify for unemployment benefits under the Federal Extended Benefits Program (See the Wisconsin Department of Workforce Development for more information). While regular and emergency unemployment programs are still in effect, many unemployed Wisconsinites either have exhausted their unemployment benefits or will exhaust them soon.

Losing one dollar of unemployment benefits translates into a lose of more than one dollar in aggregate spending because of the spending multiplier effect. Thus, as unemployment benefits are exhausted the already slow pace of recovery could slow even further. In the Valley, county sales tax revenues have been declining since September ‘10 in declining sales tax revenue, which indicates decreasing aggregate spending in the region. 

The housing market remains grim. In April, median home price in the Valley declined 14.5 percent from one year ago to about $130,000, and the S&P Case-Shiller Home Price Index for the Minneapolis metropolitan statically area has declined for nine consecutive months (the latest release of the S&P Case-Shiller Home Price Index was in February). In fact, the national S&P Case-Shiller Home Price Index for February is at its lowest point since the height of the hosing market collapse.  Slow progress processing foreclosures, high inventories of unsold homes and the ending of the homebuyer tax credit are contributing to housing market weakness.   

Wisconsin's St. Croix Valley is comprised of St. Croix, Polk, and Pierce counties. All three counties are located along the Wisconsin-Minnesota border. Two of the three counties, St. Croix and Pierce, are included in the Minneapolis-St. Paul-Bloomington MN-WI metropolitan area, a 13-county region with of population of 3.25 million residents. For additional information on the May edition of the St. Croix Valley Economic Dashboard, contact Dr. Logan Kelly at cer@uwrf.edu or (715) 425-4993 or William Rubin at bill@stcroixedc.com or (715) 381-4383.

*Please note that most regional data is available with between a one and two month delay, thus the current month's dashboard will have data from previous months.

Fed Watch

The Federal Open Market Committee concluded its meeting Wednesday with no change in its policy instrument, the federal funds rate. This interest rate is the rate at which banks borrow from each other. The Fed can influence the rate by making bank reserve more plentiful or less. When the Fed buys US Government securities from banks, the Fed is increasing the supply of bank reserves or by selling US Government securities to banks, they decrease the supply of reserves. More reserves tend to push the fed funds rate down and fewer reserves tend to push it up.

Recently the Fed has been under pressure to tighten up its policy and conduct policy to increase interest rates. This policy would tend to fight inflation and increase the value of the US dollar. Individuals proposing this tend to be most concerned about possible inflation and the rising price of oil, partly caused by the falling price of the US dollar.

The European Central bank recently acted to increase interest rates. This is not a surprise since they have a very narrow purpose to keep inflation low, regardless of the growth rate of the economy.

The majority of the members of the FOMC have been on the side of keeping interest rates low. They are more concerned about the slow growth of real GDP and higher than desired unemployment than any possible inflation. Their assessment of inflation is that it will stabilize below 2% over the next several months. 

With low stable inflation, the FOMC is focusing policy on stimulating the economy. Low interest rates and a cheap dollar are believed to increase spending in the United States.

For now, the FOMC speaking for the Fed has decided to continue its policy of low interest rates.

Labor Market Report

In March the national economy added 216,000 jobs which is welcome news.  Consistent with this job growth unemployment fell slightly to 8.8 percent (from 8.9 percent).  In addition, underemployment, which includes unemployed, discouraged workers, and people working part-time who want full-time work, fell slightly to 15.7 percent (from 15.9 percent).  While this is a positive sign, there is a long way to go in order to get back to effective full employment (which is about a 5 percent unemployment rate).  Center for Economic Research (CER) estimates that if the economy adds 200,000 jobs per month a 5 percent unemployment rate will be achieved in January 2018.

The unemployment rate in Wisconsin (for February) remained at 7.4 percent.  In our 3 county region the unemployment rate is 8.2 percent.  This is due to the 10.2 percent unemployment rate in Polk County.  The unemployment rate in Pierce and St. Croix counties are at the state average.  This past year Wisconsin added an average of 2,500 new jobs per month.  CER estimates suggest at this level of job growth each month Wisconsin can achieve 5 percent unemployment by March 2015.

Examining employment in Wisconsin by sector the 4.1 percent growth in manufacturing employment stands out as a positive development.  Also of interest is the 4.7 percent employment growth in other services.  This sector includes repair and maintenance jobs.  An intriguing hypothesis (not yet investigated) is whether growth in this sector is related to high unemployment in construction.  It is plausible that unemployed workers in the constructions trades may finding self-employment opportunities in plumbing, electrical work, building repair, and remodeling which is reflected in the increased employment in other services.  Future blogs will report on any evidence found regarding a connection between these sectors.

Increased spending is central to our economic recovery nationally and in Wisconsin.  During the past 40 years we have relied, for the most part, on Federal Reserve monetary policy to stimulate spending during recessions.  In the current recession, that option is not available as short term interest rates are at zero and banks hesitate to make loans.  That leaves us with fiscal policy, which engenders more controversy.  Some argue we need government to stimulate spending through public investment (i.e., infrastructure) and low taxes.  Others argue that we need austerity primarily in the form of reduced government expenditures.  Austerity, then, will reduce budget deficits (and debt) which will stimulate spending in the economy by promoting confidence that government will meet its obligations and not interfere in the economy.

It appears our policies at the federal level and in Wisconsin are moving towards austerity.  We will be watching closely (and reporting on) the effects of these policies on our recovery in future blogs.

St. Croix Valley Economic Dashboard for April Released

The UW- River Falls Center for Economic Research (CER) in partnership with St. Croix Economic Development Corporation (SCEDC) has released the April edition of the St. Croix Valley Economic Dashboard. The dashboard presents a snapshot of the economic condition of the labor, consumer and housing markets in the three county area. It presents the latest available data* in one convenient package and can be viewed on the CER's website at www.uwrf.edu/cer.
January's labor market data was troubling because the labor force dropped 2.2% from the previous year. This is an issue because as the economy improves, we expect to see discouraged workers reentering the labor market. A declining labor force, on the other hand, is usually a sign of worsening labor market conditions. February's numbers give some hope, though. The unemployment rate edged up 0.65 percentage points in February (year over year) for the St. Croix Valley, but the unemployment rate is lower than one year ago. Moreover, the increase in the unemployment rate for February was driven by an increase in the labor force rather than job loss as total employment remained relatively unchanged.

The housing market, however, is still grim. The median home price in the region fell vs. one year ago for the forth straight month, and the number of homes sold in March declined by 20.4% from one year previous. This is consistent with the national housing market, which continues to show signs of weakness.

Wisconsin's St. Croix Valley is comprised of St. Croix, Polk, and Pierce counties. All three counties are located along the Wisconsin-Minnesota border. Two of the three counties, St. Croix and Pierce, are included in the Minneapolis-St. Paul-Bloomington MN-WI metropolitan area, a 13-county region with of population of 3.25 million residents. For additional information on the March edition of the St. Croix Valley Economic Dashboard, contact Dr. Logan Kelly at cer@uwrf.edu or (715) 425-4993 or William Rubin at bill@stcroixedc.com or (715) 381-4383.

*Please note that most regional data is available with between a one and two month delay, thus the current month's dashboard will have data from previous months.