WisBusiness: Report shows surging economy in first half of '04
By Brian E. Clark
Wisconsin's economy surged in the first half of 2004 - adding 42,500 jobs - and should continue to grow for the next few years, according to a report released Tuesday by the state's Revenue Department.
Nearly 44,000 private sector jobs were created, while government employment cut 1,400 positions as state and local governments adjusted to tight budgets.
Personal income also increased, rising to $174.5 billion in the first quarter of 2004 for a gain of $3.1 billion over the fourth quarter of 2003.
The improving economy added to the state's coffers, with state tax revenues beating expectations of the Legislative Fiiscal Bureau, bringing in $69 million more than predicted for fiscal year 2004, which ended June 30.
State leaders lauded the report, which they said shows that Wisconsin is outperforming its Midwest neighbors and the nation as a whole.
Tom Hefty, co-chair of the governor's Economic Growth Council, called the news "good for business, good for jobs and good for the state budget."
He said the numbers were consistent with statistics he has been tracking for seven months.
"Clearly, growing state revenue is an outcome of our strong economy," he said. "We are leading our neighboring states and our slightly above the job picture of several years ago."
He credited the governor and Legislature's decision to not seek new taxes, Wisconsin's excellent schools, improved technology transfers from universities to the private sector and other factors as the reasons for a resurgent state economy.
He said Ohio, which raised taxes in response to the recession, continues to languish in economic doldrums.
"The important thing, though, is that Wisconsin has turned the corner and we now have the best growth record in the Midwest," Hefty said.
Still, Hefty said much remains to be done.
"Tech transfer can be enhanced, especially in the Milwaukee area, Venture capital can be improved and the legislature needs to hold the line on new taxes and we need to continue the bipartisan effort on regulatory reform."
Jason Helgerson, a spokesman for the Revenue Department, said the second-quarter report shows Wisconsin has "come out of very difficult period.
"From the first quarter in 2000 to the last quarter of 2003, we lost a sixth of our manufacturing jobs," he said.
While job recovery has been strong, he said the downside of the outlook is that the recovery has not occurred equally in all areas of the state.
Employment growth has been greatest in the Eau Claire, Sheboygan and Green Bay metropolitan regions. In the Janesville-Beloit and Racine areas, employment decline appears to have ceased, but no significant growth is anticipated this year.
"Growth in manufacturing will occur, but it won't be as robust in Rock County or Racine as in some other parts of Wisconsin," he said.
"Still, those areas will see overall growth in employment, but it will be because they are diversifying.
Helgerson said the report also showed that Wisconsin incomes are rising compared to national averages.
In 2001, a Wisconsin resident earned 96 percent of the national average.
"We are now up to 98 percent," he added.
Here are some other highlights of the study:
- Nonfarm employment will increase by 1.4 percent in 2004, slightly higher than previously predicted.
- Wisconsin total personal income will increase 6.2 percent, which is also faster than the Department of Revenue's earlier projection.
- In 2005 and beyond, employment growth will average in excess of 1.5 percent annually and nominal income growth should average more than 5 percent per year. Inflation will remain in the 2 percent range, so real incomes are expected to rise steadily.
- In the second quarter of 2004, seasonally adjusted nonfarm employment averaged 2.821 million, a gain of 42,500 over six months earlier.
- Of the 43,900 private sector jobs created in the first half of 2004, 9,000 were in the manufacturing sector. Other gains were in professional and business services, 14,000; trade, transportation and utilities, 8,100; and leisure and hospitality, 7,200.
- Wisconsin employment is forecast to increase by 1.8 percent in 2005, 1.6 percent in 2006 and 1.7 percent in 2007. Fastest-growing sectors will be professional and business services and educational and health services. Manufacturing, trade and government employment is expected to increase at slower-than-average rates.
- Manufacturing employment is forecast to increase by 0.8 percent this year, followed by gains of 2.4 percent in 2005, 1.7 percent in 2006 and 1.2 percent in 2007. While it is reassuring to see employment increasing in this sector, employment gains of 2,000 per quarter are far smaller than the losses experienced in the 2000-2003 period.
- Wisconsin income growth is accelerating. In the three most recent quarters, year-over-year growth in wage and salary income has accelerated from 2.8 percent in the third quarter of 2003 to 4.8 percent in the first quarter of 2004. Strong employment growth again in the second quarter of 2004 suggests that wage income probably was 5.8 percent above year ago levels in that quarter.
- No further acceleration of income growth is forecast. In fact, a slight moderation is expected. Total income is forecast to increase 5.9 percent this year followed by 5 percent in 2005 and 5.1 percent in 2006. After three years of stagnation, property income should resume growth this year in response to higher interest rates.
- The Madison metropolitan area was least affected by the recent economic downturn because it has the lowest proportion of jobs in manufacturing of any Wisconsin metro area. In 2004, the Madison area is projected to see employment increase 2.3 percent, with all sectors showing employment growth. The fastest growth is forecast for the health and educational services sector, where growth rates are expected to exceed 3 percent a year.
- Milwaukee-Waukesha employment declined faster and longer than the state average from 2001-2003 because of difficulties in the manufacturing sector and slower growth in the service sector. Between 2000 and 2003, total nonfarm employment decreased by 52,700 jobs statewide and 37,000 of these positions were lost from the Milwaukee-Waukesha area. A corner appears to have been turned, however, with employment forecast to improve by 1 percent this year as manufacturing stabilizes. In 2005, job growth is expected to increase to 1.2 percent. By 2007, employment levels will have regained their pre-recession peak.