– Wisconsin experts agree the U.S. economy is likely headed for a recession later this year as federal officials continue their efforts to tamp down inflation.
That was the general consensus among panelists during yesterday’s Wisconsin Economic Forecast Luncheon in Madison, hosted by WisPolitics.com, WisBusiness.com and the Wisconsin Bankers Association with the support of other partner organizations.
Todd Mattina, head economist for the State of Wisconsin Investment Board, said he and other economists need to be “cautious” about forecasting recessions given the uncertainty involved. But he noted peak inflation rates — like last year’s rate of around 9 percent — are usually followed by recessionary periods.
“You don’t come off peak inflation rates like that historically without a recession at the end,” he said. “Usually the playbook is central banks hike interest rates and then that leads to a slowdown and a recession … I suspect we’ll see some kind of dynamic along those lines.”
But he and other speakers yesterday expressed uncertainty about the likelihood of a “soft landing” versus a “hard landing,” where regulatory efforts to stave off inflation lead to a more severe economic downturn.
In a separate presentation from the other panelists, a managing director and senior economist for Wells Fargo’s Corporate and Investment Bank said a soft landing is possible — but not likely. Sarah House noted job growth has been strong in recent months but added that’s expected to change, pointing to “some cracks under the surface.”
“If you look at temporary hirings … We’ve seen that contract over the past year pretty sharply,” the Charlotte-based economist said. “So that suggests that you’re going to see slower growth in hiring overall. And we are starting to see layoffs tick up.”
Forward Analytics economist Dale Knapp predicted a recession will occur in the second half of this year. While he doesn’t expect a major downturn, he said it will “probably be a little bit more than mild.”
By the first quarter of 2024, he expects the national economy to begin recovering. But he added that outlook depends greatly on “how well the Fed handles this,” highlighting the challenge of balancing efforts to reduce inflation with maintaining a healthy economy.
Meanwhile, Marquette University Prof. David Clark said a recession is slightly more likely than not to occur.
“I think that there’s probably a 50-50 chance — maybe even a 51-49 percent chance, I don’t want to get too bold here, that they’ll classify the beginning of a recession sometime in the second half of the year,” he said, though he noted the National Bureau of Economic Research “takes a long time to make up their mind” about declaring a recession.
He said inflation is “probably a tougher problem to deal with” than the Federal Reserve would hope, though he said officials are likely pleased with the progress they’ve made already after inflation recently fell slightly to around 5 percent. Still, that remains well above the target rate of around 2 percent.
The president of Farmers & Merchants Bank of Kendall, Cynthia Erdman, highlighted the impact this expected recession will have on families in the United States. Though she said by the middle of next year, “I think most American families are going to feel a little relief.”
Yesterday’s discussion also captured the effects of inflation and interest rate hikes on the housing market to the state’s urban and rural divide, with panelists weighing in on how various industries and regions might be affected by national trends.
“I think by the end of this quarter, we are going to see a little bit of an increase in some credit problems,” Erdman said, referring to the banking industry. “But I think it’s going to be manageable. Banks will have to be very due-diligent and watch their margin, but I think that’s not something we haven’t done before.”
Speakers yesterday also underlined the magnitude of the Federal Reserve’s challenge in fighting inflation, with Mattina pointing to a “policy dilemma” for federal regulators. While keeping interest rates high is critical for reducing inflation, he explained, doing so “risks jeopardizing the regional banking system, which is already showing signs of stress.”
House described monetary policy as a “famously blunt instrument,” noting the target inflation rate of 2 percent probably won’t be reached until 2025. She agreed an economic contraction is likely sometime later this year, with the worst coming in the fourth quarter. Still, she added it’s not a foregone conclusion.
“There’s still a lot of different ways this could go,” she said.
— This week’s episode of “WisBusiness: the Podcast” features two guests from Anthem Blue Cross Blue Shield on Medicaid reenrollment in Wisconsin.
Paul Nobile is the organization’s commercial plan president, and Ted Osthelder is its Medicaid plan president. With the federal pandemic public health emergency ending shortly, they share insights on how the Medicaid renewal process will be playing out in Wisconsin.
“At the start of COVID-19, the public health emergency put in place the suspension of the determinations for eligibility,” Osthelder explained. “That process is now coming to an end … We’re redetermining folks’ eligibility for the safety net program.”
He noted states including Wisconsin now need to check if Medicaid members remain eligible for coverage, based on if they had a change in income, household size, disability status or other factors.
“No real estimates right now on how many in Wisconsin could lose access to coverage, but the overall growth in the Medicaid program since the public health emergency began is about 300,000,” he noted.
Nobile highlights the state’s effort to reach those who might be impacted and provide resources.
“The last thing we want to have happen is people fall through the gaps for any reason … The majority of folks will remain on Medicaid. So that’s positive news for a lot of folks. But there will be populations and cohorts of people that will no longer be eligible,” he said.
Listen to the podcast here: https://www.wisbusiness.com/2023/wisbusiness-the-podcast-with-paul-nobile-and-ted-osthelder-anthem-blue-cross-blue-shield/
See the full list of WisBusiness.com podcasts: https://www.wisbusiness.com/category/podcast/
— Several counties and cities in the state set or tied record low unemployment rates in March, according to the state Department of Workforce Development.
While all 12 of Wisconsin’s metro areas saw unemployment rates decline over the year, The Appleton area’s rate of 1.9 percent was tied with its lowest rate on record, set in January 1990, a DWD release shows.
Meanwhile, preliminary unemployment rates declined over the year in 34 of the state’s largest cities. And four cities either tied or set new record low unemployment rates compared to available data: Mequon, with 1.8 percent; Muskego, 1.7 percent; Sheboygan, 1.8 percent; and Stevens Point, 1.9 percent.
Plus, DWD notes all 72 Wisconsin counties saw their unemployment rates fall over the year. And Menominee and Outagamie counties tied or set record low rates for any month going back to 1990, with 3.7 percent and 1.9 percent, respectively.
DWD earlier this month announced the statewide unemployment rate hit a record low 2.5 percent in March.
See the release: https://www.wispolitics.com/2023/dept-of-workforce-development-march-local-unemployment-data-breaks-records
<br><b><i>Top headlines from the Health Care Report…</b></i>
— A UW initiative aimed at getting more Native American people into the health care field is expanding its efforts with new funding from the Wisconsin Partnership Program.
<i>For more of the most relevant news on COVID-19, reports on groundbreaking health research in Wisconsin, links to top stories and more, sign up today for the free daily Health Care Report from WisPolitics.com and WisBusiness.com.</i>
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#TOP STORIES#
# Wisconsinites with disabilities could help address labor shortage, but face obstacles
# Workers’ Memorial Day honors those who died on the job
# Harley starts year with 20% jump in revenue
#TOPICS#
# CONSTRUCTION
– Campaign to tear down I-794 could get a boost from new downtown plan
# ECONOMY
– More people, more jobs, more housing: New plan seeks big growth for Downtown Milwaukee
# EDUCATION
– Madison West High School pool, renovation referendum work progresses
# ENVIRONMENT
– Upper Mississippi River floods homes, businesses, roads, farm fields
– Floodwaters expected to ‘linger well into May’ with Mississippi tributaries backed up
# HEALTH CARE
– Wisconsin provides $8M for treatment of opioids, other drugs as deaths reach record highs
– Froedtert & MCW land $12.5M gift for brain-injury program from Home Depot founders’ nonprofit
– Froedtert & Medical College receive $12.5 million to launch traumatic brain injury treatment program for veterans, first responders
# LABOR
– Lt. Gov. Sara Rodriguez to attend Workers’ Memorial Day event in Milwaukee
– Wisconsin AFL-CIO report: 105 state workers died in 2021
# LEGAL
– Texas-based restaurateur sues Mukwonago diner for trademark infringement
# MANUFACTURING
– Harley-Davidson roars past analyst estimates while retail sales slip
– Increased focus on automation could push Rockwell revenue over $9 billion this year
# POLITICS
– Wisconsin GOP offering at least 10% boost to shared revenue. Milwaukee could get sales tax.
# REGULATION
– Rock County will form ad hoc committee to examine rail service expansion
# TECHNOLOGY
– Green Bay-based company looks to bring high-speed internet to rural Outagamie County
# TRANSPORTATION
– Wisconsin state senator pushes for funding to improve local agricultural roads
http://wisconsinagconnection.com/story-state.php?Id=452&yr=2023
– Jet IN completes $11 million fixed-base operator complex at Milwaukee Mitchell International Airport
– Crawford County train derailment sends multiple cars into Mississippi River
– Train derails in southwest Wisconsin along Mississippi River
# COLUMNS
– House Republican proposals hurt rural communities
http://wisconsinagconnection.com/story-state.php?Id=451&yr=2023
# PRESS RELEASES
<i>See these and other press releases:
https://www.wisbusiness.com/press-releases/ </i>
Bank Five Nine: Launches Tim’s Treat: A new social media campaign to make lives better
