It’s a bit early to sing Happy Days Are Here Again, but most key industry sectors expect another strong economic year.
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From the pages of In Business magazine.
These days, most economists find it hard to contain their excitement about the state of the economy, and they have plenty of data to back their bullishness on everything from high growth to low inflation.
Reasons for optimism are as plentiful as snowflakes in January. Locally, metropolitan Madison’s unemployment rate of 2.2% remains the lowest in Wisconsin and harkens back to the days of the dot-com boom.
Wisconsin’s 3.4% unemployment rate is its lowest for the month of October in 18 years, more state residents are now employed than ever before, and the labor force participation rate (68.8%) is six percentage points above the national rate. The Foxconn Technology Group development is expected to create such a demand for workers that the state is devoting $6.8 million to recruit people from the outside, in part so that the Taiwanese electronics manufacturing giant doesn’t take all its workers from existing employers.
Nationally, consumer confidence has soared to a 17-year high, the U.S. Commerce Department has just reported consecutive quarters of 3% or higher growth, the stock market has reported several record closes, and while this is hardly a consensus view, advocates for tax reform believe it will sustain the recovery, at higher rate of growth, for several more years.
Elliot Eisenberg, an economist with GraphsandLaughs LLC, presented his mostly upbeat forecast recently in a program sponsored by State Bank of Cross Plains. With notable exceptions such as the availability of labor, just about every measure — GDP growth, inflation, consumer and business confidence — is either solid or rising.
One reason Eisenberg is so bullish is the U.S. is gaining ground simultaneously with other western democracies. “The global economy hasn’t been this solid since 2006–07,” he notes. “In the recent past, our economy was pretty decent but other economies were weaker. Now they are all pretty strong. This is about as good as it gets.”
Manufacturing: With success comes challenge
With a synchronized global economic recovery, all 45 industrial countries (even Greece) are growing. Few industry sectors benefit more from the growth synergy among western democracies than Wisconsin manufacturing, a sector that gained nearly 3,800 jobs in the 12-month period ending June 30, 2017, and that’s thanks in part to improving trade activity.
To say this sector is humming is understating things, especially if the annual First Business Economic Survey is any indication. According to the survey results for Dane County, the percentage of manufacturing respondents expecting an increase in actual sales increased sharply in 2017 from 53% to 76%, setting a new historic high. Ninety percent project a sales increase for 2018, also a new historic high, and profitability saw a 10% increase to 63% in 2017, yet another historic high.
In addition, 52% report an increase in their number of employees, just 4% below the historic high, but the percentage of those projecting an increase in the number of employees for 2018 jumped from 47% to 71%, another all-time high.
Even more encouraging, 86% of respondents reported an increase in wages, up sharply from 59% the previous year, and 95% project wage increases in 2018, another new historic high. While 43% reported an increase in actual capital expenditures (10 points below last year), those projecting an increase in 2018 was 48%, yet another a historic high.
This activity also is attributed to a weaker dollar, which helps U.S. exports, reasonable labor costs, moderating energy costs, and growth in business investment for plants and technology.
Buckley Brinkman, executive director/CEO of the Wisconsin Center for Manufacturing and Productivity, says there have been few times when manufacturing has been stronger. “I just saw some statistics from the Chicago Fed that say we’re at an all-time output high, and we’re at one of the highest utilization rates we’ve been at for a long time,” Brinkman states. “Usually when those things happen, you see investment come in behind it.”
The main worries include President Trump’s trade and immigration policies, the former because of the benefits of the North American Free Trade Agreement, and the latter because of its potentially restricting impacts of the availability of labor. Even the biggest potential boon, the Foxconn development, brings “body count” worries.
“It’s one of those things that’s a real double-edged sword,” Brinkman notes. “On one side, you’ve got the tremendous pressure it’s going to put on the workforce. On the other side, most people don’t get how cosmic this is. This is an industry that we surrendered. We just forfeited it four decades ago when Zenith made the last television and all that moved to the Far East.”