Range of indicators can measure Wisconsin’s economic health
For reasons rooted more in politics than economics, much of the debate over Wisconsin’s relative economic standing has revolved around job creation: Is the state on track (or not) to create the 250,000 jobs set as a four-year goal by Gov. Scott Walker during his 2010 campaign for governor?
While no one can deny that raw job creation is one vital sign for Wisconsin’s health, the debate shouldn’t overlook other measures that help quantify and qualify how the state is doing.
Here are a few examples of other economic indicators that can assist policymakers – and citizens – in taking the state’s economic pulse:
Quality of jobs: The latest monthly estimates from the state Department of Workforce Development show the unemployment rate at 6.6%, the lowest mark since late 2008, and 4,500 private-sector jobs were added to the workforce in December 2012. That’s good news, but what also matters over time is the type of jobs being created – and what they pay. Despite some upward movement in recent years, Wisconsin’s per-capita income is about $700 behind the U.S. average, according to the Census Bureau, and total household income lags by roughly $400. That would indicate Wisconsin needs to create more jobs at the higher end of the spectrum.
“Knowledge” job creation: Part of the quality measure is the number of jobs created in growth sectors of the national economy. That often means jobs tied to information technology and other technology jobs that require skilled workers. According to the 2011 Cyberstates report of the TechAmerica Foundation, Wisconsin lost about the same number of tech jobs (1%) as it lost in its overall workforce in 2010. However, it added jobs in software publishing, where the state now ranks 10th among the 50 states, and electromedical equipment, where it ranks third. Wisconsin is also 11th in electronic components. Wisconsin’s reported high-tech payroll in 2010 was $5.2 billion, or 22nd nationwide.
Company creation: Figures from the state Department of Financial Institutions showed 35,988 new business entities were created in 2012, up 8.4% from 2011 and the highest total since 2007, when the total was 33,164. Getting behind those numbers is the trick. Many of the “entities” created are on paper only, such as some LLCs. That means counting the actual number of companies created – even if it’s only one person – is important. Wisconsin has historically lagged in company start ups, but there are signs of a turnaround. Why is company creation so important? All net new jobs in the United States are created by young firms, according to the Ewing Marion Kauffman Foundation.
Exports and foreign direct investment: Exports by Wisconsin companies and investments by non-U.S. companies in Wisconsin produce a more balanced, profitable economy and add to job creation over time. The state continues to outperform national growth in exports, and foreign companies are increasingly investing in the state. In fact, Wisconsin was on pace in late 2012 to set a record for state exports – probably in excess of $23 billion. Industrial machinery, vehicles, farm products, electrical machinery, and medical equipment were leading the way.
Investment in R&D: Wisconsin’s production of patents, which protect the intellectual property of companies and individuals, continues to outperform the nation on a per-capita basis. Also, academic research and development spending remains high, although the UW-Madison slipped back a notch to fourth in the United States in the most recent National Science Foundation statistics. What ultimately matters, however, is how that research is translated into companies and jobs. Improving that performance over time is a priority for a number of players, including the university system itself.
Economists also examine many other indicators, including workforce education levels, angel and venture capital investments, and poverty rates in trying to assess how any given economy is performing. Raw jobs data is important, but it’s far from the only factor and not an indicator so exclusive that every month-to-month rise – or fall – is worth celebrating or lamenting.
For policymakers and citizens alike, keeping a broader range of indicators in mind is critical, even if political noise sometimes clouds the picture.
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