A Closer Look at Badger Boasts


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Lofty claims about the performance of the Wisconsin economy occasionally drift across the Saint Croix River, attempting to highlight the success of conservative fiscal and anti-union policies in the Badger State. These claims, however, are woefully incomplete, and at times border on the fraudulent. Since the Great Recession, Wisconsin’s economic performance has been mediocre at best, lagging well behind Minnesota in terms of job growth and other measures of economic performance.

One such recent claim notes that more people are employed than ever before in Wisconsin. For several years during and immediately following the Great Recession, states struggled to restore employment to the pre-recession peak achieved in or around December 2007, when the Great Recession began.* The only states which had more jobs at the end of the Great Recession than at the beginning were Alaska and North Dakota, which benefited from the boom in domestic energy production.

The claim that more people are currently employed in Wisconsin “than ever before” is accurate. This achievement, however, is no indicator of extraordinary economic performance, insofar as it is true of nearly every state in the union. Midway through 2014, approximately half of the states had recovered all of the jobs lost during the Great Recession—and thus could boast that there were more jobs in their state “than ever before.” Wisconsin, however, was not among these states. It was not until early 2015 that Wisconsin had restored employment to pre-recession levels. Minnesota, incidentally, achieved this milestone midway through 2013, over one year ahead of the nation as a whole and eighteen months ahead of Wisconsin. As of June 2017, only six states have yet to restore employment to the pre-recession level.

In terms of overall employment growth, Wisconsin’s track record is not impressive. Wisconsin’s job growth rate since the onset of the Great Recession is not only less than half that of Minnesota and the U.S. as a whole, but even lags behind the sluggish Midwest average.

Over the last nine and a half years, Wisconsin’s 2.7 percent job growth rate failed to keep pace with its meager population growth (approximately 3.0 percent, based on a comparison of 2007 and 2016 U.S. Census Bureau population estimates). Meanwhile, Minnesota’s 6.4 percent job growth rate exceeded the estimated 6.0 percent growth in the state’s population.

Thus, while the claim that more people are working in Wisconsin that at any point in the past is technically accurate, it conceals the critical fact that that state’s job growth rate lags well behind the national average and that of most other states. Other claims from conservative interest groups even fail to meet the minimal standard of technical accuracy. For example, a few years ago a Wisconsin business group made a series of claims, a number of which were of dubious merit.† The following will focus on one particular claim that was especially bogus: the fact that Wisconsin ranks number one for economic growth among all Midwestern states.

This claim is apparently based on growth in the Philadelphia Federal Reserve Bank (FRB) state coincident index over a one-month span during 2013. This index—which was described in a recent North Star article—was developed by FRB economists to gauge state economic growth over time. It is absurd to make grandiose claims regarding a state’s economic performance based on a one-month change in this index for at least two reasons. First, the Philadelphia FRB indexes are revised after they are initially published. Wisconsin lost its number one ranking among Midwestern states in a subsequent revision. Second, and more importantly, a one month change in the index can be driven by a statistical quirk or a one-time event that is not at all indicative of a long-term trend.

To get a more complete picture of Wisconsin’s economic growth over time, we compare growth in the Philadelphia coincident index over the period examined above: from the beginning of the Great Recession (December 2007) to present. Over this period, Wisconsin’s index grew by 20.9 percent—below the unweighted Midwest average‡ of 23.1 percent and seventh among the twelve Midwestern states. Minnesota’s index, incidentally, increased by 30.4 percent—nearly 50 percent greater than Wisconsin’s growth rate. Minnesota ranked second among Midwestern states in coincident index growth over the last nine and a half years, surpassed only by North Dakota, which experienced extraordinary energy-related growth.

As with any state, Wisconsin’s performance relative to other states based on the Philadelphia FRB coincident index will vary if a different time frame is examined. There is, however, no time frame of extended duration during which Wisconsin leads the Midwest in economic growth. Even if we use other measures of economic performance, Wisconsin still is not a leader. For example, since the beginning of the Great Recession, growth in chained Gross Domestic Product (an inflation-adjusted measure of economic output, calculated by the U.S. Bureau of Economic Analysis) in Wisconsin (8.6 percent) lags behind that of Minnesota (11.3 percent) and that of most other Midwestern states, as well as the U.S. average (11.0 percent).

This analysis does not prove that Wisconsin’s conservative fiscal policies have caused the lackluster rates of job and economic growth in that state; however, when conservatives make extravagant claims based on shoddy analysis and selectively chosen data points, they invite close scrutiny of their claims. Such an examination reveals that Wisconsin is far from a national or regional leader in terms of employment or economic growth. If anything, it comes closer to being a laggard.

 

*According to the National Bureau of Economic Research, a private non-profit research group that defines the beginning and ending dates of U.S. recessions, the Great Recession began in December of 2007. Peak pre-recovery employment for most states occurred during or within a few months of December 2007. In this article, “pre-recession employment” is defined as the employment level in that month. Employment growth or loss since the onset of the Great Recession is also measured relative to that month. Employment is measured in terms of total non-farm employment as listed in Current Economic Statistics (CES) from the U.S. Bureau of Labor Statistics.

Among the claims made by this group was that Wisconsin ranks ahead of four Midwestern states in terms of average weekly wages. Given that the Midwest region as defined by the U.S. Census Bureau consists of twelve states (Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin), the fact that Wisconsin was ahead of only four in terms of average wages means that it was behind seven other Midwestern states. Ranking eighth out of twelve states would ordinarily not be considered an indicator of economic success.

This is a simple arithmetic average of the Philadelphia coincident index for the twelve Midwestern states (i.e., the sum of the index for each state divided by twelve). As such, small states such as North Dakota are weighted the same as large states such as Illinois or Michigan. (There is no obvious way to construct an average coincident index for multiple states that weights each state based on the relative size of its economy.)