Fourth Quarter Summary
The Northeast Wisconsin economy continued the gradual decline that started earlier this year in the fourth quarter 2019. The theme of this quarter’s indicators is caution. Employment growth in the region continued to decline on an annualized basis and unemployment has continued to creep upwards. Employers are currently seeking candidates for more than 17,000 active openings in a highly competitive marketplace while labor market availability remains near historic lows. This illustrates the dissonance that persists across many of the region’s key economic indicators.
The outlook for 2020 remains cautiously optimistic as recessionary concerns have grown. Annualized GDP growth of 2.3 percent in 2019 represents a near-term low and industrial inventories have decreased each of the past five months. Recent trade deals with China and the ratification of the USMCA should provide some stability, but ongoing tensions with the EU and the resolution of Brexit portend rocky waters ahead. The near-term domestic outlook remains bullish with unemployment and inflation as we enter into a critical election year.
Annualized Employment Growth
January 2016 - December 2019
- Growth patterns that diverged in March 2013 have normalized in 2019.
- Recent employment growth rates have inverted and remain at -0.1 percent in December 2019. Weakness continues in the manufacturing sector due to ongoing trade pressures.
- Annualized wage growth of 2.8 percent suggests that employers are beginning to respond more aggressively to respond to talent shortages.
Monthly Unemployment Rate
January 2010 - December 2019
- Unemployment rates have decreased precipitously since 2010 as a reflection of improving economy and hiring markets. This pattern stabilized in 2019.
- Regional unemployment trend has followed state pattern since end of recession.
- Current unemployment rate of 3.1 percent remains near historic lows and matches the annual average.
- The current stability in labor market conditions represents a possible new “normal” or condition of full employment. This is coupled with little volatility in hiring trends despite recent slowdowns in manufacturing and construction.
Total Unfilled Job Vacancies for the United States
2010 - 2019
- Unfilled vacancies nationally have flattened in the last half of 2019 as trade pressures and demographic shifts have depressed hiring.
- Current average duration of 48 days marks a two-year high, suggesting that employers have considerably more difficulty locating talent and are scaling back their recruiting efforts.
- Greatest demand continues to exist in the health care and logistics industries.
- Average wage on offer has increased 2.8 percent YTD. This represents a near-term increase of 0.3 percent since Q4, reflecting both increasing wage pressures as well as greater availability of higher-income occupations.
Industrial Commodities Snapshot
- Industrial commodity price indices increased by nearly 18 percent YTD, or 28 percent above 2017 benchmarks.
- Recent daily metal markets have become increasingly volatile over the past year due to ongoing trade tensions with China and the European Union. The recent Phase 1 agreement with China has added some bilateral certainty but the slowing of global markets continues as a result of constrained supply.
- Commodity pricing increases continue to impact production costs and product availability especially in iron and steel-intensive industries. This has been noted both by suppliers and producers throughout the region as domestic production has yet to increase.
New Housing Starts - December 2019 Annualized Change
- New housing starts continue to decrease both regionally and statewide. Valuations have increased, however, as the average square footage per project and cost of construction materials continue to rise.
- A mild early winter has allowed contractors to catch up in many communities, though activity and interest remain generally low.
- Labor constraints in the industry continue to delay projects and extend deadlines.