Category Archives: Economy

Wisconsin’s economy bounces, but has a long way to go

Here is my full column that ran in the Washington County Daily News yesterday:

I went to a restaurant the other night and something happened that has not happened in quite a while. I had to wait for a table. It was a sign that we are on a long, slow road back to normal. Outside of Milwaukee and Madison, the summer life of sidewalk tables, brat fries, live music, and outdoor recreation have returned, if muted, for these few precious months before those northern winds return Wisconsin to its deep freeze.

My anecdotal experience is borne out in the most recent employment numbers from the Wisconsin Department of Workforce Development. According to the preliminary data, Wisconsin added 104,600 total non-farm jobs in June and the unemployment rate dropped to 8.5% from an adjusted peak of 12.1% in May. Wisconsin’s unemployment rate remains below the national unemployment rate of 11.1%, but the state rate traditionally lags the national rate due to the state’s economic mix. People are getting back to work as Wisconsin’s economy groans back to life.

Digging deeper into the data, there are some promising signs and some worrying signs. On the positive side, almost all of the job growth came from the private sector. Leading the way, private-sector service-providing sectors added 100,000 jobs. Some 16,400 of those were retail trade jobs as stores opened; 11,300 jobs were added in health care and social assistance. A whopping 47,700 jobs were added in the leisure and hospitality sectors. Many of the sectors of the economy that were hardest hit are bouncing back.

The troubling part of the report is just how far Wisconsin still is from where we were just a few short months ago. Despite the strong growth in jobs, there are still over 200,000 fewer people working than were in June of 2019. And while an unemployment rate of 8.5% is still nothing to brag about, it is still overstated. About 44,400 people have left the labor force completely and are not counted in the unemployment rate. The cause of the economic recovery is quite simple. In his initial overreaction to the onset of coronavirus, Gov. Tony Evers forcibly shut down the state’s economy. Widespread job losses and economic contraction was inevitable with the governor standing in the restaurant door. When Evers attempted to ignore the Constitution and extend his dictatorial rule, the state Supreme Court stepped in and stopped Totalitarian Tony’s economic stranglehold.

Since then, most of the state has opened. It has done so cautiously and unevenly, but it has opened. Outside of a couple of cities being run by liberal mayors, the state’s restaurants, shops, and factories have tried to get back to work.

In order to continue the state’s economic recovery, a few things need to happen. First, government needs to step back and let people and businesses manage their own lives. The virus is here to stay. Whether or not we ever have a vaccine, we cannot live perpetually petrified. We all know a lot more about how the virus spreads, who is at greatest risk, and how to mitigate the risk of catching and spreading the virus.

Second, we need our governments at all levels to stop threatening to shut down the economy again. The uncertainty continues to retard a recovery. Whether or not the initial lockdowns, and how and when they were implemented, helped prevent the spread of the virus will be subject to studies for years. What is indisputable is that the lockdowns had countless other negative outcomes on people’s health and well-being as health care systems denied treatment for non-COVID ailments and economic stress pushed people to the brink. What is also indisputable is that our politicians have proven that they are incapable of evenly enforcing a lockdown as they crack down on some people and allow others to violate them at will.

Furthermore, it is clear that the American people are done with being locked down. Even as some states and cities try to reimpose economic restrictions and infringe on civil rights, those actions are being widely ignored. After the initial shock and awe of coronavirus, Americans are finding their spines again and remembering that liberty is in our blood.

Finally, the only way our economy can truly recover is for Americans to feel comfortable returning to their normal activities. For some people, they will never feel comfortable returning to restaurants, shops, concerts, or anything else until they feel that everyone else is taking reasonable steps to prevent the spread of disease. That means that for those of us who may not have much, if any, fear of the ’rona, we must respect the concerns of others. Keep some distance, wash your hands, and, yes, put on a mask if the situation warrants. Such measures may keep you from getting sick, but they will definitely help our economy get healthier.

 

Wisconsin’s economy bounces, but has a long way to go

My column for the Washington County Daily News is online and in print. Here’s a part:

Second, we need our governments at all levels to stop threatening to shut down the economy again. The uncertainty continues to retard a recovery. Whether or not the initial lockdowns, and how and when they were implemented, helped prevent the spread of the virus will be subject to studies for years. What is indisputable is that the lockdowns had countless other negative outcomes on people’s health and well-being as health care systems denied treatment for non-COVID ailments and economic stress pushed people to the brink. What is also indisputable is that our politicians have proven that they are incapable of evenly enforcing a lockdown as they crack down on some people and allow others to violate them at will.

Furthermore, it is clear that the American people are done with being locked down. Even as some states and cities try to reimpose economic restrictions and infringe on civil rights, those actions are being widely ignored. After the initial shock and awe of coronavirus, Americans are finding their spines again and remembering that liberty is in our blood.

Finally, the only way our economy can truly recover is for Americans to feel comfortable returning to their normal activities. For some people, they will never feel comfortable returning to restaurants, shops, concerts, or anything else until they feel that everyone else is taking reasonable steps to prevent the spread of disease. That means that for those of us who may not have much, if any, fear of the ’rona, we must respect the concerns of others. Keep some distance, wash your hands, and, yes, put on a mask if the situation warrants. Such measures may keep you from getting sick, but they will definitely help our economy get healthier.

Wisconsin’s Unemployment Rate Drops

Good. I’m glad the Supreme Court struck down Evers’ lockdown.

The Wisconsin economy’s labor market improved during June as its seasonally adjusted unemployment rate fell to 8.5% and the state added 99,300 private sector jobs during the month according to U.S. Bureau of Labor Statistics data released today by the state Department of Workforce Development.

The state’s unemployment rate improved significantly from May when it was 12.1%, according to revised data, and is well below the national rate of 11.1%

In June of 2019, the state’s seasonally adjusted unemployment rate was 3.4%, and the nation’s was 3.7%.

Jobs Bouncing Back

This is fantastic to see. America is getting back to work!

Nonfarm payrolls jumped by 4.8 million in June and the unemployment rate fell to 11.1% as the U.S. continued its reopening from the coronavirus pandemic, the Labor Department said Thursday.

Economists surveyed by Dow Jones had been expecting a 2.9 million increase and a jobless rate of 12.4%. The report was released a day earlier than usual due to the July Fourth U.S. holiday.

The jobs growth marked a big leap from the 2.7 million in May, which was revised up by 190,000. The June total is easily the largest single-month gain in U.S. history.

Businesses in Downtown Madison Struggle

Not that I go there very often anyway, but I doubt I’ll be sitting at a sidewalk cafe in downtown Madison for a very long time. I expect I’m not the only one. These businesses are going to struggle for a long time thanks to the deliberate inaction of their mayor and police department.

But several business owners and the head of a Downtown business organization said the disturbance at Coopers Tavern was not an isolated incident. They said Johnson and others entered multiple businesses on State Street on Monday and Tuesday, played loud music, called business owners racists, threatened to burn buildings, demanded free food and drinks and knocked over patio chairs and tables.

[…]

A number of business owners who spoke to a reporter were unwilling to be named or have their businesses identified for fear they or their businesses would face retribution from protesters. They said the government needs to do more to ensure State Street is safe and protect their businesses, including calling in the National Guard if needed.

Save State Street?

I feel for these business owners who have seen their livelihoods destroyed. I wonder how many of them supported the lefty city politicians who shut down their local economy and then stood by while the rioters destroyed their businesses.

A coalition of State Street businesses pleaded with the city on Monday to improve safety, offer subsidies to attract new businesses and to temporarily convert the street into a pedestrian mall.

In a letter to the city titled “Save State Street” and signed by “your concerned local State Street business and property owners,” the group, which had been meeting for nearly two weeks, also encouraged the city to fund programs to increase the number of Black and other minority-owned businesses; add more security cameras, remove rocks from planters and to replace the glass at the now boarded up visitor center adjacent to Lisa Link Peace Park.

The list of 19 requests come in the wake of closures due to COVID-19 followed by rioting and looting during protests over the killing of George Floyd. Business owners say they fear for their safety, haven’t been listened to by the city and worry about the street’s vibrancy as several businesses have indicated they may not return.

[…]

A major issue revolves around the presence of police, something the street has lacked in recent weeks, according to business owners.

“We have heard continuously that people, regardless of race, age, sex, etc., do not feel comfortable or safe on State Street with the current state of affairs,” business owners wrote. “That perception is unlikely to change unless the city actively works to change it. Neighborhood officers should be peacefully present, walking State Street and pleasantly interacting with people in an attempt to rebuild relationships and trust with community members.”

Verveer, who represents much of the downtown, said Monday that he is not surprised by the letter and is “appreciative” of the list of the requests. He was asked by the merchants several weeks ago if it would be helpful if they made a list of concerns and offer ideas to address the issues on the street that normally gets millions of visitors a year. The letter is absent names of business owners.

Casino Revenue Decline Hits Tribes Hard

Everybody is getting hurt. I’d wager that this impact will be felt for a long time in the gambling business as people have less disposable income to use at casinos for a while.

With every U.S. casino shut down for at least part of the spring and many still not open, some 241 tribes — including all 11 in Wisconsin — stand to lose about $22.4 billion, more than half their projected revenue this year, according to the National Indian Gaming Association, an inter-tribal organization dedicated to protecting the welfare and sovereignty of tribes.

“Gaming for the most part is what we survive on,” said NIGA chairman Ernest Stevens Jr., a member of Wisconsin’s Oneida Nation. “In a lot of cases, if we don’t have gaming we don’t have dollars. We don’t have a tax base.”

Wisconsin’s casinos generated nearly $1.3 billion in gross revenue based on nearly $17.6 billion in wagers made in the 2018-19 fiscal year, the most recent numbers available from the Wisconsin Department of Administration, which regulates the compacts that govern tribal gaming.

“It’s really pretty much crippled our tribal economy,” said Marlon WhiteEagle, president of the Ho-Chunk Nation, whose six Wisconsin casinos generate more than 80% of the tribe’s annual operating budget. “The casinos are really the bread and butter of our funding.”

People Moving Out of Cities

That’s fine. Just leave your liberal politics there too.

As the real estate market began to recover in May, home searches in suburban zip codes jumped 13%, according to realtor.com, one of the largest real estate listing websites. That doubled the pace of growth in urban areas.

While homes are spending more time on the market overall, due to complications surrounding closings, both suburban and rural markets are not experiencing that lag time as much, due to very strong demand.

“This migration to the suburbs is not a new trend, but it has become more pronounced this spring,” said Javier Vivas, realtor.com director of economic research. “After several months of shelter-in-place orders, the desire to have more space and the potential for more people to work remotely are likely two of the factors contributing to the popularity of the burbs.”

Retail Sales Surge

Fantastic.

Retail sales shattered already-lofty expectations for May as consumers freed from the coronavirus-induced lockdowns began shopping again.

The 17.7% headline gain including food sales easily topped the previous record from October 2001 and beat the 8% estimate from economists surveyed by Dow Jones.

Retail sales powered 16.8% higher from April, more than double the estimate of 8% from Dow Jones and reversing a 16.4% plunge from a month ago. Clothing and accessories stores reported the biggest percentage gain at 188% while sporting goods, hobby, musical instruments and book stores rose 88.2%.

Kudlow: $600 Unemployment Add-on to End in July

Good.

Larry Kudlow, director of the National Economic Council, said Sunday that the $600 checks being sent to Americans on unemployment as part of coronavirus relief efforts are expected to end in July and called them a “disincentive” for people to get back to work.

“The $600 plus-up that’s above the state unemployment benefits they will continue to receive is in effect a disincentive. I mean, we’re paying people not to work. It’s better than their salaries would get,” Kudlow said on CNN’s “State of the Union.”

“That might have worked for the first of couple months. It will end in late July,” he added.

It’s an old saw about compensation plans… people will do what you pay them to do. If you pay people to not work, they won’t. I might do the same if faced with the choice.

We Can’t Shut Down Again

Agreed.

Treasury Secretary Steven Mnuchin said Thursday that shutting down the U.S. economy for a second time to combat the spread of Covid-19 isn’t a viable option and could cause even more headaches for Americans.

“We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin told CNBC’s “Squawk on the Street.”

“And not just economic damage, but there are other areas and we’ve talked about this: Medical problems and everything else that get put on hold,” he added. “I think it was very prudent what the president did, but I think we’ve learned a lot.”

Employment Rises, Beats Expectations

From the email. Outstanding!

 

Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate fell to 13.3 percent. These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.

 

Evinrude Ends Production

Another iconic casualty.

BRP, the parent company of Evinrude outboards, announced last night that it is discontinuing production of Evinrude engines. In its press release, it stated that the COVID-19 pandemic obliged it to stop production immediately. BRP President and CEO José Boisjoli said, “This business segment had already been facing some challenges and the impact of the current context has forced our hand.”

Hemp Profits Fail to Materialize

I was hopeful for this market. I expect it will normalize over time. The key will be whether or not there is an uptick in other uses for hemp beyond consumable products. Hemp can be used for rope, cloth, etc., but it will need to be more than a novelty product to be a sustainable product.

Farmers and manufacturers who wanted to capitalize on the frenzy around CBD, which comes from hemp, were lured into the industry after Congress passed the 2018 farm bill. It legalized cultivation of the crop, a low-potency sibling of marijuana. Hemp acreage in the U.S. more than tripled from 2018 to 2019. McConnell was a driving force behind legalization.

“It was a mad rush,” said Colorado Agriculture Commissioner Kate Greenberg.

But the boom has quickly turned into a bust.

In recent months, several CBD businesses declared bankruptcy — including GenCanna, a hemp processing facility in Winchester, Ky., that McConnell visited in April of last year.

[…]

But his hope has so far failed to materialize as the industry struggles on several fronts: The gold rush mentality led to an oversupply, tanking wholesale prices. CBD remains unregulated by the FDA. Consumers are left with conflicting messages about the legality of hemp products while unscrupulous businesses tout CBD as a potential treatment for every illness under the sun, including the coronavirus.

States have written their own jumble of rules to contain the mess. The decline in investor interest in the cannabis sector last year led to financial troubles for businesses focused on expansion over profitability.

“We had really a perfect storm,” Minnesota hemp farmer John Strohfus said. “We had oversupply … and then we had the unfortunate issue of impotence really on the part of the FDA.”

Animals Being Euthanized

So wasteful

RALEIGH, N.C. — Coronavirus outbreaks at meat processing plants are forcing North Carolina farmers to euthanize 1.5 million chickens, according to a state official.

Assistant Agriculture Commissioner Joe Reardon told The News & Observer that this is the first time during the pandemic that farmers in the state have had to euthanize their animals. Roughly a third of the 1.5 million chickens already had been killed, Reardon said.

Chicken and hog farmers in other states also have been euthanizing millions of animals during the COVID-19 pandemic. North Carolina hog farmers have not taken steps to euthanize their animals, Reardon said.

Wisconsin DWD Fails Unemployed Wisconsinites

It has been two months since Governor Evers shut down the state and should have anticipated the wave of unemployment. His incompetence is showing.

Across Wisconsin, almost a third of weekly unemployment claims (675,563 out of 2,121,906 claims) made between March 15 and May 16 are still unpaid, according to the overwhelmed Department of Workforce Development. And millions of phone calls from the thousands of people still waiting for their unemployment insurance have been consistently overloading DWD’s phone lines.

The state Department of Workforce Development on Wednesday reported that Wisconsin lost 385,900 private-sector jobs from March to April, and the unemployment rate shot up from 3.1% to 14.1%. Wisconsin is still doing slightly better than the nation as a whole. The national unemployment rate is 14.7%, while its labor participation rate, 60.2%, is 6.4 percentage points lower than Wisconsin’s.

Like thousands of other out-of-work Wisconsinites, Avila has spent days calling the DWD without ever speaking to an operator. By networking through Facebook groups like “Wisconsin Unemployment support group,” which was founded on May 1 and already has more than 1,400 members, she’s been able to call some DWD employees directly.

Lockdowns Destroy Livelihoods and Kill More People, Study Shows

Interesting. Follow the science.

Coronavirus lockdowns have ‘destroyed millions of livelihoods’ but failed to alter the course of the pandemic given many US states have seen lower infection rates after easing restrictions, a JP Morgan study has claimed.

The statistical analysis has raised questions about the effectiveness of the lockdowns put in place across much of the United States two months ago to stop the spread of COVID-19.

It suggests that the lockdown measures have not only resulted in economic devastation but could have also resulted in more COVID-19 deaths.

The strict stay-at-home measures put in place by the governors of most states in mid-March has so far seen nearly 39 million American lose their jobs and forced businesses to close.

[…]

Many states, including Alabama, Wisconsin and Colorado, have seen lower infection reproduction rates (R rates) after lockdown measures were lifted, according to the report.

Meanwhile, Nevada, Rhode Island, Texas, North Dakota and Pennsylvannia are the states where infection rates increased after lockdowns ended, according to the report.

Infection rates have continued to decline even once a lag period for new infections to become visible is factored in, according to the report.

A chart included in the report shows that many US states have seen a lower rate of transmission (R rate) after full-scale lockdowns were ended.

Real Estate – Sales Down, Prices Up

Interesting data here. It’s hard to tell if the decline in sales is a result of fewer buyers or the lack of inventory to buy. It is probably some of both. In any case, if you are selling a house, this looks like a great time to do it before the foreclosures hit the market, flood the inventory, and lower prices.

Sales of existing homes fell 17.8% month-to-month, and were 17.2% lower than April 2019, seasonally adjusted, according to the National Association of Realtors. That puts the annualized pace at 4.33 million units, the slowest sales pace since September 2011.

These numbers are based on closed sales, not signed contracts, so they represent contracts signed in late February and March. The April drop in closings is the largest one-month decline since July 2010, when the homebuyer tax credit, a federal stimulus resulting from the subprime mortgage crash, expired.

[…]

The supply of homes for sale fell 19.7% annually to 1.47 million units for sale at the end of April. That is the lowest April inventory figure ever. Not only did potential sellers decide not to list their homes, as job losses mounted and the economy shut down, but some sellers already on the market pulled their listings.

That drop in inventory pushed prices to a new record high. The median price of an existing home sold in April rose 7.4% annually to $286,800. That record does not account for inflation, but is a nominal record-high.

The thing about real estate is that it is time sensitive. Many people are buying because of a life change – move, new job, new kid, etc. That demand is relatively inelastic with economic fluctuations. The elastic part of the demand are investment buyers. This is the wild card. Some investment buyers are likely sitting this one out because their net worth has been hammered. But another group of investment buyers might be more active in real estate in anticipation of inflation and a decline in the equity markets. Inflation always drives up the prices of hard assets, so real estate is a good hedge. But many of these investors are probably going to wait until the foreclosures hit and prices are better.

JC Penney Considers Spinning off Real Estate

One wonders if owning retail space will be any more profitable than operating in it.

A piece of J.C. Penney’s proposal to emerge from bankruptcy includes spinning its real estate into a publicly traded real estate investment trust.

As part of a plan filed with the bankruptcy court, Penney would reorganize into a new retailer (“JCP”), along with a REIT that would collect rent checks from the retail business. Court documents say as much as a 35% stake in the newly created REIT could be sold to a third-party investor to raise cash, or to provide additional funding for the REIT.

Weighed down by a heavy debt load of more than $4 billion and hit hard by the coronavirus pandemic, Penney filed for Chapter 11 bankruptcy protection Friday evening. Some are now questioning if the department store chain, which has been around for more than a century, should still operate. It has been stuck in a sales slump for years. The department store industry as a whole has also been on the demise, with people shifting their spending away from the mall. When Penney filed, it still operated roughly 850 locations at malls across the country.

“Why Weren’t You Prepared for a Downturn?”

I am seeing comments here and elsewhere from liberals, mostly, who snootily ask why all businesses don’t have cash reserves to survive multiple months with no income. The attitude is equally stupid and condescending. Very few businesses carry enough ash reserves to survive months with zero revenue. This is particularly true for small businesses that survive on cash flow. They may have a line of credit, but that usually requires it to be secured by the owner(s) personal assets. But before accessing that line of credit, which is a loan, the business owner must decide if they are willing to risk their house and other assets when the government might just shut them down again – or business might never return to its previous level.

This attitude drips with the undertone that the businesses that go bankrupt because of the government enforced recession deserved to go under. You see, they weren’t prudent and had months of expenses set aside in cash. Never mind that these same liberals gripe when companies hoard cash because they are not spending it on employee wages or community projects. These companies deserve it.

What about government?

With government revenue collapsing, shouldn’t government have been prepared? Some states and local governments have a rainy day fund. Is it enough? Do they have one at all? If these governments weren’t prepared for an economic downturn, why should the taxpayers bail them out through higher taxes or more debt? As mayors and governors bemoan the lack of tax revenue, shouldn’t liberals demand the same level of foresightedness and prudent fiscal management that they are demanding of the local tavern owner?

Nobody could have reasonably anticipated that the government would shove us from a booming economy into a depression overnight. Businesses will go under through o fault of their own. Some governments might have to do the same. The difference is that government caused this depression. The business owners did not. This is not a normal economic cycle. This is an artificial depression caused by the totalitarian actions of government.