Unemployment Rate Increases Percentage point change (August August 2009) Wisconsin +4.6

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1 + 3.5 Unemployment Rate Increases Percentage point (August - August 2009) or less or more Note: This year s Workforce Profile has a slightly different layout. The first two pages give a brief synopsis of the recession, the worst by most measures since the Great Depression. We would be remiss if this publication didn t recognize and report on it. More information about the stages of the recession can be found on our website: In the subsequent pages of the Profile, readers will find the figures and analysis they depend on. If you have any questions or comments, please don t hesitate to contact us. Scott Hodek 221 West Madison Street Eau Claire, WI scott.hodek@dwd.wisconsin.gov OEA P Department of Workforce Development

2 Office of Economic Advisors WI Department of Workforce Development Workforce Profile Note: All data appearing in this profile are subject to revision. The Big Picture As this piece of the profile is written in mid-september 2009, the economic recovery appears to be underway. It is expected that the trough of the recession will be registered in the third quarter of 2009 when it is finally decided by the National Bureau of Economic Research (NBER) in about a year from now. It is the NBER that pegged the beginning of the recession at December. This recession will be documented as the longest recession since the Great Depression of the early 1930s. This recession has lasted more than twenty months, twice the length of the average post-war recession. How bad was this downturn? Bad. Real GDP growth was negative for four quarters in a row. That has never happened before in quarterly data dating back to Only two quarters in the last fifty-three years suffered as % Year Ago 5% 3% 1% 0% - 1% - - 3% - Q1:2000 Real GDP Growth 2000 Q Q2 Q1:2001 Q1:2002 Q1:2003 Quarterly Q1:2004 Q1:2005 Q1: Recessionary Periods in Gray Q1: Q1: 1 large a GDP loss as did the back-to-back quarters of Q4 and Q1 2009, one was Q1 of 1958 and the other was Q2 in This is the first time that the economies of the U.S. and Japan were in recession at the same time. In fact, it was the first time since WWII that aggregate global economic growth turned negative. Why was this recession so bad? There were two downturns, one on top of the other. The first one started in December and was an economic recession, based on falling demand for housing construction. The second began in earnest in September and was a financial crisis, based on weak underlying supports (housing) of new unregulated financial tools and products. The first downturn led to the second. They are now interdependent. Volumes will be written on this great recession of. A brief synopsis follows here. Low interest rates and incentives led to a Q1:2009 % Year Ago Source: U.S. Dept. of Commerce, Bureau of Economic Analysis, July % 8% 0% % Quarterly wave of debt-based asset accumulation buying stuff on credit: homes, businesses, cars, vacations. A home buying spree ensued as did commercial debt-financed acquisitions. Housing developers responded with enthusiasm. Lenders, with the help of the federal government, did their part to make home ownership more accessible. Early on, housing supply could not keep up with demand and housing prices increased. In parallel, global economic gains swelled stock market values. Debt was cheap and highly utilized across all sectors of the economy around the world. The financial industry created new tools to extend and diversify the new debt loads, many based on home mortgage debt.

3 Workforce Profile 2009 The Big Picture Cont. These new tools derivatives were unregulated, offex transactions between individual parties. When housing became over supplied and prices began to adjust (fall), mortgage defaults increased, and it was discovered that the newly created financial products were under-collateralized. More important perhaps, the issuers of debt insurance were hugely under capitalized (short of money to pay out claims). When the homeowner couldn t pay and the insurer couldn t pay, the lenders faced gigantic losses a financial crisis. The crisis quickly spread as financial markets are highly integrated worldwide. At present, global financial and political institutions continue to work on repairing the financial wreck. With cash and credit being the grease that lubricates the global economic engine, the rapidity and robustness with which the economy recovers is dependent on the speed and strength of the financial markets fix. The severity of this recession affected employment in a commensurate manner. s unemployment rate increased from a seasonally adjusted 4.5 percent in December of, when the recession began, to 8.8 as of August 2009, almost doubling over the period. The Current Landscape last reached an unemployment rate peak of 11.8 percent in January of 1983, after the harsh recession of The graph below shows a comparison of county, state, and national unemployment rates through the recession. 10% 9% 8% 7% 5% 3% Unemployment Rates (NOT Seasonally Adjusted) United States Jan Jan Jan 2009 Source: U.S. Bureau of Labor Statistics, CPS, LAUS, 2009 lost 137,000 jobs during this downturn, almost 5 percent of its job base since the recession began in December, on a seasonally adjusted basis. All sectors suffered job losses with the exception of health care. The manufacturing sector lost 13 percent of its jobs statewide during this recession, some 66,000 on a seasonally adjusted basis. All of the upper Midwest major manufacturing states took a beating in this business cycle. Especially hard hit were Michigan, Indiana, and Ohio, due to the collapse of the auto industry. With large manufacturing job losses in Indiana, became the leader in the share of its workers employed in manufacturing. Construction, which was the first industry to be affected with the housing turn that began in in, lost 16 percent of its jobs since December, and almost 20 percent since its peak in February of. Professional and Business Services also lost more jobs on a percentage basis than the state average, 8.9 percent. Other sectors lost jobs as well, but were not impacted quite as severely as those above. Leisure and Hospitality, for example, lost 1.4 percent of its jobs. recovery always lags economic recovery. Following recessions since WWII, the economic upswings led job gains by nine to nineteen months. After the % 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% Jan Apr 2 recession, it took twenty-six months before job numbers began to increase again on a sustained basis. It was fifty months before the state s job levels recovered to pre-2001 recession levels. Job recovery following the current recession is expected to be slow as well. Consumers are not expected to be the driving sector in the economic recovery, as the huge destruction in home and financial equity wealth will force an increased proclivity for savings instead of consumption. The chart below is a comparison of employment. Proportional (comparing each month to same month one year earlier) Jul Oct Jan Apr Jul Oct Jan Apr Jul United States Oct Source: U.S. Bureau of Labor Statistics, Quarterly Census of and Wages, 2009

4 Population added 3,719 residents from 2000 to, growing at a rate of 10.1 percent. Though s growth was modest compared to nearby St. Croix, the same growth trend was readily apparent. was the 11th fastest growing county in the state. is located just across the Minnesota state border from the rapidly developing Twin Cities. Skyrocketing land prices near the Cities, and the appeal of living in a rural area while still having access to high paying urban jobs, has fueled growth in s nearby border counties. In fact, over 40 percent of s workers commuted to jobs in Minnesota in 2000! Net migration accounts for about 56 percent of s population growth. Natural increase, or births minus deaths, accounts for the rest of the county s growth. has a very high rate of natural increase, which indicates a relatively young population starting families. The City of River Falls, home to the University of -River Falls, is the largest population center in. Even though the City of River Falls grew at 11.2 percent, adding 1,143 people between 2000 and, it was not the fastest growing area in the county. The fastest growing townships in were Oak Grove, growing at a rate of 30 percent, and Clifton, at 20.5 percent. Both townships are located on the state border, and close to the Twin Cities. The City of Prescott, also on the border, added 292 residents. It s easy to spot the growth trend here the flow of migrant Minnesotans spreads east from the Twin Cities, as workers accept ever longer commutes to achieve their desired lifestyle. Unemployment Rate Situation 10% 8% s Typical & Current Unemployment Rates Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 's actual unemployment rates in 's typical unemployment rates (1997- avg) Workforce Profile 2009 s Ten Most Populous Municipalities April 1, 2000 Census Jan 1, Estimate Numeric Proportional United States 281,421, ,059,724 22,637, % 5,363,715 5,675, , % 36,804 40,523 3, % River Falls, City* 10,242 11,385 1, Prescott, City 3,764 4, % Ellsworth, Village 2,909 3, % River Falls, Town 2,304 2, % Clifton, Town 1,657 1, % Oak Grove, Town 1,522 1, % Trenton, Town 1,737 1, Trimbelle, Town 1,511 1, Spring Valley, Village* 1,187 1, % Martell, Town 1,070 1, % * portion only. Source: WI Dept. of Administration, Demographic Services, Population Est., July 2009 Components of Population, % 3% 1% 0% Natural Increase Net Migration % 3.5% 2.3% United States 4.7% 2.7% Source: WI Dept. of Administration, Demographic Srvcs, Pop Est. The graph to the left compares 12 months of unemployment rates through July 2009 to historical averages. Like the nation, and most counties in the state, s unemployment rates have surged to levels not seen since the early 1980s. Rates clearly swelled in 4Q, but rate increases accelerated in earnest during Despite all this, rates continue to follow typical seasonal patterns, albeit at higher levels. Even if economic recovery is declared in the second half of 2009, it is likely that unemployment rates will remain quite elevated for the remainder of 2009 and into year Employers tend to be cautious about taking on the economic risk of hiring coming out of a recession. Source: WI DWD, Bureau of Workforce Training, LAUS,

5 Workforce Profile 2009 Jobs & Wages First Quarter level Second Quarter level Third Quarter level Fourth Quarter level All industries 9, % 9, % 9, % 9, Natural Resources % % % % Construction % % % Manufacturing % , % % Trade, Transport. & Utilities 1, % 1, % 1, , % Information % 130 not avail. 123 not avail % Financial Activities % % % Prof. & Business Services % % % Education & Health 3, , , % 3, Leisure & Hospitality % 1, % 1, , Other Services % % % Public Administration % % Source: WI DWD, Workforce Training, QCEW, June 2009 Over two-thirds of s counties lost jobs from to (using annual averages)., however, was among the minority that actually gained jobs, though its job count was up only 0.2 percent. A quarter-byquarter analysis, as seen in the table above, shows more detail of the s within s job market in. showed a gain in the first quarter from levels, then lost jobs in the following two quarters. Despite the worsening economy (which continued to decline into 2009), the fourth quarter showed a gain of 0.6 percent over, with year-over-year growth continuing into early Education and health, the largest industry super-sector of employment in, grew all four quarters of over levels, with growth accelerating in the fourth quarter, and even into early Pay in the education sector is quite close to the state average, but healthcare is a different story. The healthcare sector employment in is dominated by residential care and nursing facilities jobs, and most of the healthcare jobs added were in 4 this sub-sector. These jobs are fairly low paying relative to occupations in the rest of the healthcare industry. This accounts for the wide difference between healthcare wages in versus the state, which has a much more balanced mix of healthcare occupations. Also, clinics in smaller rural counties tend to have lower concentrations of highly paid specialists, a factor that normally lowers average healthcare wages in these counties. The impact of this large sector on the local average wage likely accounts for much of the disparity between and the state. Overall, as went on, more and more industries saw less employment than in the previous year. Construc- level As a share of Level All industries $31, % 80.7% $39, % Natural Resources $33, % 106.8% $31, % Construction $35, $49, Manufacturing $42, % 87.9% $48, % Trade, Transport. & Utilities $26, % $33, Information $32,243 not avail. 64.7% $49, % Financial Activities $33, % 64.7% $52, % Prof. & Business Services $44, % 97.8% $45, % Education & Health $36, % 87.8% $41, % Leisure & Hospitality $10, % $14, % Other Services $16, % $22, % Public Administration $31, % $41, % Source: WI DWD, Workforce Training, QCEW, June 2009 Annual Average Wage Annual Average Wage

6 Jobs & Wages Industry Sub-sectors (3-digit NAICS) tion was especially hard hit, as both residential and business construction slowed. As s population growth soared, so did demand for housing, leading to rapidly rising home prices. This created pockets of the same kind of housing speculation and overcapacity, and the resultant bubble collapse other high growth areas of the country experienced, albeit on a smaller scale. Data for the first half of 2009 data shows construction employment continuing to fall. Industries dependant on consumer spending, like leisure & hospitality, also suffered, as consumers cut back spending. The county s average all-industry wage increased from to, up 4.3%, faster than statewide growth. And though it was only about 81 percent of the statewide average, that is over one percent point higher than in. The above table of prominent industry sub-sectors highlights the importance of education and health, with three Establishment Level - Prominent Public and Private Employers in Service or product 5 Workforce Profile Wage sub-sectors listed. In fact, seven of the top ten largest employers in are either in the education or healthcare sectors. is home to the University of River Falls, the single largest employer in the county. This sector also includes the county s six school districts. The healthcare industry is also a major employer in. Most of this employment is in nursing and residential care facilities, with two employers on the largest employers list above. Spring Valley Health Care Center operates a nursing care facility in the Town of Spring Valley, and The Mentor Network, with a local office in River Falls, provides various services for adults and children with disabilities. in both healthcare subsectors listed above grew from to, substantially outpacing similar growth rates at the statewide level. Jobs in the specialty trade contractors sub-sector have fallen significantly since a Number of Employees (December ) University of - River Falls Colleges, univ. & professional schools employees School District of River Falls Elementary & secondary schools employees of Executive & legislative offices, combined employees Mentor Management Inc Residential mental retardation facilities employees School District of Prescott Elementary & secondary schools employees Ellsworth Community School District Elementary & secondary schools employees Thomas & Betts Corp Iron, steel pipe & tube from purchase steel employees City of River Falls Fire protection employees Western Medical Associate Offices of physicians, exc. mental health employees Spring Valley Health Care Services Nursing care facilities employees Source: WI DWD, Bureau of Workforce Training, QCEW, OEA special request, April Education services 1, % 1.8% $41, % Food services & drinking places * not avail $9, % Nursing & residential care facilities % $21, % 3.5% Executive legislative & general government % $32, % 1.8% Ambulatory health care services % 2.3% $48, % 4.7% Food & beverage stores % $14, % Professional & technical services % - 0. $61, % 2.1% Specialty trade contractors % - 9.8% $36, % 3.8% Truck transportation % - 4.8% $41, % 0.3% Prime metal manufacturing * not avail % * not avail. 1.7% * Data suppressed to protect employer confidentiality. Source: WI DWD, Workforce Training, QCEW, July 2009 Prominent Industries in Fourth Quarter Average Annual Wage peak. s rapid growth had resulted in a building boom, but employment in this sub-sector has dropped, echoing the trends in the troubled housing market nationwide.

7 Income Total personal income, the broadest collection of income data, includes income from three main sources: net earnings; dividends, interest and rent; and transfer receipts. Net earnings come from employment, whether selfemployed or employed by someone else. Dividends, interest and rents come from investments, savings accounts, dividends, retirement payments from company pensions, or 401(k) plans. Transfer receipts come from state and federal governments, primarily in the form of Social Security, Medicare payments, unemployment insurance, veterans benefits, welfare, and other payments received from public agencies. Net earnings make up the vast majority of income, with the remaining percentage divided between the other two components. In most counties, and in the state and nation, income from net earnings exceeds two-thirds of total personal income. At almost 73 percent in, residents share of income from earnings is higher than that of the state. This is usually a reflection of the relative youth of the county s workers, rather than higher wages a higher percentage of a younger person s income tends to result from wages earned. However, In this also reflects the high wages being paid to commuters to the Twin Cities, as illustrated by the massive adjustment for residency. Net earnings includes an adjustment for wages earned by residents working beyond the county s borders (inflow) and an adjustment for nonresidents working for county employers (outflow). The bottom chart shows that in residents working in jobs outside the county added about $633 million to s total personal income while the adjustment for non-resident workers was actually a negative $123 million, making the total net residency adjustment $510 million - 41 percent of the county s total personal income! This indicates that is by far a net exporter of labor, with this trend continuing to accelerate. Dividends, interest and rent account for about 15 percent of total income, while transfer payments contributed about 13 percent (both lower than their corresponding statewide averages). While total personal income (TPI) is the sum of its parts, per capita personal income (PCPI) is derived by dividing total personal income by total population. In, the PCPI of $31,609 in 6 Workforce Profile 2009 Personal Income in Total Personal Income Per Capita Personal Income (in thousands) (PCPI) $1,025,768 $1,257,866 $27,370 $31,609 $163,308,733 $203,083,544 $29,994 $36,272 United States $8,872,871,000 $11,634,322,000 $30,838 $38,615 Five Year United States 40.0% 31.1% % Source: US Dept. of Commerce, Bureau of Economic Analysis, April was about 87 percent of s PCPI. s PCPI ranked 34th among s 72 counties. While the lower wages paid within the county are one factor in s PCPI, they tend to be balanced by the high wages earned across the border. However, the presence of so many children, counted in the population statistics used to compute PCPI, gives a perhaps misleadingly lower PCPI than we might see in this county otherwise. Though is technically part of the Minneapolis - St. Paul Metropolitan Area, most of the county is rural. s PCPI is about three percent higher than the PCPI for non-metropolitan counties in the state, a more reasonable comparison than to the statewide average which is heavily influenced by higher wages paid in metro areas % TPI 10.0% Commuting Impact Earnings of residents working in other counties (inflow) Earnings of workers living in another county (outflow) -$ $ % $633.1 $ $200 $ $200 $400 $600 $ Graph axis in Millions % 20.9% Source: US Dept. of Commerce, Bureau of Economic Analysis, April % 10.0% 20.0% 30.0% PCPI