Wisconsin’s Economy Still Ranks Near Bottom on Federal Reserve Index
WI Is the Only State with a Decline Since the Start of the Current Fiscal Year
As we have noted before, the Federal Reserve Bank of Philadelphia tracks economic indicators for each state on a monthly basis and prepares a map comparing the states’ economic trends over the last three months. Their latest analysis was released today, and once again Wisconsin ranks near the bottom in the 3-month improvement, ranking fourth lowest.
I downloaded the Philly Fed data, which they call the “Coincident Index,” and I analyzed the trends over various timeframes. If you look at the change in that index since the end of 2010, Wisconsin has the second lowest improvement. Measured since the end of the last fiscal year (June 2011), Wisconsin is the only state that went backwards (or essentially made no improvement). If one focuses on the change in the index over just the last month (from January to February), Wisconsin looks a little better; our improvement was 17th lowest and about one half the national average.
The Coincident Index combines four indicators: non-farm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements. It uses preliminary data for those measures, so the index is revised as better employment data becomes available.
The Philly Fed also crunches the numbers somewhat differently each month to calculate something they call the Leading Index, which looks at recent trends to estimate a state’s growth over the next 6 months. That was also released today, and Wisconsin does somewhat better on that index – with a rating of 1.5 percent growth. That’s about half the national average (3.25%) and places Wisconsin 13th lowest.
A few weeks ago, after the preliminary January employment figures came out, Wisconsin looked a little better in the Leading Index. Although the Philly Fed’s numbers indicated that our growth prospects were still below average at that time, the Governor’s office and conservative bloggers noted that our state’s improvement in the Leading Index was the best in the nation (based on the change in that index from October to January). Although their calculation was correct, it was presented out of context, and the change was mostly attributable to the fact that we had so much room to improve. (Other potential factors are that the Philly Fed’s first crack at each index uses preliminary jobs numbers, and for some reason the Leading Index bounces around considerably more than the Coincident Index.)
A statement issued last month by Governor Walker heralded that month’s increase in the index: “…the Federal Reserve Bank of Philadelphia’s newest report of state leading economic indexes provides yet one more indication that our pro-jobs policies are moving us in the right direction.” I think it will be challenging to put a positive spin on the newer figures released today, but perhaps I’m not sufficiently creative. A good column by Mike Ivey in the March 24 Capital Times comments on the debate over the Philly Fed numbers released last month.
As I noted in a December blog post, I believe politicians (including governors, presidents and legislators) get too much credit or blame for economic trends. That said, I think that if you are going to try to judge state policymakers based on job trends and other economic indicators, it should be done by comparing their state’s economic trends with those elsewhere, not by analyzing the data in isolation from the rest of the nation or region. With that in mind, I think the Coincident Index provides a useful and very interesting perspective on how Wisconsin is doing economically.
For additional information, see the Federal Reserve Bank of Philadelphia’s website.