UW Economics Professor Noah Williams is the founding Director of the Center for Research on the Wisconsin Economy (CROWE) and gave a report on the economic situation since the start of the pandemic lockdown in March 2020 through November 2020. He also gave some insight on economic trends and expectations for 2021.
He examined the impact by looking at labor market statistics from official government sources (State of Wisconsin, Bureau of Labor Statistics), as well as private data collectors that utilize cell phone data and offer employment and business services that can produce data on a more contemporaneous basis.
Professor Williams started by saying the economy is secondary to the course of virus spread and infection. As the virus spread in March, April and May unemployment claims increased dramatically to a peak of over 300,000 compared to approximately 80,000 in 2019. New claims are at the rate of 15,000 per week compared to 5,000 last year. Continued unemployment has declined since the peak but there are still over three times the number of unemployed than there were in 2019. However, this only measures persons eligible for unemployment insurance. It is estimated that the actual number of unemployed individuals is double when you include ineligible and those who have stopped looking for work. In terms of raw numbers that translates to around 205,000 fewer employed than the same time last year.
The impact of job losses has been varied across sectors of the economy. The hardest hit has been Leisure and Hospitality with a 50% drop in employment at the peak in April. While it has recovered somewhat to about a 20% loss year-over-year it is still a dire situation as events, attractions and restaurants have been hampered or outlawed to curb the spread of the virus. Manufacturing and Retail employment took a dip in April (15%), as well, but is now only down from 3.0-4.5% as of October.
Changes in spending patterns and economic activity have been dramatic. For example, Madison has not fared as well due to the absence of students on campus. Foot traffic, measured by cell phone tracking, is down about 40% in Madison, compared to Milwaukee at 26% down and the rest of the state at 30% down. Also, there has been a shift from local and small business to large business and online: Retail purchases are down around 7% and online is up over 20%.
For 2021, the good news is that highly effective vaccines have been developed but we should expect continued economic headwinds (probably at least six months) as it will take many months to get enough people vaccinated. And, while negative surprises were on the downside and recovery surprises were on the upside the rate of improvement has slowed as government support programs are coming to an end. While the most dire of projections have not borne out, the economic consequences of the pandemic will continue to be a challenge.
Our thanks to Prof. Noah Williams for his presentation this week and to Kevin Hoffman for preparing this review article. If you missed our meeting, you can watch it here: https://youtu.be/WkOzn3reDmI.