is Open for Business THE STATE OF THE WISCONSIN CONSTRUCTION INDUSTRY Building Advantage 2012 Spring Conference Dennis K. Winters Chief, Office of Economic Advisors Department of Workforce Development
is Open for Business FIRST OF ALL, YOU NEED TO UNDERSTAND WISCONSIN S ECONOMY 2
is Open for Business THE ECONOMY HAS CHANGED AND SO MUST YOU 3
Percent is Open for Business ECONOMIC RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES 7.0 6.0 5.0 Average Real GDP Growth First 9 Quarters of Recovery 4.0 3.0 2.0 1.0 0.0 1953-54 1957-58 1960-61 1969-70 1973-75 1981-82 1990-91 2001 2007-09 4
is Open for Business JOBS RECOVERY HOW IS THIS ONE NOT LIKE THE OTHER ONES 5
1995-I 1995-III 1996-I 1996-III 1997-I 1997-III 1998-I 1998-III 1999-I 1999-III 2000-I 2000-III 2001-I 2001-III 2002-I 2002-III 2003-I 2003-III 2004-I 2004-III 2005-I 2005-III 2006-I 2006-III 2007-I 2007-III 2008-I 2008-III 2009-I 2009-III 2010-I 2010-III 2011-I 2011-III is Open for Business HOUSING CREATION BELOW SUBSISTENCE 900 800 Investment in Residential Housing, Billions of 2005 Dollars 700 600 500 400 300 6
is Open for Business HOUSING WHO WANTS TO BUILD NOW 45,000 40,000 Building Permits, 12 Month Total 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Jul 11 Jan 11 Jul 10 Jan 10 Jul 09 Jan 09 Jul 08 Jan 08 Jul 07 Jan 07 Jul 06 Jan 06 Jul 05 Jan 05 Jul 04 Jan 04 Jul 03 Jan 03 Jul 02 Jan 02 Jul 01 Jan 01 7
Percent Change Over Prior Year is Open for Business HOUSING PRICING GOOD DEALS TO BE HAD 15% 10% FHFA Purchase Index 5% 0% -5% US WI -10% -15% Mar-00 Mar-99 Mar-98 Mar-97 Mar-96 Mar-95 Mar-94 Mar-93 Mar-92 Mar-01 Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 Mar-03 Mar-02 Mar-11 8
Thousands of Units Percent is Open for Business HOUSING FINANCING HISTORIC 3,000 Relationship Between Housing Starts and Mortgage Rates Breaks Down 20.0 18.0 2,500 16.0 2,000 14.0 12.0 1,500 10.0 8.0 1,000 6.0 500 Housing Starts 30-year Mortgage Rate (Right Axis) 4.0 2.0 0 Apr-71 Jan-77 Oct-82 Jul-88 Apr-94 Jan-00 Oct-05 Jul-11 Source: U.S. Department of Commerce: Census Bureau/Board of Governors Federal Reserve System/FRED 0.0 9
Index 1991q1=100 is Open for Business HOUSING NEW APPRECIATION PARADIGM 240 220 Housing Prices Relative to Consumer Prices 200 180 160 140 120 100 FHFA Index CPI Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 Mar-03 Mar-02 Mar-01 Mar-00 Mar-99 Mar-98 Mar-97 Mar-96 Mar-95 Mar-94 Mar-93 Mar-92 Mar-91 Mar-11 Mar-10 10
is Open for Business TAKE MY HOUSE PLEASE 11 http://www.corelogic.com/landing-pages/asset_upload_file676_7395.gif
is Open for Business THE GOOD NEWS FOR CONSTRUCTION SETTING A BOTTOM (?) 12
is Open for Business INTEREST IS TURNING UP IN FITS AND STARTS 13
is Open for Business CONSTRUCTION EMPLOYMENT STILL DROPPING; DOWN A THIRD FROM PEAK 145,000 135,000 125,000 115,000 105,000 95,000 85,000 75,000 65,000 Jobs 2005 2010 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Bureau of Labor Statistics, LMI, OEA 14
is Open for Business CONSTRUCTION EMPLOYMENT MILWAUKEE AREA SITUATION NO BETTER 38,000 36,000 34,000 Milwaukee MSA Jobs 32,000 30,000 28,000 26,000 24,000 22,000 2005 2010 2011 20,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Bureau of Labor Statistics, LMI, OEA 15
is Open for Business U.S. CONSTRUCTION SPENDING WHICH WAY FROM HERE? $ Billions 1, 4 0 0, 0 0 0 1, 2 0 0, 0 0 0 1, 0 0 0, 0 0 0 US Annual Spending T o t al C o nst ruct io n Resident ial Nonresident ial 8 0 0, 0 0 0 6 0 0, 0 0 0 4 0 0, 0 0 0 2 0 0, 0 0 0 0 19 9 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2 0 10 2 0 11 Source: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html 16
Millions is Open for Business WISCONSIN CONSTRUCTION SPENDING WHICH WAY FROM HERE? $12,000 $10,000 : Dollars of New COMMERCIAL RESIDENTIAL TOTAL REAL ESTATE $8,000 $6,000 $4,000 $2,000 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: DOR, https://ww2.revenue.wi.gov/eqvalue2/application 17
Millions is Open for Business M7 CONSTRUCTION SPENDING WHICH WAY FROM HERE? $10,000 $9,000 $8,000 Milwaukee 7: Dollars of New COMMERCIAL RESIDENTIAL TOTAL REAL ESTATE $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: DOR, https://ww2.revenue.wi.gov/eqvalue2/application 18
is Open for Business HOUSING PLANS WHICH WAY FROM HERE? 45,000 40,000 35,000 30,000 25,000 20,000 15,000 Wisco nsin N ew P rivately Owned H o using Unit P ermits 10,000 5,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: U.S. Census Bureau, http://www.census.gov/construction/bps/ 19
is Open for Business HOUSING PLANS DARE WE BE ENCOURAGED? 7,000 6,000 Milwaukee MSA New Privately Owned Housing Permits 5,000 4,000 3,000 2,000 1,000 0 2003 2004 2005 2006 2007 2008 2009 2010 Source: U.S. Census Bureau, http://www.census.gov/construction/bps/ 20
OUTLOOK
Job Losses Relative to Peak Month is Open for Business JOB RECOVERY WILL TAKE TIME MORE THAN WE HAD HOPED 1.0% 0.0% Job Losses in Recent Recessions - - # of Months Since Recession Declaration 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61-1.0% -2.0% -3.0% 1981 Recession 1990 Recession 2001 Recession 2007-2009 Recesion -4.0% -5.0% -6.0% -7.0% Source: U.S. BLS, CES, Seasonally adjusted series Source: BLS, OEA 22
is Open for Business REAL EARNINGS ARE FLAT $38,000 $36,000 Real Average Annual Wage $34,000 $32,000 $30,000 $28,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 23
Billions is Open for Business INTEREST INCOME TAKE HIT WITH LOW INTEREST RATES $1,500 $1,400 Personal Interest Income $1,300 $1,200 $1,100 $1,000 $900 $800 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 24
Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Percent is Open for Business HOUSEHOLD DEBT DELEVERAGING 15 14 Household Debt as % of Disposable Income 13 12 11 10 Source: Fed flow of Funds 25
is Open for Business HOME EQUITY WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING 26
Change over Prior Year $M REVOLVING CREDIT WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING is Open for Business 100,000 80,000 60,000 40,000 20,000 0-20,000-40,000-60,000-80,000-100,000 Jan 1 2000 Jul 1 2000 Jan 1 2001 Jul 1 2001 Jan 1 2002 Jul 1 2002 Jan 1 2003 Jul 1 2003 Jan 1 2004 Jul 1 2004 Jan 1 2005 Jul 1 2005 Jan 1 2006 Jul 1 2006 Jan 1 2007 Jul 1 2007 Jan 1 2008 Jul 1 2008 Jan 1 2009 Jul 1 2009 01/01/2010 07/01/2010 01/01/2011 Source: Federal Reserve Board of Governors 27
is Open for Business NO SAVINGS WAS USED FOR CONSUMPTION NOW PART OF DELEVERAGING 800 700 Personal Savings, Billions of Dollars 600 500 400 300 200 100 0 2000-I 2000-III 2001-I 2001-III 2002-I 2002-III 2003-I 2003-III 2004-I 2004-III 2005-I 2005-III 2006-I 2006-III 2007-I 2007-III 2008-I 2008-III 2009-I 2009-III 2010-I 2010-III 2011-I 28
is Open for Business It is difficult to increase consumption when you: 1. have stagnant income, 2. are losing wealth, 3. paying down debt, 4. increasing savings, 5. and are paying more for food and gas. 29
is Open for Business CORPORATE PROFITS AT NEW RECORDS MOSTLY DUE TO COST CUTTING 30
is Open for Business MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND 31
Billions of 2005 $ is Open for Business CORPORATE PROFITS BUILDING CASH HOARD 100 0-100 Change In Investment From 2007 4 th Qtr -200-300 Private investment Residential -400-500 -600 2007q4 2008q1 2008q2 2008q3 2008q4 2009q1 2009q2 2009q3 2009q4 2010q1 2010q2 2010q3 2010q4 2011q1 2011q2 2011q3 32
is Open for Business INVESTMENT GROWTH IS IN PRODUCTIVITY, NOT EXPANSION Source: BEA, OEA 33
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 is Open for Business EXTENDING CREDIT BANKS ARE RETICENT TO LEND FUNDS $2,000 $1,500 Reserves of Depository Institutions (billions of dollars) $1,000 Required Reserves Total reserves $500 $0 -$500 Source: Federal Reserve Board, Data Download Program 34
is Open for Business 35
is Open for Business RETAIL SALES USING THE APPROPRIATE ADJUSTMENTS 36
is Open for Business BUSINESS CYCLE SEVERE FINALLY RECOVERED AFTER NINE QUARTERS $13,500 $13,400 $13,300 $13,200 $13,100 $13,000 $12,900 $12,800 $12,700 $12,600 Real GDP $12,500 2006-I 2006-II 2006-III 2006-IV 2007-I 2007-II 2007-III 2007-IV 2008-I 2008-II 2008-III 2008-IV 2009-I 2009-II 2009-III 2009-IV 2010-I 2010-II 2010-III 2010-IV 2011-I 2011-II 2011-III 2011-IV Source: BEA, OEA 37
Year/Year Change is Open for Business WISCONSIN SALES TAX COLLECTIONS MOVING HIGHER 8.0% 6.0% Sales Tax Collections 3-Month Moving Average 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% 2007M09 2008M09 2009M09 2010M09 38
Year/Year Change is Open for Business WISCONSIN WITHHOLDING TAX COLLECTIONS MOVING HIGHER 12.0% 10.0% Withholding Collections 3-Month Moving Average 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 2007M09 2008M09 2009M09 2010M09 39
Millions is Open for Business JOBS NUMBERS LOOKING BETTER RATE PICKING UP 140 138 2007 2010 2011 2012 U.S. Jobs 136 134 132 130 128 126 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 40
Thousands is Open for Business JOBS NUMBERS LOOKING BETTER RATE PICKING UP 3,000 2,950 2007 2010 2011 2012 Jobs 2,900 2,850 2,800 2,750 2,700 2,650 2,600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 41
CONSTRUCTION WORKFORCE OUTLOOK
is Open for Business WISCONSIN CONSTRUCTION COMPOSITION AND PROJECTED EMPLOYMENT GROWTH Employment Composition of 13% 24% 63% Projected Percentage Employment Growth 5.4% Specialty Trade Contractors of Buildings Heavy and Civil Engineering Heavy and Civil Engineering of Buildings 5.3% 11.9% Specialty Trade Contractors 4.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Source: Wi., DWD, Office of Economic Advisors 2008 Long Term Workforce Development Area Projections 43
SE WISCONSIN PROJECTED CONSTRUCTION JOBS COMPARED TO OTHER INDUSTRIES is Open for Business Government Inf., Prof. Serv., Other Percent of NonFarm Job-Base, 2008 2.9% Projected Percent Employment Change 6.0% 8.2% 15.0% Leisure and Hospitality 5.9% 11.9% Ed. and Health Services 13.6% 22.9% Financial Activities Trans. and Utilities 1.6% 3.3% 4.2% 3.5% Trade -0.3% 15.2% Manufacturing -9.5% 18.3%, Mining, Nat. Res. 5.4% 4.0% -15% -10% -5% 0% 5% 10% 15% 20% 25% 44 Source: WI, DWD, Office of Economic Advisors 2008 Long Term Workforce Development Area Projections
is Open for Business SE WISCONSIN CONSTRUCTION OCCUPATIONS 2008-18 PROJECTED GROWTH Office clerks, general Bookkeeping, accounting, and auditing clerks -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 1.5% 2.9% 30 100 laborers 90 12.5% Electricians -3.9% -30 Numerical Change Proportional Change Carpenters 10 0.9% Managers of construction trades and extraction workers 30 7.7% Plumbers, pipefitters, and steamfitters 10 1.9% Operating engineers and other construction equipment operators 40 9.3% Cost estimators 30 9.7% -60-40 -20 0 20 40 60 80 100 120 140 Source: WI, DWD, Office of Economic Advisors 2008 Long Term Workforce Development Area Projections 45
is Open for Business SE WISCONSIN CONSTRUCTION OCCUPATIONS NEW JOBS AND REPLACEMENTS New Jobs Cost Estimators Operating Engineers, and Other Equip. Operators Plumbers, Pipefitters, and Steamfitters Replacements Managers of Trades Workers Carpenters Heating, Air Cond., and Refrigeration Mechanics Electricians Laborers Bookkeeping and Auditing Clerks Office Clerks, General 0 10 20 30 40 50 60 70 46 Annual Openings Source: Wi., DWD, Office of Economic Advisors 2008 Long Term Workforce Development Area Projections
Person Contracts is Open for Business ATTRACTION TO TRADES DECLINE AFFECTING MORE THAN JUST CONSTRUCTION 20,000 Apprentice Program Participating Persons 2000-2011 All Trades Trades 15,000 10,000 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Department of Workforce Development, Bureau of Apprenticeship Standards; OEA 47
Person Registrants is Open for Business ATTRACTION TO TRADES NEW ENTRANTS PICKING UP AGAIN 5,000 4,000 Apprentice Program New Registrants 2000-2011 All Trades Trades 3,000 2,000 1,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Department of Workforce Development, Bureau of Apprenticeship Standards; OEA 48
Person Registrations Person Contracts is Open for Business 1,400 1,200 1,000 800 600 400 Milwaukee Area Apprentice Program Participating Persons 2000-2011 All Trades Trades 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 600 Milwaukee Area Apprentice Program New Registrants 2000-2011 All Trades Trades 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 49
is Open for Business IN CONCLUSION CONTINUED RECOVERY Recovery is self-sustaining. Employment may breach in 2015. Strength of recovery subject to consumer income and wealth uncertainty. Risks High unemployment dampens income growth. Prolonged high gasoline prices sap consumption. European Union fiscal problems wash over the global financial markets. 50
is Open for Business Questions? 51
is Open for Business CONTACT INFORMATION Dennis Winters Phone: 608-267-3262 Email: dennis.winters@dwd.wisconsin.gov Website: www.dwd.wisconsin.gov OEA website: www.dwd.wisconsin.gov/oea 52