CBEI Central Wisconsin Fall 2021 Report

Special Report - Data Analytics From the Depths of Motivation to the Heights of Cell Towers by Prof. Kurt Pflughoeft, Ph.D. and Grace Nemecek ’21




From the Depths of Motivation to the Heights of Cell Towers

by Prof. Kurt Pflughoeft, Ph.D. and Grace Nemecek ’21


Interesting Times Recent times have been both interesting and challenging with the spread of the Delta variant interrupting a return to normalcy that we were all looking forward to. Now, the emergence of the Omicron variant promises to keep things interesting as we head into the holiday season and the new year.

Table of Contents

The Economy: Where We’ve Been and Where We’re Going............1-10 Kevin M. Bahr, CBEI Chief Analyst Economic Indicators...................................................... 11-17 Scott Wallace, CBEI Director and Editor National Economic Statistics........................................ 11-13 Table 1: Key Economic Indicators Table 2: Contributions to Percent Change in Real Gross Domestic Product Table 3: Lifecycle of the Expansion Labor Market Statistics.......................................................14 Table 4: Labor Market Indicators from LAUS Table 5: WI Employment by Major Industry Sector County Economic Statistics. ...............................................15 Table 6: Help Wanted Advertising Table 7: Unemployment Claims Table 8: County Sales Tax Distribution Housing and Construction..............................................16-17 Table 9: National Affordability Index Table 10: Median Home Prices and Home Sales Table 11: Residential Construction Table 12: Nonresidential Construction Special Report................................................................ 18-22 Data Analytics: From the Depths of Motivation to the Heights of Cell Towers Kurt Pflughoeft and Grace Nemecek Column: Insight Spotlight.............................................. 23-27 Corporate Social Responsibility (CSR) Bo DeDeker MBA Program.......................................................................28 The Voltage Effect Event. .......................... Inside Back Cover

Speaking of interesting times, Chief Analyst Kevin Bahr in The U.S. Economy – Like Nothing That You’ve

Seen describes how the pandemic has created a truly unique set of economic conditions. Our Economic Indicators section provides further evidence for Kevin’s narrative.

Our special topic report, Data Analytics: From the Depths of Motivation to the Heights of Cell Towers by Prof. Kurt Pflughoeft and Grace Nemecek ’21 demonstrates the enormous power of data analytics in informing a regional telecommunications company’s decisions over the geographic locations of cell towers. These decisions are critical in maximizing cell tower revenue and in providing rural communities greater access to wireless services. Prof. Pflughoeft is a Sentry Endowed Chair of Computational Analytics at UWSP and Grace Nemecek is a data scientist at Bug Tussel Wireless. This issue’s Insight Spotlight features Bo DeDeker, assistant professor of accounting, describing the role of Corporate Social Responsibility (CSR) in expanding corporate goals beyond maximizing shareholder value to include improving environmental outcomes and supporting greater social equity. The Center for Business and Economic Insight is very excited to announce our next speaker in our Business and Society Lecture Series: University of Chicago economics professor and UWSP alum John List will present The Voltage Effect on Friday, March 4 at 8-9:30 a.m. at the SentryWorld Atrium. John will talk about the importance of scaling new ideas, ventures, and businesses to ensure their success and maximize their impact. Preregistration is required and seats are limited. All registered attendees receive a free copy of his book, The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale . See the inside back cover for more information.

CBEI Mission

CBEI Staff

The UW-Stevens Point Center for Business and Economic Insight (CBEI) promotes regional economic and community development through the provision of business and economic knowledge to local business, governmental, and community leaders. The primary areas of focus are Portage, Marathon and Wood counties.

Scott Wallace.................................... Director and Editor, CBEI Kevin Bahr................................................... Chief Analyst, CBEI Alexis Flaten......................................Research Assistant, CBEI Eva Donohoo................................... Publication Designer, CPS

The Center for Business and Economic Insight is made possible thanks to support from the UW-Stevens Point School of Business and Economics.

The UW-Stevens Point School of Business and Economics creates career-ready graduates and leaders through applied learning. We serve the businesses, economy and people of the greater Central Wisconsin region. We specialize in preparing students for success by providing professional development experiences, access to employers, and in-demand skills.

The Economy: Like Nothing That You’ve Seen

Kevin M. Bahr CBEI Chief Analyst; Professor of Business School of Business and Economics

The events of the last two years are ones that few Americans thought they would ever see. The performance of the U.S. economy as we enter 2022 continues to be unprecedented in many ways. The gradual changes that typically occur in a normal business cycle for economic growth, the labor market, and inflation were replaced by significant COVID driven volatility. The pandemic caused sudden and significant changes in economic growth, the labor market, and inflation. COVID created unprecedented economic and forecasting challenges for policy makers and businesses in the United States and globally. While COVID was the driving force in creating these changes and challenges, COVID also magnified structural vulnerabilities in supply chains. Economic growth returned in 2021, but the labor market and inflation (including supply chain issues) presented challenges never seen before. I review the economic growth of the past few years and then discuss the nuances and challenges created by the current economy. Economic Growth After modest economic growth in 2019 and a significant downturn in 2020, consistent economic growth returned in 2021 despite a COVID rebound. The Bureau of Economic Analysis (BEA) compiles and publishes Gross Domestic Product (GDP) statistics, which measures the U.S. output of goods and services and is the benchmark for measuring economic growth. Quarterly GDP growth is usually expressed as a percentage that represents the rate at which U.S. economic output is either growing or contracting. Looking at the percent change from the previous quarter at an annualized rate can be useful in identifying trends and comparing the economic growth of different quarters, particularly during an economic expansion or contraction. However, the annualized rate assumes that the rate of change in the recent quarter would basically continue for four consecutive quarters, with some adjustments for seasonality and compounding effects. Table 1 below shows quarterly economic growth at an annualized rate since 2019 when economic output in a quarter is compared to the previous quarter. The table reflects tepid economic growth in 2019 followed by a severe COVID driven downturn in the second quarter of 2020. The Bureau of Economic Analysis (BEA) began tracking quarterly GDP growth data in 1947. The 2020 second quarter decline of 31.9% was the worst on record, and much greater than the worst quarterly decline during the financial crisis which was 8.5% in the second quarter of 2008. The 2020 economic recession (two consecutive quarters of negative GDP growth) was the shortest on record according to the BEA. Since the second quarter of 2020 economic growth has returned, with annualized growth at over 6% in the first two quarters of 2021. Economic growth continued in the third quarter of 2021 but was tempered by a COVID resurgence. Preliminary numbers indicated that the annualized rate of growth slowed to 2.0% while growth increased 4.9% compared to the prior year quarter. The increase in third quarter GDP reflected the continued economic impact of the COVID-19 pandemic. Until COVID wanes significantly, both domestically and internationally, impacts on the U.S. economy will remain.

Central Wisconsin Report - Fall 2021


Percent Change from Previous Quarter in Real GDP – Annualized Rate (Source: Bureau of Economic Analysis) Q1 Q2 Q3

Q4 1.9 4.5 n/a

2019 2020 2021










Future economic growth should be aided by the $1.2 trillion infrastructure package passed by Congress in November. The package includes funding for building and repairing roads and bridges, expanding broadband access to rural areas, upgrading public transportation, improving power and water systems, upgrading airports, ports, and waterways, and increasing electric vehicles and charging systems. The Labor Market Overview A collage of factors influenced the labor market in 2021, with some of those factors likely to continue impacting the labor market in 2022. The economic rebound of 2021 prompted a flurry of job openings; however, those job openings were not always filled, and talk of a “labor shortage” resulted. First, an overview of the labor market is presented followed by a discussion of factors affecting the labor market. Employment The chart below shows the roller coaster for U.S. employment from January 2020 through October 2021. Prior to the effects of COVID-19 on the economy, U.S. employment peaked at 152.5 million in February 2020. Two months later in April, employment dropped to 130.2 million. In two months, employment had declined by approximately 22.3 million jobs. 20.7 million jobs were lost in April; the magnitude of the job loss was unprecedented. It was most significant drop in monthly employment since the Bureau of Labor Statistics began tracking monthly changes in employment in 1939. Prior to 2020, the biggest drop in monthly employment was approximately 800,000 jobs in March 2009, almost 20 million less than the number of jobs lost in April 2020. Prior to the financial crisis, nonfarm employment peaked at 138.4 million in January 2008 before bottoming out at 129.7 million in February 2010. During the financial crisis, approximately 8.7 million jobs were lost over two years . During the COVID crisis in 2020, 22.3 million jobs were lost over two months . Since May 2020, employment has consistently recovered. The June 2020 addition of 4.8 million jobs was the largest gain since the Bureau of Labor Statistics began tracking monthly changes in employment in 1939. Prior to 2020, the biggest increase in monthly employment was approximately 540,000 jobs in May 2010, over 4 million less than the number of jobs added in June 2020. In 2021, a resurgence of COVID contributed at least partially to a summer slowdown in employment growth. Between May and July approximately 1 million jobs were added to the U.S. economy. Between July and September, approximately 0.6 million jobs were added. However, employment growth increased strongly in October as 531,000 jobs were added, and employment reached 148.3 million. Since employment growth returned in May 2020, over 18 million jobs have been added back to the economy.

All Employees, nonfarm Payrolls (seasonally adjusted) Source: Bureau of Labor Statistics


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The Unemployment Rate Changes in the unemployment rate over the course of the business cycle in normal times typically occur gradually, often characterized by persistence and momentum. Persistence means the variable will slowly gravitate to a historical average; momentum means the variable will continually move in the same direction for a period of time. Neither happened in 2020. The unemployment rate was volatile, moving significantly, rapidly, and in opposite directions. The chart below shows the U.S. unemployment rate since January 2020. The onset of COVID in 2020 caused the unemployment rate to skyrocket from a pre-COVID low of 3.5% in February 2020 to a peak of 14.8% in April, a two-month increase of 11.3%. The 10.4% increase that occurred in April was the largest monthly increase based on available Bureau of Labor Statistics data since 1948. Prior to 2020, the largest monthly increase in the unemployment rate was only 0.7% in April 1958. During the COVID crisis in 2020, the unemployment rate increased 11.3% over two months . During the financial crisis, the unemployment rate increased 5.6% over 29 months , from a 2007 low of 4.4% in May to a peak of 10.0% in October 2009. Beginning in May 2020, the unemployment rate began a consistent downward trend and reached 6.7% by year end. Strong job gains in October 2021 led to a further drop in the unemployment rate to 4.6%. In approximately a year and a half, the unemployment rate declined over 10%. The 8.1% drop that occurred in the unemployment rate from April through December 2020 was unprecedented. Prior to 2020, the largest drop in the unemployment rate that occurred during a given year was 2.1% in 1983. Although the overall unemployment rate has declined, differences in rates remain for major worker groups. The unemployment rate in October was 4.3 percent for adult men, 4.4 percent for adult women, and 11.9 percent for adult teenagers. The unemployment rate was 4.0 percent for Whites, 7.9 percent for Blacks, 4.2 percent for Asians, and 5.9 percent for Hispanics. In 2020, the unemployment rate for persons with a disability continued to be much higher than the rate for those without a disability, rising to 12.6 percent. In addition to employment challenges, unfortunately Social Security rules are restrictive and significantly limit the amount of income and assets that a disabled person may have. Even part-time employment could cause a disabled person to lose Social Security benefits, including healthcare, despite an employer not offering health insurance.

Unemployment Rate (16 yrs. and older) Source: Bureau of Labor Statistics

Central Wisconsin Report - Fall 2021


The Labor Market and “Labor Shortage” Employment growth and the decline in the unemployment rate have been extensive since April 2020 when the negative impacts of COVID on the economy peaked. Although employment growth has been significant, there were still approximately 4 million fewer employed in October 2021 than in February 2020. Despite the decrease in employment, “labor shortages” have been discussed as many businesses have not been able to hire desired employees. Next, a discussion of factors potentially affecting the labor market and “labor shortages.” Extended Unemployment Benefits In March 2020 the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and became law. The CARES Act established the Federal Pandemic Unemployment Compensation program, which provided an additional $600 per week to individuals who were collecting regular unemployment insurance benefits. The additional $600 payment ended in July 2020, but in January 2021 the program was partially reinstated, with an additional $300 payment that was scheduled to end in March 2021. The American Rescue Plan, passed in March 2021, extended federal unemployment programs, including the $300 additional payment, through September 4, 2021. However, states could opt out of the extended benefit program. In an attempt to incentivize workers to return to work, 26 states ended the federal benefit before September, with 22 states ending the program in June. Did ending the benefits early prompt a flood of workers to return to work? No, according to multiple studies. “Early Withdrawal of Pandemic Unemployment Insurance: Effects on Earnings, Employment and Consumption” from a team of economists and researchers at Columbia University (K. Coombs and S. Naidu), Harvard University (C. Janke and R. Kluender), the University of Massachusetts Amherst (A. Dube), and the University of Toronto (M. Stepner) concluded that ending the unemployment benefits early provided only a relatively small increase in employment relative to states that did not end benefits. However, the resulting decrease in consumer spending that resulted from 7 out of 8 people not finding employment caused a drastic decline in consumer spending and lowered state economic growth from what would have occurred if benefits did not end. The bottom line – ending the unemployment benefits early did not result in a significant return to work for the unemployed. UKG, a payroll and time management firm, compared data of states that ended unemployment benefits early relative to states that did not end benefits. The UKG data showed that states ending additional federal unemployment benefits grew workforce activity among hourly employees at a lower rate of growth relative to states that continued the additional benefit. The extension of unemployment benefits was not the primary reason that people did not return to the workforce. Job Openings As the economy recovered in 2021, the number of U.S. job openings skyrocketed. The chart below shows the number of U.S. monthly job openings since 2000. Looking at the number of U.S. monthly job openings since 2000 provides a picture of how significant the number of job openings has been recently. Prior to 2014, the number of monthly job openings was generally below 5 million. Following the end of the financial crisis in 2009 an expanding economy contributed to monthly job openings gradually increasing from approximately 2.2 million in July 2009 to a pre-COVID peak of nearly 7.6 million in October 2018. As economic growth slowed in 2019 the number of monthly job openings declined consistently to a yearly low of 6.7 million in December. The number of monthly openings dropped precipitously in early 2020 due to COVID to a low of 4.6 million in April 2020 before increasing later in the year. By December 2020, the number job openings was approximately equal to the number of job openings one year earlier. The number of job openings had increased by over 2 million from a COVID low of 4.6 million in April 2020 to over 6.7 million in December. However, in 2021 the number of monthly job openings exploded to record levels. The number of job openings in July 2021 was slightly greater than 11.0 million, an increase of 4.3 million job openings (64%) from the December 2020 level. Although the number of job openings slightly declined after July, the number of job openings remained strong. The number of job openings totaled just under 10.5 million in September, down from the record high 11.0 million in July. This compares to a pre-COVID high of 7.6 million job openings in November 2018.


Center for Business and Economic Insight

U.S. Monthly Job Openings 2000 through September 2021(thousands) Source: Bureau of Labor Statistics

The record level of job openings contributed to the “labor shortage.” The number was more than twice the level of job openings that occurred in any year between 2000 and 2014, and approximately 40% greater than the peak of job openings that occurred during 2018 before the pandemic. The Quit Rate Record levels of job openings? “Hold my beer” replies the 2021 quit rate. The graph below shows the quit rate for the United States since the turn of the century through September 2021. The quit rate is the number of people quitting jobs during the entire month as a percent of total employment. That rate reached a record high 3.0% in September 2021. For seven consecutive months, from March 2021 through September 2021, the quit rate was higher than any month this century prior to March 2021. More Americans had it with their job and called it quits in 2021 than at any other time. There were likely a myriad of factors contributing to the high quit rate, including: • Job Openings. The record number of job openings meant that employees could quit and reassess their job, career, and work environment and likely find a job when they decided to return to work. • Wages. Want a raise? Average hourly earnings have increased by 4.9 percent for the 12-month period ending October 31, 2021. Although wages have generally increased, in some cases getting a raise was easier by quitting than staying in the same job. In some occupations, new hires could get paid more than employees with more experience. • COVID resurgence. The summer resurgence of COVID meant some workers faced an increased risk of contracting the virus if they remained in their current job, either from customers or coworkers. • Job stress or work conditions. Certainly, many workers experience job stress, but arguably health care workers led the way in dealing with significantly more of it since the onslaught of COVID. • Unruly customer behavior. Unfortunately, not all jobs and occupations receive the respect they deserve. From retail, to healthcare, to education, job incidents increased. Airlines provide an unfortunate example. Through early November, the Federal Aviation Administration indicated that the number of investigations initiated regarding unruly passenger behavior was more than twice the level of any previous year.

Central Wisconsin Report - Fall 2021


The Quit Rate Source: Bureau of Labor Statistics

No doubt the number of employees quitting contributed to the hiring woes of employers. The industries with the top two quit rates in August and September 1) Leisure and hospitality (including food service), and 2) Retail trade. Generally, relatively low paid, high customer contact positions. Workers Not in the Labor Force The table below compares the number of workers by age that opted to stay out of the workforce in October 2021 relative to October 2020. Who’s not going back to work despite the record level of job openings? Older Americans. The number of workers opting to stay out of the workforce for workers aged 16–24 years and 25–54 years decreased for both groups. However, the number of workers opting to stay out of the work force increased by over 1 million for workers aged 55 and older. Will older workers rejoin the work force? Maybe, but early retirement might look pretty good – particularly given recent stock market returns.

Workers Not in the Work Force by Age (in thousands) (Source: U.S. Bureau of Labor Statistics)

16–24 Years

16–24 Years

25–54 Years

25–54 Years

55 and Older

55 and Older

Oct. 2020

Oct. 2021

Oct. 2020

Oct. 2021

Oct. 2020

Oct. 2021







Stock Market Returns For those workers with money invested in the stock market (including retirement funds), things have been looking pretty good. The table below shows the quarterly returns of three major U.S. stock indexes: 1) the S&P 500 – a diversified index that measures the stock performance of 500 relatively large companies (it is a “large-cap” index, generally comprised of companies having a total stock value exceeding $10 billion), 2) the NASDAQ – an index comprised of over 3000 companies listed on the NASDAQ stock exchange and heavily weighted toward technology, and 3) the Russell 2000 – a diversified index that measures the stock performance of 2000 relatively small companies (it is a “small-cap” index, generally comprised of companies having a total stock value less than $2 billion). For comparative purposes, the long-run average annual return (since 1926) is approximately 12 percent on large-cap stocks and 16 percent on small-cap stocks.


Center for Business and Economic Insight

Since 2019, stock market returns have generally been excellent. Even in 2020, when all three indexes significantly declined in the first quarter due to the onset of COVID, the stock market began looking forward to a post-COVID recovery. For the full year, the S&P 500 increased 16.26 percent and the Russell 2000 was up 18.36 percent, both higher than their historical average annual return. The NASDAQ increased an amazing 43.64 percent. Through early November 2021, the year-to-date returns once again remain strong, with each index increasing approximately 20%. Certainly, there have been ups and downs, but generally the market has been looking forward with an expectation for sound economic growth.

U.S. Stock Market Returns (Source: Morningstar)

2020 Q1

2020 Q2

2020 Q3

2020 Q4

2021 Q1


-20.00 -14.18 -30.89

19.95 30.63 25.00


11.69 15.41 30.99

5.77 2.78


Russell 2000



*year-to-date return as of November 2

For workers invested in the stock market, that strong performance has provided some financial flexibility through increased investment account balances, which in turn can affect the work decision. Inflation Overview There are two broad factors that affect prices – supply and demand. Generally, inflation is caused when there is a change to one of these factors. If the supply of goods is reduced for a given demand, prices (inflation) will increase until a higher price level is reached that balances the demand to match the reduced supply. If the demand for goods is increased for a given supply, prices (inflation) will increase until a higher price level is reached that balances the supply of goods to match the increased demand. The chart below shows the 12-month change in the Consumer Price Index (CPI) over the past ten years. The change in the CPI is used to measure the rate of inflation, which is the percentage change in prices. Generally, the rate of inflation varied between 1% and 3% over the past decade, although the rate approached 4% in late 2011 as the economy rebounded following the financial crisis. After a January 2012 rate of 3.0%, inflation remained below 3.0% through 2020. In 2020, inflation dipped below 1% due to the severe economic contraction caused by COVID.

12-month Percent Change in CPI for all Urban Consumers, October 2011–October 2021 Source: Bureau of Labor Statistics and Federal Reserve Economic Database

Central Wisconsin Report - Fall 2021


The chart below focuses on the rate of inflation between October 2020 and October 2021. Things changed in 2021. In 2021, inflation began the year at only 1.4%, but by October inflation jumped to 6.2%, a 4.8% increase. The effect of COVID on the economy created a collage of factors that contributed to a highly unusual jump in inflation. The Bureau of Labor Statistics provides monthly data since 1948 on the 12-month percent change in the rate of inflation. The 4.8% increase that occurred between January and October of 2021 was the second largest increase in inflation that occurred in any year since 1948. The oil embargo and energy crisis in 1973 contributed to the largest increase in inflation in any year, as inflation rose from 3.6% to 8.9%, a jump of 5.3%. Both 1973 and 2021 featured “supply shocks” to the U.S. economy. Energy prices rose sharply in each case, but supply chain interruptions extended beyond energy in 2021. The novelty for the U.S. economy in 2021 – inflation was caused by changes in both supply and demand.

12-month Percent Change in CPI for all Urban Consumers, October 2020 – October 2021 Source: Bureau of Labor Statistics

There is no question that the short-term pain created by the significant increase in inflation is real to U.S. consumers. Although the effect on consumers has been painful, corporate profits have been at record levels, indicating that increased corporate costs have generally been more than offset by price increases passed through to consumers. Second quarter 2021 corporate profits reached a record $2.7 trillion, surpassing the previous record of $2.4 trillion which was set in the first quarter of 2021. Corporate profits have increased approximately 30% from their pre-COVID highs in 2018. Inflation Factors A myriad of factors contributed to the recent spike in U.S. inflation. COVID impacted the two broad factors that affect prices – supply and demand. Price increases have been broad, affecting a wide variety of consumer products. Listed below are the price increases for selected product categories that had some of the largest price increases for the 12 months ending October 2021.


Center for Business and Economic Insight

12-Month Change in Prices – October 2020 to October 2021 (Source: Bureau of Economic Analysis)

All Items All Food

6.2% 5.3%

Meats, poultry, fish, and eggs

11.9% 30.0% 49.6% 28.1%

All Energy Gasoline

Natural gas

New Cars Used Cars



Sporting Goods (including bikes)


Furniture and Bedding Lodging away from home Car and Truck Rental

12.6% 22.8% 39.1%

While COVID was the driving force in creating demand and supply imbalances in not only the U.S. but also globally, COVID also magnified other issues that contributed to inflation. Although COVID was the driving force behind inflation, there wasn’t just one factor causing inflation. Depending on the product, price increases were caused by different factors. Global Economic Recovery On the demand side, COVID caused a global economic contraction in 2020. In 2021, it’s not just the U.S. economy that is recovering, it’s also the global economy. According to the International Monetary Fund (IMF), in late 2021 the global economic recovery continues amid a resurging pandemic with unique policy challenges. After declining 3.1% in 2020, global GDP is expected to increase 6.0% in 2022 and 4.9% on 2023. That dramatic reversal in economic growth increases the demand for products and services globally (including energy) and strains pandemic affected supply chains. Energy Prices The strong rebound in global economic growth contributed to a significant rise in energy prices. And when energy prices increase, prices of almost everything will increase. Almost everything you buy gets delivered by a truck. And it’s not just the United States facing increased energy costs, it’s global. According to the IMF, as of late October 2021, “spot prices for natural gas have more than quadrupled to record levels in Europe and Asia, and the persistence and global dimension of these price spikes are unprecedented”. Brent crude oil prices, the global benchmark, recently reached a seven-year high and quadrupled in 2021 relative to 2020. Overall, U.S. energy prices increased 30 percent between October 2020 and October 2021, with gasoline prices increasing 49.6% and natural gas increasing 28.1%. 2021 featured a global imbalance of demand and supply in the energy sector. The impact of COVID globally caused a collapse of energy consumption in 2020, leading energy companies to cut investments and supplies. However, consumption of natural gas rebounded fast with the global economy. Industrial production accounts for about 20 percent of final natural gas consumption, and the economic rebound boosted demand at a time when supplies were relatively low. Energy supply has also been impacted by weather, labor shortages, maintenance backlogs, and infrastructure issues. Supply Chain COVID also magnified other issues that contributed to inflation. World-wide demand for semiconductors grew significantly 2020 and 2021, as sales of consumer electronics ramped up and new technologies developed in the auto industry. However, the bulk of semiconductors are produced in Asia, including Taiwan, South Korea, China, and Vietnam. Supply chain issues, including the impact of COVID on the supply chain, contributed to a semiconductor

Central Wisconsin Report - Fall 2021


shortage in 2021, particularly in the automotive industry. The shortage of semiconductors contributed to a stunning 26.4% increase in used car prices and 9.4% increase for new cars. According to the Semiconductor Industry Association, the U.S. share of global semiconductor manufacturing capacity has declined from 37% in 1990 to just 12% today. The drop in U.S. global semiconductor manufacturing capacity exacerbates COVID related sourcing problems. In the United States, the ramp-up in consumer demand for imported goods as the economy expanded, combined with infrastructure problems at ports and railways, and labor shortages, contributed to supply chain problems. Imports of sporting goods, particularly bikes, and furniture are heavily relied on by U.S. consumers. Imports were impacted by COVID related supply chain issues not only in the U.S. but also in the foreign sourced country. Sporting goods prices (including bikes) increased 8.4% and furniture and bedding prices rose 12.6% for the 12-month period ended October 2021. A myriad of factors contributed to a rise in food prices. Rising energy prices affect transportation and feed costs. COVID has created labor shortages which in turn affect product availability and supply chain issues. Unfavorable weather has also been a factor. For the 12-month period ended October 2021, food prices increased 5.3%, with meats, poultry, and fish up 11.9%. Pent-Up Demand Pent-up demand for travel and a COVID decline contributed to soaring prices in 2021 for lodging away from home, which saw a price increase of 22.8%, and car and truck rental prices, which increased 39.1%. Car and truck rental prices were also impacted by the semiconductor shortage, which impacted the prices and availability of new and used cars. Although the demand and supply imbalances created by COVID that led to inflation are expected to subside, there will likely be some lasting effects. Inflation created by COVID magnified other problems, such as supply chain issues and offshore sourcing, infrastructure problems, labor market issues, global energy reliance on oil and natural gas, and in some cases, inventory management. Each of these areas has problems that although exacerbated by COVID, are not because of COVID. Changes will likely be made. Conclusion What a ride. Since early 2020, the COVID driven economy created unprecedented ups and downs in economic growth, employment, job openings, the quit rate, workers leaving the workforce, and inflation. Supply chain issues, including infrastructure problems and offshore sourcing, were not created by COVID, but the economic impacts of COVID magnified supply chain problems. Economic volatility began in 2020 with the dramatic, sudden negative economic impacts of COVID. Economic volatility continued as multiple fiscal and monetary responses reversed the negative economic effects of COVID, but new problems such as inflation and supply chain issues appeared in 2021. The uniqueness of the pandemic and unprecedented fiscal and monetary responses combined to create new challenges for businesses and policymakers. As the U.S. and world get ready for 2022, the effects of COVID on the global economy continue. The greater the prevalence of COVID in 2022, the greater the negative economic effects. The impact of COVID was and remains global; countries are connected economically. Hopefully in 2022, the unprecedented economic volatility and negative effects caused by the virus dissipate. Supply chain issues should improve as the impact of COVID on global economies is reduced and infrastructure is improved. Demand and supply should become balanced as economic growth stabilizes and supply irregularities resolved, leading to reduced inflation and stabilization in the labor market. Some of the economic impacts of COVID will likely remain. Businesses may rethink supply chains and offshore sourcing. Infrastructure problems need to be resolved. Given the steep rise in energy prices, energy sourcing may be reconsidered. The labor market has changed, and increased flexibility and employment options for workers will likely remain in a growing economy. COVID created unprecedented economic challenges; meeting the challenges will allow the U.S. to emerge as a stronger global economic leader.


Center for Business and Economic Insight


Scott Wallace, Ph.D. Director and Editor, CBEI; Professor of Economics School of Business and Economics

As Kevin Bahr described in his report, our current economy is truly one we haven’t experienced before. The pandemic induced dramatic and rapid shifts in behavior which have had jarring effects on economic conditions. It will take time for the economy to adjust and heal from these changes. The highly contagious and severe Delta variant impeded much of the progress that the economy was making earlier this year. The emergence of new and deadly variants has added a great deal of uncertainty over future economic progress. It is important to recognize that economic indicators are snapshots in time and have a short shelf life given the recent acceleration of economic change.

National Economic Statistics Table 1 Key Economic Indicators 2021 Third Quarter

% ∆ Yr. Ago

Nominal Gross Domestic Product (in Billions) Real Gross Domestic Product (in Billions) Industrial Production (2017 = 100) Consumer Price Index (1982 - 84 = 100)

$23,173.50 $19,465.20


+ 4.87


+4.6 + 5.4


Description: • Nominal Gross Domestic Product (in Billions): The dollar value of all final goods and services produced in a year, using current prices. • Real Gross Domestic Product (in Billions): The dollar value of all final goods and services produced in a year, using prices from a base year (2012) to adjust for inflation. • Industrial Production Index: Measures real output (as a percentage of actual output in 2012) produced in the United States in manufacturing, mining, and electric & gas utilities. • Consumer Price Index: Measures the average monthly change in the price of a representative basket of goods and services bought by consumers Analysis: • The third quarter increase in Real GDP of 4.87% from 2020 Q3 reflected a slowing of economic growth compared to the second quarter 12.2% increase from 2020 Q2. Much of the decline in growth has been attributed to the impact of the Delta variant, especially in southern states during the third quarter. (see Table 2 analysis for more discussion) • Industrial Production is often a good indicator of economic conditions because it adjusts fairly quickly to changes in the economy. Manufacturing by its very nature is very responsive to changes in market conditions. Here we see that the Industrial Production Index has increased by 4.6% over the last year though it recently has declined 1.3% since August. The good news is that there has been a 1.6% increase between September and October of this year. • Inflation has increased with CPI rising by 5.4% since 2020 Q3. On a monthly basis, October numbers indicate that inflation is accelerating with 6.2% increase over a year ago. As Kevin Bahr discusses in his report, increases in aggregate demand combined with supply chain constraints are largely responsible for this acceleration. The Federal Reserve expects inflation rates to be elevated well into 2022.

Central Wisconsin Report - Fall 2021


Table 2 Contributions to Percent Change in Real Gross Domestic Product (Seasonally Adjusted at Annual Rates) Line Percent Change at an Annual Rate 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 1 Gross Domestic Product Percentage Points at Annual Rates -31.2 33.8 4.5 6.3 6.7 2 2 Personal Consumption Expenditures -24.1 25.51 2.26 7.44 7.92 1.09 3 Goods -1.89 9.92 -0.07 5.69 2.99 -2.32 4 Durable Goods 0.01 5.49 0.1 3.5 1.01 -2.7 5 Nondurable Goods -1.9 4.43 -0.17 2.19 1.98 0.39 6 Services -22.21 15.59 2.34 1.75 4.93 3.4 7 Gross Private Domestic Investments -9.64 11.71 4.01 -0.37 -0.65 1.94 8 Fixed Investment -5.63 4.88 2.92 2.25 0.61 -0.14 9 Nonresidential -4.28 2.72 1.57 1.65 1.21 0.24 10 Structures -1.77 -0.46 -0.22 0.14 -0.08 -0.19 11 Equipment -1.99 2.73 1.29 0.75 0.66 -0.18 12 Intellectual Property Products -0.51 0.45 0.5 0.76 0.62 0.61 13 Residential -1.36 2.16 1.34 0.6 -0.6 -0.38 14 Change in Private Inventories -4.01 6.84 1.1 -2.62 -1.26 2.07 15 Net Exports of Goods and Services 1.53 -3.25 -1.65 -1.56 -0.18 -1.14 16 Exports -8.34 4.64 2.07 -0.3 0.8 -0.28 17 Goods -6.24 4.75 1.59 -0.1 0.48 -0.4 18 Services -2.09 -0.11 0.49 -0.2 0.32 0.12 19 Imports 9.87 -7.89 -3.73 -1.26 -0.99 -0.87 20 Goods 7.27 -7.37 -3.04 -1.21 -0.51 0.02 21 Services 2.59 -0.52 -0.69 -0.05 -0.48 -0.89 22 Government Consumption Expenditures and Gross Investments 0.97 -0.19 -0.09 0.77 -0.36 0.14 23 Federal 1.42 -0.32 -0.22 0.78 -0.38 -0.33 24 National Defense 0.16 0.11 0.22 -0.25 -0.04 -0.06 25 Nondefense 1.26 -0.43 -0.44 1.02 -0.34 -0.27 26 State and Local -0.45 0.13 0.14 -0.01 0.02 0.46 Bureau of Economic Analysis Description: • The above table decomposes percent changes in Real GDP into its components (consumption, investment, government, and net exports) and more specific subcomponents. Analysis: • For 2021 Q3, real GDP grew at a disappointing 2.0% (seasonally adjusted at annual rates) from second quarter numbers. Growth was well below the 6.7% increase in the second quarter. The contribution of personal consumption expenditures to real GDP fell sharply to only 1.09%. • In addition to the impact of the Delta variant on demand, supply chain constraints are likely the reason for a drop in personal consumption expenditures as a driver of growth. The contribution of durable goods expenditure to real GDP growth was -2.7%. • A number of Wall Street analysts are expecting a strong rebound in growth numbers for the fourth quarter.


Center for Business and Economic Insight

Table 3 Lifecycle of the Expansion


















Average Weekly Hours

Description: • Table 3 plots the unemployment rate against average weekly hours in manufacturing on a quarterly basis since the fourth quarter of 2019. • There are four phases: 1. In the initial phase of an expansion, unemployment is stable and remains high while there is a sharp rise in hours per week. 2. In the second phase, the unemployment rate falls while hours per week tend to be relatively stable. 3. In the third phase, the unemployment rate is stable and hours per week decline. 4. A contraction occurs when unemployment rises and hours per week falls). Analysis: • The unprecedented nature of the impact on the economy is well illustrated in the above chart. • Traditionally, plotting the unemployment rate against average weekly hours has been a great way of tracking the business cycle. In the past, changes in both these variables from quarter to quarter have been incremental, resulting in loop-like configurations. The pandemic has interrupted that pattern. • The initial impact of the pandemic can be seen by sharp increase in the unemployment rate and sharp decline in average weekly hours in 2020 Q2 (6/20). For 2020 Q3 (9/20) the economy rebounded quickly with significant declines in the unemployment rate and expansion in average weekly hours. • Since that time, the changes in both variables have been more in line with pre-pandemic patterns.

Central Wisconsin Report - Fall 2021


Labor Market Statistics

Table 4 Labor Market Indicators from LAUS and retrieved from WisConomy

Labor Force

Unemployment Rate


Labor Market Area

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3

2020 Q3 2021 Q3 (000)

% ∆ Yr. Ago

Portage County

38,189 14,095 73,953 34,329

-0.10 -0.32 0.73 -1.84 -0.44 0.76

2.9 3.1 2.6 3.6 3.9 4.8

4.1 4.5 3.7 4.9 5.2 7.9

37,074 13,656 72,030 33,086

1.11 1.11 1.83 -0.49 0.93 4.15

City of Stevens Point Marathon County

Wood County




United States



Description: • Labor Force: Includes all people over the age 16 who are either working or actively looking for work. • Unemployment Rate: The number of unemployed as a percentage of the labor force. Analysis: • The employment numbers have improved considerably nationally and statewide. For the United States, the unemployment rate has fallen to 4.8% from 7.9% a year ago. For Wisconsin, the unemployment rate fell to 3.9% from 5.2% a year earlier. • Central Wisconsin’s recovery with respect to employment has been extraordinarily impressive with Portage, Marathon, and Wood counties facing unemployment rates of 2.9%, 2.6%, and 3.6% respectively. These numbers are quickly ap- proaching pre-pandemic levels.

Table 5 Wisconsin Employment by Industry Sector from Payroll Employment Survey - CES and retrieved from WisConomy

Trade, Transport and Utilities

Nonfarm Jobs

Construction Jobs Manufacturing Natural Resources and Mining

Information Jobs

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3 (000)

% ∆ Yr. Ago

2021 Q3 (000)

% ∆ Yr. Ago

2,876.4 1.8 121.4 -1.0




12.1 530.9 1.0



Education and Health

Leisure and Hospitality

Finance Jobs

Business Services

Other Services


2021 Q3 (000) % ∆ Yr. Ago 150.4 -1.1 320.3 4.3 445.4 -1.3 243.4 5.9 149.2 3.5 387.5 -0.5 Description: • Employment data are classified using the North American Industry Classification System (NAICS). The above table categorizes data according to major industry sectors. Analysis: • Wisconsin has witnessed some recovery in the Leisure and Hospitality sector despite employment numbers still significantly lower than pre-pandemic levels • The Manufacturing sector has been resilient and job growth has been strong with numbers back to pre-pandemic levels. % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000)


Center for Business and Economic Insight

County Economic Statistics Table 6 Help Wanted Advertising

Stevens Point



Wisconsin Rapids

Lincoln County

Adams County

Index Value 2021 Q3

% ∆ Yr. Ago

Index Value 2021 Q3

% ∆ Yr. Ago

Index Value 2021 Q3

% ∆ Yr. Ago

Index Value 2021 Q3

% ∆ Yr. Ago

Index Value 2021 Q3

% ∆ Yr. Ago

Index Value 2021 Q3

% ∆ Yr. Ago

1946.5 136.08 2604 152.45 1162 128.10 1608 184.85 2538.5 219.31 1523.5 199.02 Description: • Presents index values for on-line job advertising for Stevens Point, Wausau, Marshfield, Wisconsin Rapids, Lincoln County, and Adams County. Analysis: • Help Wanted Advertising is an important leading indicator of local labor market conditions. • The dramatic increases in the index values for all four counties and Stevens Point from a year ago indicate a strong jobs recovery from the depths of the pandemic last year. • Compared to 2019 Q3, the 2020 Q3 numbers fell by 50% or more in all areas. • Current conditions are consistent with record job openings nationwide. See Kevin Bahr’s report. Table 7 Unemployment Claims - Portage, Marathon, and Wood Counties Portage Marathon Wood Weekly Average 2021 Q3 % ∆ Yr. Ago Weekly Average 2021 Q3 % ∆ Yr. Ago Weekly Average 2021 Q3 % ∆ Yr. Ago New Claims 90.51 -72.74 124.77 -74.40 94.54 -61.98 Total Claims 487.31 -77.51 994.23 -73.40 540.31 -65.34 Description: • New Claims: Weekly average of new claims for 2021 Q3. • Total Claims: Weekly average of total claims for 2021 Q3. Analysis: • Initial claims for unemployment insurance are an important leading economic indicator because it helps predict likely changes in the level of consumption. • Weekly averages of new claims and total claims are used because of the volatility of new claims from week to week. • The numbers show a significant decline in both new and total claims since 2020 Q3, another strong indicator of a rebounding labor market. • These numbers are consistent with the 50-year low of initial weekly claims nationwide in late November. Table 8 County Sales Tax Distribution Portage Marathon Wood 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago 2021 Q3 (000) % ∆ Yr. Ago County Sales Tax Distribution $2,075.17 3.32 $4,043.47 9.35 $1922.37 3.67 Description: • The county sales tax rate of 0.5% is placed on retailers that make taxable sales. • Changes in county tax collections is a good indicator of changes in retail activity in Central Wisconsin. Analysis: • The healthy increase in tax collections for Portage, Marathon, and Wood County indicate higher levels of retail activity compared to one year ago. • These gains mirror those at the national level with retail sales increasing by 1.7% in October.

Central Wisconsin Report - Fall 2021


Housing and Construction Table 9 National Affordability Index (Third Quarter 2021)


Median Price Existing Single Family Home

Mortgage Rate

Monthly P & I Payment

Payment as % of Income

Median Family Income

Qualifying Income



300,200 363,700

3.17 2.92

1,035 1,214

14.6 16.6

84,969 87,874

49,680 58,281

171.0 150.8

Q3 2021

Description: • Composite Index measures affordability. An index of 150 means that a family earning the median family income has 150% of income necessary to quality for a conventional loan covering 80% of a median price family home. Analysis: • The median price of a single-family home has increased by a staggering 21% since 2020! • The increase in home prices has reduced the Composite Index from 171 to 150.8, indicating declining affordability de-

spite lower mortgage rates and higher median family income. • Qualifying income has increased from $49,680 to $58,281. Table 10

Median Home Prices and Home Sales (Third Quarter 2021) Wisconsin Marathon Portage


2021 Q3

% ∆ Yr. Ago

2021 Q3

% ∆ Yr. Ago

2021 Q3

% ∆ Yr. Ago

2021 Q3

% ∆ Yr. Ago

Median Home Prices

250,000 8.70 200,000 4.16 229,950 6.95 167,050 20.26

Home Sales

26,690 -7.57







Description: • Above table gives median home prices and home sales for the state of Wisconsin and the counties of Central Wisconsin. • If you list home prices from lowest to highest, the median home price is the one at the half way point. Analysis: • With the exception of Wood County, increases in median home prices have been more modest than in the nation overall. • Along with the state overall, the decline in home sales combined with higher prices in Marathon and Portage counties implies a decrease in the supply of homes for sale in these areas over the last year. • The increase in home sales combined with significantly higher prices implies an increase in the demand for homes in Wood County.


Center for Business and Economic Insight

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