• WisBusiness

Monday, November 21, 2011

Churning away: Analyzing the ups and downs of Wisconsin's economic news

By Tom Still
Instead of "Forward," perhaps the state motto should be amended to "Two Steps Forward, One Step Back and One Sideways."

So goes the up-and-down news about the Wisconsin economy, which one day includes encouraging reports about jobs, expansions or investments but is followed the next with announcements of layoffs or a shrinking pool of private-sector jobs.

This seemingly contradictory mish-mash of news may reflect what many observers call economic churn, or what economist Joseph Schumpeter first described as "creative destruction" nearly 70 years ago. It's the notion that healthy capitalist economies are in a state of constant transition, with new products, industries and jobs necessarily crowding out the old.

Of course, if you lost a job that was creatively destroyed in the past three years, you're probably in no mood to discuss economic theory. But the paradox of good news sandwiched with the bad speaks to the fact that maybe – just maybe – the Wisconsin economy is looking for an excuse to get back on its feet.

The state Department of Workforce Development announced last week that Wisconsin lost 9,300 private-sector jobs in October, the fourth straight month of decline. That's on a base of about 2.7 million Wisconsin jobs, so the loss could be explained away as statistically minor. But it's not insignificant if the trend continues to chip away at job gains made earlier in the year.

The state has lost about 5,200 professional and business service jobs in the last year, including nearly 3,800 in the high-paying science and technology sector. Accuray, which acquired Madison-based TomoTherapy, announced last week it will shed about 50 jobs. Smaller tech companies continue to struggle as they search for angel and venture capital.

Wisconsin has also lost 3,700 finance and insurance jobs over the past year, sectors that have long been important to the state. The latest blow came when Fidelity National Information Services, which bought the former Metavante financial technology company two years ago, announced about 100 job cuts in Milwaukee.

The good news: Manufacturing continues a modest rebound. Generac is adding 300 to 400 jobs in Waukesha, Whitewater and Eagle, as well as 50 to 60 jobs at its Magnum Products subsidiary in Berlin. Ruud Lighting expects to add 469 full-time jobs over four years as part of a $24.5 million expansion in Sturtevant and elsewhere.

Supercomputer maker Cray Inc. expects to add manufacturing workers in Chippewa Falls now that the University of Illinois has awarded Cray a contract to take over a stalled $300-million supercomputer project. Companies such as Husco, which makes highly engineered hydraulic systems and controls, continue to add jobs in southeastern Wisconsin.

Virtually all of the manufacturing expansions of late have involved companies that are leveraging technology and engineered solutions, a talent that speaks to Wisconsin's knack for innovation when times get tough.

Other encouraging signs have included strong earnings reports by Wisconsin companies such as Rockwell Automation and Brady Corp., and continued growth in food processing and other farm-related sectors. As food safety and security becomes a bigger issue, Wisconsin researchers and processors are positioned to help provide market-based solutions.

The latest State Monitor report by BMO Capital Markets Economics, which is tied to BMO Harris Bank, suggests the Wisconsin economy is actually expanding at a moderate pace – despite the latest jobs report. Wisconsin exports grew by 15 percent year-over-year through August, BMO reported, and the state continues to regain manufacturing jobs lost during the recession.

(One sobering note: Wisconsin's peak month for manufacturing employment was February 2000, when the state boasted 599,000 manufacturing jobs. That compares to about 450,000 manufacturing jobs today, which still ranks Wisconsin among the nation's per capita leaders. Innovation, technology, "lean manufacturing" and other trends mean many of those lost 150,000 jobs will never return – Schumpeter's "creative destruction" at work.)

Foreign direct investment has also strengthened the state's economy by bringing much-needed bursts of capital and by opening global sales channels. A recent example is the purchase of Thiel Cheese & Ingredients of Hilbert by the Irish Dairy Board. Hundreds of Wisconsin companies have grown over time thanks to investments from abroad, primarily companies in Canada, Europe and Japan.

What's in all mean? Perhaps the economy is still bouncing along the bottom. Or perhaps the theory of creative destruction is not just a theory, but the sometimes painful way a modern economy works. In a world that never stands still, today's halting steps forward and stumbling steps back may be how Wisconsin's economy finally gets back on track. -- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.


Comments: 5

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