Wisconsin needs a new stimulus strategy, because reopening has already stimulated the economy as much as it can. That was a key takeaway from a recent WBA webinar exploring the impact of COVID-19 on the state’s economy. 

On July 29, WBA President and CEO Rose Oswald Poels hosted a complimentary webinar for over 100 WBA members featuring Noah Williams and his thoughts on the impact of the coronavirus pandemic on Wisconsin’s economy. 

Williams is director for the UW-Madison Center for Research on the Wisconsin Economy (CROWE) and a consultant to the Federal Home Loan Bank of Chicago. Prior to his position at UW-Madison, Williams was an economics professor at Princeton University. His area of focus is macroeconomics. 

Visit crowe.wisc.edu/impact-of-covid19 for more information. 

Wiliams’ presentation highlighted one of the main challenges for economists and other academics in studying the pandemic and its effects: difficulty obtaining accurate, timely data. CROWE has been tracking the pandemic since early March, and “it’s an unprecedented period, both in terms of speed and scale of the economic impact,” Williams said. This means many of the traditional economic data produced have substantial lag (such as unemployment reports). “The unique circumstances of the pandemic make measurement difficult,” Williams explained. To counter that, CROWE has been looking at high-frequency, non-traditional indicators. 

One such indicator is initial unemployment claims. “We’ve never seen changes of this magnitude,” said Williams of the data. Wisconsin saw a huge initial spike followed by a dramatic drop, and has now leveled off at around three-to-four times the levels of 2019. Also, Williams pointed out, employment is drastically different in different sectors (leisure and hospitality, for example). Based on data from a range of measures, Williams estimates the official unemployment rate may be understated by as much as 50%, which suggests the “true” unemployment rate in Wisconsin is 12-13% instead of 8.5%. 

Another measure CROWE uses to assess COVID-19's impact is foot traffic—mobility can be an indicator for commercial/retail sales. CROWE partnered with a cellphone company to sample roughly 10% of Wisconsin’s population through GPS tracking (anonymized and aggregated). This data shows the same pattern as unemployment: a sharp fall in March followed by a climb that levels off in July. “Some of the stall-out in the recovery is likely due to the spread of the virus and people cutting back on activity, along with the reinstitution of health guidelines,” Williams explained. “Also, some temporary closures have become permanent as businesses have been unable to operate in the current environment with limited capacity.” 

To look specifically at the issue of how many temporary closures have become permanent, CROWE analyzes small business timecard data, largely concentrated in the retail and food and beverage sectors. Williams said employment has (predictably) bounced back stronger where locations are open, so business have been reallocating staff to locations that are able to be opened. “Based on where the data levels off compared to pre-pandemic numbers, roughly 10% of locations will not reopen,” Williams said. 

Finally, CROWE analyzes consumer spending data to see the impact of the pandemic on the economy. “The hope going into March was that the economy would bounce back rapidly,” said Williams. “The only place that’s really taken place is consumer spending.” Wisconsin came out relatively strong compared to national numbers, corroborated by retail sales data. However, some of the increased spending is due to federal social insurance programs. Another important caveat is where the spending is taking place. “We see a substantial shift toward online spending,” Williams said. “Amazon has seen 72% year-over-year growth. This has huge implications on concentration and local retailers.” 

The strongest component of growth in consumer spending has been groceries, CROWE analysis found, with grocery sales increasing by roughly 100% in Wisconsin in early March. Sales remain up by 15% year-over-year. Williams attributed much of the growth to people stocking up and eating out less. 

Overall, while the recovery is slowing across the country with the resumed spread of the novel coronavirus, Wisconsin remains one of the two strongest-recovering states (Florida is the other). However, “we’ve probably reached a point where we’ve gotten all we can out of reopening with the world as it is,” Williams said. Further recovery and growth will need to come from a different strategy. 


Following his presentation, Williams fielded several questions from the audience on topics including unemployment, school closures, November’s presidential election, the timeline for Wisconsin’s economic recovery, interest rates, and COVID-19's regional impact in the state. 

In response to a question about the impact on commercial real estate, Williams said he expects the demand for commercial space to drop and remain low, pushed down by remote work and the shift to digital shopping. “Local, smaller retailers and restaurants have been hit hard, and I don’t see that changing anytime soon,” Williams said. 

Regarding interest rates, Williams pointed out that the Federal Reserve’s projection period is around two years, and Chair Jerome Powell has indicated “they’re not even thinking about thinking about it,” so bankers should expect rates to remain near zero for at least two or three years. “The Fed is trading off inflation and economic activity,” Williams explained. “Since inflation is staying low, I don’t think there’s going to be a real push to raise interest rates for a couple of years at least.” 

One banker asked about the pandemic’s impact in different regions of the state. Williams said urban centers were hit hard, but also noted that the data show the economic impact did not mirror the concentration of the virus. “What we saw is the impact wasn’t directly tied to the prevalence of the virus,” he said. Instead, the hardest-hit areas tended to be concentrated in tourism-dependent areas—including the northern parts of the state. 

Seitz is WBA operations manager and senior writer.