Economic Report: Expect More of the Same

By Kurt Bauer, Wisconsin Manufacturers & Commerce

When it comes to assessing the strength of our economy, I am not sure what to believe; government economic data or what I am hearing from Wisconsin Manufacturers & Commerce (WMC) members, particularly our manufacturers.

Economic numbers are overall pretty solid. The unemployment rates for both the U.S. and Wisconsin (3.9% and 3.2%, respectively), are low, and GDP growth is strong (initially reported as 5.2% in Q3).

But during a recent WMC Board meeting, one member, who happens to be a banker, said that while we are not in a recession, “we are in something.” Other Board members smiled and nodded in agreement.

To that point, the concern that “something” not so positive is happening has been reinforced by multiple business leaders during scores of member visits and CEO roundtables WMC has hosted around the state since last summer.

One warning sign, which actually has a short-term silver lining to it, is that WMC members are telling us that for the first time in years, more people are applying for jobs, coming to interviews and, if hired, showing up on the first day of work. That is anecdotal evidence that the economy is slowing.

To be sure, this is a temporary respite from the labor shortage, which is without question Wisconsin’s biggest long-term economic challenge.

To show just how acute the labor shortage is, many businesses tell us they are reluctant to lay off employees even as business slows because they know they will need them on the back end when the economy gets stronger.

Businesses also continue to be optimistic about their company’s outlook in 2024 versus the economy as a whole. For example, most businesses believe they will remain profitable in the New Year even as they suspect the national economy will be somewhat anemic.

The bipolar view of the economy may just be a sign of troubled times. There are wars in Ukraine and Israel, as well as a cold war with China. The world seems far more unstable and dangerous entering 2024 than it did just a few years ago.

Interest rates are high to combat stubborn inflation. And we are on the eve of national presidential and congressional elections, which will showcase the deep political and social divisions in our country.

2023 was a chaotic year. I would expect more of the same in 2024. There will continue to be contradictory economic information, geo-political conflict, domestic political polarization, and unrest.

The aforementioned 2024 elections will be huge. Most people tend to focus on the White House, but don’t forget the razor thin margins in both the U.S. Senate (51 Democrats, 50 Republicans) and the House of Representatives (221 Republicans, 213 Democrats and one vacancy, as of press time).

Typically, uncertainty as to which party will control both the White House and Congress compels businesses to delay major decisions. That makes sense considering the stakes for the national business climate, including tax, labor and energy policy.

At the state level, keep an eye on the Wisconsin Supreme Court in 2024. There is an activist progressive majority on the high court for the first time since 2008 by virtue of Janet Protasiewicz’s victory last spring, and the consequences to the Wisconsin business climate could be profound.

There are already challenges to school choice funding and Act 10, which ended compulsory union membership and collective bargaining for public employees, saving Wisconsin taxpayers an estimated $16 billion over 12 years. We also expect additional legal challenges to Wisconsin’s Right to Work law and scores of other pro-business reforms impacting taxes, regulations and the litigation environment.

Sweeping regulatory and liability changes by fiat from our state Supreme Court could freeze business investment the same way as national political uncertainty does, and cause Wisconsin employers to look elsewhere when making investments.

Bauer is president and CEO of the Wisconsin Manufacturers & Commerce | Wisconsin Manufacturers & Commerce (WMC) is the largest and most influential business association in the state, working to make Wisconsin the best place in the nation to do business. WMC is proud to have been serving as Wisconsin’s business voice since 1911, representing over 3,800 member companies, spanning all sectors of the economy.