By Rose Oswald Poels

Recently, I had the pleasure of co-hosting the Midwest Economic Forecast Forum with Indiana Bankers Association President and CEO Amber Van Til. She and I were joined by Chicago Fed President Charles Evans and Craig Dismuke of Vining Sparks, both of whom offered their necessary and expert economic insight. Part of their forecasts for the economy included interest rates projected to remain low until 2024, a positive outlook for residential investments, and the impact of the congressional shift on the economy.

The stimulus money provided throughout 2020 was critical for individuals and businesses, and the exigence of this relief does not seem to be disappearing any time soon. Though the blue wave predicted last year has been confirmed, it is one that seems to be documented with a few asterisks. With the majority being so minor in both chambers, this will likely limit the legislative scope. It’s still uncertain what this will mean for economic policy moving forward, but many are confident in another round of individual stimulus being a part of it.

In the first two rounds of PPP stimulus distributed during 2020, Wisconsin bankers across the state quickly took action to help their customers by providing nearly $10 billion in funding to nearly 90,000 businesses. The new year is now joined by a new Congress and presidency, both of which will impact the future of stimulus and the economy following the PPP trilogy. Beginning this week and continuing over the next month, WBA is holding virtual small group in-district meetings with each member of our Congressional delegation to discuss the industry’s priorities. In the meantime, the 2021 state legislative session has officially begun, and WBA has started the year strong by providing written testimony for the COVID liability provision in Assembly Bill 1. We will continue to advocate for the protection of Wisconsin bankers as we also begin the work on other priorities in our legislative agenda.

Finally, we will be presenting a free webinar to address what we currently know about the latest round of PPP, what might not be clear, and how your bank can help businesses during this next phase. PPP has been a lifeline for struggling businesses to help them fare through the financial stress of the pandemic that no one could have predicted, and bankers are still playing a significant role in this aid. I invite you to join us for this event on Thursday, January 14 as you once again prepare to help those who need it most.

On Thursday, Jan. 7, Wisconsin Bankers Association’s President and CEO Rose Oswald Poels and Indiana Bankers Association’s President and CEO Amber Van Til hosted the Midwest Economic Forecast Forum. The virtual event featured Chicago Fed President Charles Evans and Vining Sparks Executive Vice President and Chief Economist Craig Dismuke. Both provided a detailed overview of their expectations for the economy in 2021 and beyond.

The event began with an introduction from the hosts and a moderated Q&A. During Evans’ allotted time, he stated that the second quarter of 2020 had a quick decline, but it has been met with a steady comeback. Unemployment rate at one point hit above 14%, which has now been cut nearly in half at about 6.7%. Even further, he expects this rate to be 5% at the end of the year, which is considerable progress looking at where the year began. This, according to Evans, is a good indicator to judge the national state of where we are.

"With continuations of labor market improvement, unemployment falling to 4% and hopefully below that, it's probably going to be 2024 before we see interest rates start to rise," said Evans, though the median estimate amongst his colleagues is 2023. With that, we can “gently increase the federal funds rate, while it will still be accommodative in order to sort of achieve this overshooting and average 2% (inflation)."

As for Wisconsin and Indiana specifically, Evans believes they will both share in the improvement in the national growth. Part of what he hopes to see as a result is a vibrant labor market, clarity around international trade and longer-term sectoral changes, and continued federal support, which Dismuke added during his presentation is critical for those who have been hardest hit by the pandemic.

“It’s really been a story of diverging outcome,” said Dismuke. “We expect that will persist at least as long as the virus persists.”

During his PowerPoint presentation which addressed his economic outlook on vaccines, stimulus, and recovery, Dismuke looked back on how the pandemic’s impact on the economy took root and what he saw as the bright spots in recovery. He noted that the outlook on residential investment remains strong, interest rates are likely to stay low, and that all the pieces are in place for a strong economic recovery once the virus is contained.

Further forecasts addressed agricultural spending, cryptocurrency expectations, and the economic impacts of the elections. Attendees also had an opportunity to ask speakers pressing questions of their own. Following the event, Evans was asked to share some thoughts on the community banking sector.

“Community banking is competitive,” Evans explained. He spoke on how the banking system has been important for us especially with their efforts with the Paycheck Protection Program. “The state of capital levels is good which is good for community banks.” Yet, it is still a challenging lending environment. There are uncertainties related to commercial which is making it a more difficult lending environment.

“Although they have a lot of opportunities,” summarized Evans. “I’m optimistic.”

To access a recording of the 2021 Midwest Economic Forecast Forum, email

By, Alex Paniagua

February brought an end to the nation’s longest economic expansion. The economy had begun to slow even before the pandemic-induced economic lockdowns resulted in an unprecedented 31.4% slide in real (i.e., inflation adjusted) GDP in the second quarter of 2020. Fortunately, the combination of quick and aggressive actions taken by the U.S. Congress and the Federal Reserve Bank generated a significant economic bounce as real GDP growth rose sharply in the third quarter (33.1%), albeit on a much lower base of economic activity. Given ongoing policy efforts to limit the spread of the COVID-19 virus, it is not surprising that real GDP remains slightly below its pre-pandemic level. However preliminary indicators do suggest modest growth in the fourth quarter. This will hopefully result in a relatively normal recession, at least in terms its length. Note that the average post-war recession lasted 11.1 months.

The National Bureau of Economic Research (NBER) is the organization that officially defines the precise month in which a recession begins (the current recession began in February 2020), and the month in which it ends. The NY Federal Reserve Bank tracks the components of real GDP in real time and their preliminary estimates suggest modest growth in the range of 2.5% in the fourth quarter. While this is good news, we will need to see sustained growth in income and employment before the NBER concludes that the recession has officially ended. Once vaccines have been widely distributed, we expect economic activity to return to pre-pandemic levels.

While the economic recovery might not be V-shaped, the Wisconsin housing market recovered very quickly after a short three-month decline between April and June. This largely coincided with the timing of the economic lockdown of the state. The president declared a National Emergency in mid-March, and given the lag between an accepted offer and a closing, the impact of the virus began to show up in April home sales, where the number of closings slipped 4.7% compared to April 2019. On an annualized basis, May sales declined far more dramatically (-23.4%), but by June they were down just 1.7% relative to their levels 12 months earlier. The July through October period of 2020 revealed average growth in closed sales of 14% compared to that same four-month period in 2019. Indeed, Wisconsin is on record pace to sell more homes in 2020 than in any year since the Wisconsin REALTORS® Association re-benchmarked its data collection methods back to 2005, something that seemed nearly impossible in May.

Why have home sales increased at such a robust pace even though the state labor market, while improving, is still considerably weaker than last year? The simple answer is that record low mortgage rates have created a significant spike in housing demand. Prior to 2020, the 30-year fixed rate mortgage had been at its lowest point in November and December of 2012, when it fell to 3.32%. That rate was 3.31% in April of this year, and it has hit new record lows every month since that time. In November, the 30-year rate stood at 2.77%, which is 93 basis points below the November 2019 level. What is remarkable is that sales are growing at a record pace even though inventory levels signal a strong seller’s market. Six months of available supply is considered to be a balanced market, and Wisconsin had just 3.3 months of supply in October, which is down 31.3% from the 4.8 months of inventory just 12 months earlier. Not surprisingly, strong demand and weak supply continue to drive prices upward. On a year-to-date basis through the end of October, the Wisconsin median price rose 11.1% to $220,000 compared to the first 10 months of 2019. Still, housing remains relatively affordable due in large part to the record low mortgage rates. The Wisconsin Housing Affordability Index shows that fraction of the median priced home that a typical buyer with median family income can afford to buy given 20% down and the remaining balance financed with a 30-year fixed rate mortgage at current rates. In October, this index was at 199, suggesting that a buyer can afford to purchase nearly twice the median income in the state. Although affordability has fallen 6.5% relative to 12 months earlier, it remains higher than the national index. The national Housing Affordability Index published by the National Association of REALTORS® was at 160 in September (the latest data available at press time), and this is about 18% lower than the comparable September index value for Wisconsin.

A presidential transition, especially when it also involves a change in political party carries with it substantial uncertainty since the two parties have very different views of the appropriate roles of the private versus public sectors in the economy. Still, there are several reasons to be optimistic about the future. First, the primary drag on the economy is the ongoing pandemic, and the restrictions on economic activity currently used to control the virus. With the imminent distribution of a vaccine, we believe that constraint will be effectively lifted in the first half of 2021. Second, the Fed has indicated that it will keep short term interest rates near 0% for the foreseeable future. They view the risk of inflation as minimal and they are committed to expansionary monetary policies to stimulate growth. As long as inflation remains low, this bodes well for continued low mortgage rates in 2021. Third, assuming a Republican-held Senate, a divided federal government should keep the regulatory burden in check. At the state level, once the pandemic has ended, policymakers need to move quickly to fully reopen the state economy. Only then will we see employment levels return to pre-recession levels. In addition, working to reduce the regulatory burden on new residential construction will help to ease supply limits in the state. Finally, although state legislators have little control over local property tax decisions, maintaining a tax environment that is favorable to business formation will continue to support the housing market.

Founded in 1909, the Wisconsin REALTORS® Association (WRA) is one of the largest trade associations in Wisconsin. It represents and provides services to more than 16,500 members statewide. WRA’s goal is to help REALTORS® enjoy successful careers and stay competitive in their local markets by offering hundreds of products and services.

By, Alex Paniagua

2020 marked the Wisconsin Hospital Association’s 100th anniversary …. and what a time for that! We’re out of adjectives for a year that challenged our state’s health system in ways unfathomable just 10 months ago, and not experienced since a century ago. But Wisconsin health care is poised to emerge stronger and better after COVID-19.

Updated Playbooks, New Strategies
COVID this spring was largely a dry-run, patients not surging heavily into Wisconsin hospitals until the third and fourth quarters. As the numbers of COVID inpatients increased drastically in September, hospitals utilized their earlier experiences and planning to reprioritize care, reallocate resources and retool space. With determination and creativity, Wisconsin hospitals added capacity for over 1,400 inpatients in order to absorb the COVID wave, restructuring lobbies, waiting rooms and even ambulance garages to handle patient overflow and safely treat both COVID and non-COVID patients. All this while hospitals massively expanded their COVID testing capacity and conducting the majority community testing across our state.

Built to Bend … Can’t Allow to Break
Staffing that expanded capacity, in a highly contagious pandemic, has proven an immense challenge. Community spread of COVID has taken thousands of Wisconsin heath care workers out of the fight at the same time demand surges. Hospitals have used every staffing tool and resource to cope, but neither the supply nor resiliency of our incredible heath care workers are infinite. The sustained, COVID-caused maximum capacity operation of hospitals, enabled by seemingly endless shifts behind masks, gowns and shields, and filled with tragic losses of life (over 4,700 Wisconsin COVID deaths), has taken a toll on the state’s health care workforce. Wisconsin’s nurses, doctors, technicians, custodians, administrators, aids, food service workers and many others working to keep us healthy and safe have truly earned the title “Hero”.

Like other sectors, the pandemic has inflicted serious financial damage on health care. A federal directive in March that postponed non-emergency hospital care translated into approximately $2.5 billion in net losses for Wisconsin hospitals over four months. Delayed care, whether by government mandate or capacity conserving necessity, has other serious, yet underappreciated, ramifications. One study found that 41% of U.S. adults avoided medical care due to the pandemic through June 30. Applying lessons learned in the spring, hospitals are doing everything possible to minimize “crowd-out” of non-COVID care during the fall and winter surge. This is one of the many reasons slowing down COVID is a statewide, multi-industry imperative.

Teaming Up to Stop COVID
In September, as COVID began raging in earnest here, WHA led the creation of a multi-industry coalition “Stop the COVID Spread!”, a diverse group intent on cutting through the politicization of COVID to drive widespread adoption of simple, yet critical, healthy behaviors. Since its launch in October, the “Stop the COVID Spread!” coalition has grown to more than 125 Wisconsin organizations and aired five separate messaging campaigns. The Wisconsin Bankers Association was one of the first to lend its name and support to this effort … thank you, WBA!

“Out of Adversity Comes Opportunity”

Like many industries, health care will be forever changed by COVID and so, we hope, will government. Wisconsin’s hospitals initiated and refined new methods of care and resource use that are driving better outcomes and helping government embrace regulatory changes today and substantiate more reform in the future. Pandemic-driven innovation, from expedited physician and nurse licensure to expanded use and acceptance of telehealth to new uses for hospital space, will maximize health care quality, access and affordability long after COVID recedes.

I firmly believe Wisconsin’s nation-leading hospitals and health systems will emerge from COVID-19 stronger and better than ever.

By, Alex Paniagua

Many contractor balance sheets are reporting 2020 revenue numbers that normally reflect a strong economy and healthy industry. That seems to be a mixed message when we know that COVID-19 has devastated the financial stability of many businesses, institutions and local and state governments. To make sense of this, it is important to understand that construction projects completed this year were bid, negotiated and won in 2019 or earlier.

Even though 3 out of 4 contractors across the country experienced project delays or cancellations due to COVID-19, being deemed an ‘essential’ industry was critical in allowing many construction projects to continue over the last year – some were even completed in record time because of reduced occupants in schools, vacant corporate office buildings and fewer vehicles on the road. The construction industry was also one of the largest recipients of Payroll Protection Program (PPP) loans, allowing contractors to retain employees and providing an economic boost to counter balance increased project costs and project delays.

The common storyline from contractors about the 2021 outlook is concern over the decreasing backlog of work as their customers are uncertain about future building plans. National and local politics, increasing COVID-19 cases that make a return-to-work or school soon unlikely, and concerns about an economic recession all contribute to this uncertainty. It is no surprise that the collective prediction of economists is that the impact of the COVID-19 pandemic will be significant to both public and private sector construction because select industries were essentially shut down (manufacturing, retail and hospitality among them) and tax revenue, critical to public project funding, has decreased.

While multi-family and single-family residential construction has been strong throughout 2020, all major categories of nonresidential construction spending have decreased since February. Power, distribution centers and data centers are markets forecasted to have positive increases in 2021. Education construction is a mixed story with declining higher education construction due to decreased revenues for the UW System, but K-12 construction will likely be strong as Wisconsin voters passed 85% of school referendums on the ballots in November.

As Governor Evers prepares the budget that will be presented to the Legislature in February, it is critical that there be a focus on continued investment in Wisconsin’s infrastructure. Even throughout the pandemic when fewer residents were on the road, we realize how essential transportation is to our everyday life – keeping store shelves stocked, allowing grocery and meal deliveries to continue and stocking Amazon distribution centers. We also realized how essential our fiber-optic infrastructure is due to remote work and learning demands, and investments to improve fiber-optic infrastructure, especially in rural Wisconsin, must continue.

Ongoing investment in Wisconsin’s infrastructure is essential for recruiting and retaining businesses in our state and to post-Covid-19 economic recovery. That investment is also crucial in providing financially rewarding jobs to the more than 125,000 construction industry employees that call Wisconsin home. Wisconsin’s construction industry is essential to the health and success of our state and we welcome the challenges and opportunities that 2021 will bring.

The Construction Business Group promotes and protects the construction industry. They ensure fair contracting laws are followed on public construction projects. They work co- operatively with contractors, employees, and public entities by educating them on fair contracting laws, monitoring projects for fair contracting compliance, and identifying and helping to resolve compliance issues.

By, Alex Paniagua