Alexander Richter and Nathaniel Throckmorton, An Examination of Unemployment Rates and Business and Retailer Confidence in Central Wisconsin over the Last Fifteen Years 

Introduction

Our main goal is to further enrich the surrounding community’s knowledge of the economic conditions in central Wisconsin over the past 15 years, from 1990 through 2004.  The purpose of our research was to identify similarities and differences between the central Wisconsin counties’ unemployment rates, and to identify possible relationships between retailer confidence indices.  Additionally, we compared unemployment rates to business and retailer confidence indices in central Wisconsin to determine whether or not the confidence of businesses and retailers in the economy reflects changes in area unemployment rates.  The entire report, which details the statistical analysis of the data and includes a more elaborate commentary with tables and graphs, can be found online at http://www.uwsp.edu/business/CWERB.

Findings

Over the 15 year time frame, the unemployment rate was significantly lower for Wisconsin compared to the national rate.  This implies that, on average, Wisconsin has a better workforce environment and economic conditions than many of the other states in the union.  In addition, the difference in the average quarterly unemployment rate may be due to Wisconsin’s strong work ethic and public education system compared to the average state. 

Wood County’s average unemployment rate was significantly higher than Portage and Marathon Counties’ unemployment rates.  Furthermore, Portage and Marathon Counties’ unemployment rates were statistically equivalent.  A possible explanation for this deals with how the municipalities are structured in Marathon and Portage Counties.  In Marathon there is a large city, Wausau, adjacent to two towns, Rothschild and Schofield.   Similarly, Portage County has a city, Stevens Point, which is adjacent to two towns, Whiting and Plover.  On the other hand, Wood County has two smaller cities, Wisconsin Rapids and Marshfield, which are not adjacent.  It seems likely that the geographic relationship of the municipal populations in Marathon and Portage Counties is more conducive to a healthy employment situation.  In addition, Wood County’s high dependence on paper manufacturing is likely to have played a role in this outcome.

Wood County’s unemployment rate was significantly higher than the rate for the State of Wisconsin.  This difference cannot be attributed solely to the layout of Wood County’s municipalities.  Education and health care services typically account for nearly a quarter of Wood County’s employment, creating less variety in the labor market.  The lack of variety in the labor market may have led to poor job opportunities for people who were looking for work in other sectors.  Also, the reliance on a struggling paper manufacturing industry, along with the less than optimal geographic relationship of its municipal populations, could possibly be creating the atypical unemployment rates.  In general, Portage and Marathon Counties have more stable employment situations with respect to Wisconsin than that of Wood County’s situation.

During the relevant period, central Wisconsin had better employment conditions than the nation on average.  In all instances, when the average unemployment rates for each of the central Wisconsin counties were compared with the national rate, they were significantly lower. 

The CWERB conducts a quarterly survey asking businesses and retailers in central Wisconsin to rate their confidence regarding economic conditions.  On average, retailers in Portage and Wood Counties experienced similar changes in total sales and store traffic.  On the other hand, when Portage or Wood County were compared with Marathon County, the difference in retailer confidence was significant.  It should be noted that Marathon County experiences a much higher level of economic activity than Portage or Wood County—this could be the cause of the difference in confidence. 

Retailers in Portage and Wood Counties are less reliable predictors of future changes in total sales and store traffic than those in Marathon County.  This means that the survey is more useful in predicting what will occur in the next quarter given the expected confidence in total sales and store traffic by retailers in Marathon County.  The opinions of retailers in Portage and Wood Counties were determined to be less helpful in predicting what total sales will be like in the future quarter.  The fact that Marathon retailers are better predictors of the future may be due to greater economic stability.  That is to say that growth may be more constant in Marathon County and more variable (or less predicable) in Portage and Wood Counties.  Economic stability in Marathon County can be attributed to the greater amount of economic activity as evidenced by sales tax distributions and a more robust employment situation.

There was an inverse relationship between the central Wisconsin yearly change in the unemployment rate and retailer confidence in total sales.  This means that if the central Wisconsin unemployment rate decreases, retailers have a relatively higher confidence in total sales.  Likewise, the opposite holds true.  Support for this comes from the fact that a higher unemployment rate results in a decrease in the average amount of disposable income per consumer.  Thus, one would expect that a decrease in disposable income directly influences the level of sales at retail outlets.

There was an inverse relationship between the national half-year change in the unemployment rate and business confidence in national activity.  This means that central Wisconsin businesses’ confidence in current national economic activity correlated well with similar changes in the national unemployment rate.  However, there was no apparent relationship between the central Wisconsin half-year change in the unemployment rate and business confidence in local activity.  A possible explanation for this may be due to the fact that it is easier to predict economic activity on a larger scale than a smaller scale.  For example, a business that provides services to hundreds or thousands of customers nationally can gauge economic activity much better than a business serving relatively few customers locally.  Another factor contributing to this inverse correlation may be due to the stability of national activity in comparison to the variability in local activity.

There was an inverse correlation between retailer confidence in expected store traffic and the central Wisconsin yearly change in the unemployment rate one quarter in the future.  Although this correlation does show that one variable relates to another, it does not imply causality.  However, it is possible that if entrepreneurs expect to perform well in the future, more likely than not economic conditions will improve due their increased activity.  This is an illustration of self-fulfilling prophecy.

There was an inverse relationship between business confidence in expected local activity and the central Wisconsin half-year change in the unemployment rate two quarters in the future.  This reinforces the notion that as businesses in an area become more confident in local activity, the area experiences a better employment situation.  If businesses expect an increase in activity, then they must accommodate for such expectations.  Therefore, we see an immediate impact on the unemployment rate.

Conclusion

Over the last fifteen years,

• the state of Wisconsin had significantly lower unemployment rates than the nation.
• Wood County’s unemployment rates were significantly higher than Portage and Marathon Counties’ unemployment rates.
• Wood County had significantly higher unemployment rates than the State of Wisconsin.
• Portage, Marathon and Wood Counties’ unemployment rates were significantly lower than the national unemployment rate.
• Marathon County retailers were significantly more confident in total sales and store traffic than retailers in Portage or Wood Counties.
• Marathon County retailers were better predictors of future total sales and store traffic; Portage and Wood Counties’ retailers were less accurate predicators of future total sales and store traffic.
• there was an inverse relationship between the central Wisconsin yearly change in the unemployment rate and central Wisconsin’s retailer confidence in total sales.
• there was an inverse relationship between the national half-year change in the unemployment rate and business confidence in national activity.
• there was an inverse relationship between central Wisconsin’s retailer confidence in expected store traffic and the central Wisconsin yearly change in the unemployment rate one quarter in the future.
• there was an inverse relationship between central Wisconsin’s business confidence in expected local activity and the central Wisconsin half-year change in the unemployment rate two quarters in the future.

Data Sources

Central Wisconsin Economic Research Bureau Business and Retailer Confidence data can be found in part on the web at http://www.uwsp.edu/business/cwerb/, or by calling 715-346-3774 for further information.

Department of Workforce Development Local Area Unemployment Statistics can be located at http://worknet.wisconsin.gov/, by clicking Data Analyst on the left, Data Tables in the submenu, and then Query for LAUS.

Department of Workforce Development Industry Data for Wisconsin counties can be located at http://worknet.wisconsin.gov/, by clicking Data Analyst on the left, Data Tables in the submenu, and then Query for Non-Metro County Industry Employment Estimates.

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