Wisconsin continues to see historically low unemployment, but the state’s economy is showing signs it could be slowing down.
Over the first two and a half months of 2023, the Wisconsin Department of Workforce Development has seen an increase in layoff notices compared to the same period last year.
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But the most recent unemployment data shows Wisconsin’s unemployment rate remained low at 2.9 percent in January — better than the 3.4 percent national rate that month — according to state Department of Workforce Development, or DWD.
“Wisconsin’s historically low unemployment rate, combined with strong job growth across multiple sectors, continues to signal the vitality and resilience of our workforce and economy,” DWD Secretary-designee Amy Pechacek said in a March 9 statement. “While these numbers are incredibly positive, they also call out the need for continued efforts to remove employment barriers and equip workers with in-demand skills.”
State data for February hasn’t been released, but national unemployment remained low at 3.6 percent last month — Wisconsin typically fares better than the country as a whole in terms of unemployment.
Despite unemployment remaining low, Laura Dresser, associate director of the COWS economic think tank at the University of Wisconsin-Madison, said increased layoffs are tied to the Federal Reserve’s efforts to curb inflation by raising interest rates.
“There’s federal policy focused on trying to cool economic growth,” she said. “I think it’s also the case that the economy remains — in spite of that — quite robust in terms of demand for workers. The unemployment rates are staying low and new workers are coming into the labor market.”
The Fed’s efforts were designed to reduce inflation by slowing business and consumer spending. The Fed has said it hoped to do so without creating a recession like it did in the 1980s.
Steven Deller, professor of agriculture and applied economics at UW-Madison, said it remains to be seen whether the economy will experience the “soft landing” the Fed is hoping for.
“The debate is not whether or not the economy is going to slow down, it’s whether or not we’re going to go into a recession or not,” Deller said. “And the general consensus is that we probably are going to go into a recession. The debate really is, how severe will it be?”
He added that the number of economists predicting a deep recession remain in the minority, but businesses are trying to get ahead of a potential economic downturn.
“I think that a lot of businesses are starting to go into a little bit of a wait and see mode because interest rates are going up (and) with the bank scare,” he said. “Maybe they’re going to back off on hiring, whether or not they’re going to start laying people off.”
Dresser and Deller both said the state’s labor shortage could help avoid a major spike in unemployment during an economic downturn. In October, the state had 112,000 more job openings than it had people to fill them.
“It’s always possible to get a spike in unemployment,” Dresser said. “Wisconsin’s unemployment rates will never spike as much as other states that have more workers or more slack in their labor market.”
Deller said it’s also less likely that businesses will turn to layoffs after lessons-learned from hiring challenges as the COVID-19 pandemic eased.
“Firms had such a difficult time hiring people, they’re going to be really hesitant to lay people off,” he said. “Because they’re thinking, ‘If we had a really hard time hiring (people) back post-COVID, do we really want to do that to ourselves again?’”
Wisconsin Manufacturers & Commerce, or WMC, is the state’s largest business advocacy group. The association said the layoffs recorded so far in 2023 represent less than one-tenth of 1 percent of the overall jobs in the state.
“The biggest threat to Wisconsin’s economy is the persistent workforce shortage,” WMC President Kurt Bauer said in a statement. “Right now, we have more jobs available than people looking to fill them, which is a threat to a growing economy. To solve this, not only do we need to attract and retain talented people, we must find ways to get people off the sidelines.”
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