FEATURE: Dodging the Down Economy
numbers suggest the Chippewa Valley has skirted national economic woes
Chances are, you’re under the impression you should feel terrible about the economy. Despite continued evidence that things are slowly improving nationwide, we’re constantly bombarded with hyperbole on the supposed bad state of financial affairs. That may be partly because national expectations for constant, escalating growth have reached a generally unsustainable level. That, combined with an exclusive diet of TV commentator opinion can hurt our understanding of what’s really going on. For one thing, it surely does nothing for our knowledge of the economy in our own communities. And it just so happens for those of us living in the Chippewa Valley, there’s plenty to feel good about.
We looked into some recent economic statistics about the Eau Claire Metropolitan Area, and to our untrained eyes, it appears as though there’s evidence we’re on the economic rise (and frankly, that things were never all that bad here to begin with). So that got us thinking. Are we ahead of the curve, and is the rest of the nation to follow? Or, since some statistics suggest we never actually dipped all that much, could it be that we’re behind the curve, and the worst is yet to come? Or perhaps a third option is possible – is our area is somehow insulated from national economic woes, existing outside of the curve entirely?
As we dig into this, it may help if you consider turning off your TV and ignoring the “reality” cable news tries to sell you. And instead, participate in the actual reality of our own community.
First up, a look at our "Local Gross
Domestic Product" »
Local Gross Domestic Product (GDP)
What It Means ...
A pessimist might say, “Sure, we did well over one year. Big deal.” In response, an economist would punch the numbers and dive deeper. And one did: Scott Hodek, economist for the Wisconsin Department for Workforce Development. First of all, GDP statistics always appear to go up, Hodek said. It’s when you look at the stats adjusted for inflation (“The Real GDP”) that the story becomes clearer.
Productivity and standard of living typically go hand in hand, and so it has increased here more than the average metro around the country. And the acceleration trend continues, which is really interesting.
“What’s interesting is when you look at our (Real GDP) compared to the metro areas of the U.S., in 2010 we grew by more than 5.4%, whereas all metro grew 2.5%. Our growth was slow in 2007, and 2008 was our worst year, but in 2009 and 2010 we pulled out of it,” Hodek said, adding that the U.S. dropped the most in 2009 and has yet to pull out of it. “So maybe there’s something in the theory that we’re ahead of the curve.”
But Hodek took it one step further, examining our GDP divided by the population (Per Capita Real GDP), which is a crude sort of way to see what our average person’s productivity is.
“From 2001 to 2010 the nation grew by 5.7%, while we grew by almost 18%. So what that says is, even though we started lower, we’re accelerating faster,” he said.
“Productivity and standard of living typically go hand in hand, and so it has increased here more than the average metro around the country. And the acceleration trend continues, which is really interesting.”
Next up, the statistics on
Local Unemployment »
Local Unemployment
What It Means ...
While it’s easy to see how the numbers have gone down slightly, most people don’t realize that Eau Claire has been consistently a few percentage points lower than the state, region, and nation. “Generally speaking, metro areas are almost always lower,” Hodek said of unemployment, “but we do tend to be low in addition to that.”
The reasons for this resilience, are Eau Claire’s diverse balanced economy, our young workforce, and the solidarity of our health care and education sectors. That was a repeated statement from several officials, including Thomas Kemp, former EC city councilman and current UWEC economics professor on leave to serve as economist for Abu Dhabi’s Department of Transport.
“The Eau Claire economy does not really experience economic busts (or booms) like the rest of the nation. The reason for this is that many of the core services in Eau Claire, such as education and medical, do not experience those cycles.”
“The Eau Claire economy does not really experience economic busts (or booms) like the rest of the nation. The reason for this is that many of the core services in Eau Claire, such as education and medical, do not experience those cycles,” he said. “People do not stop getting sick or going to school when the economy goes bad. On the boom side, people don’t get sick more or go to school more when the economy improves.”
Hodek added that, in poor economic times when people are laid off, those people tend to return to school, so in that respect, a recession could help the education sector. “And there’s a tight correlation between high education levels and low unemployment,” Hodek said. “We’re higher than the state and nation in associate’s degrees, bachelor’s degrees, and higher than the state in graduate/professional degrees.”
In Eau Claire, 11% of the population has associate’s degrees, 20% have bachelor’s, and 10% have graduate/professional. That’s compared to 9% and 7% for the state and nation in associate’s degrees, 17% for the state and nation’s bachelor’s degrees, and 8% and 10% for the state and nation’s graduate/professional degrees.
“It’s not necessarily a cause itself,” Hodek added, “but it draws in companies looking for an educated and skilled labor force.”
Like several workforce statistics, unemployment rates have a lag time in showing improvements, so Hodek said the situation is likely improving more than the stats show. This is because companies take a long time to lay people off in bad times, and a long time to hire in good times.
Next up, Local Foreclosures
& Assistance Programs »
Local Foreclosures & Assistance Programs
What It Means ...
If you look at line graphs of foreclosures for the nation, state, and Eau Claire Metro Area, you see pretty dramatic spikes. But the good news is there’s evidence much of it has flat-lined, and foreclosures are much like unemployment numbers – they lag.
“Numbers are down compared to last year, but I’m expecting it to stay the same for about 12 to 18 months and then there will be a decline,” said Jeff Theisen, president of the Realtors Association of Northwestern Wisconsin. “The reason being it’s a long process to get through them. It can take a full year to 18 months for them to process.”
It’s such a long process, he added, that in our three-county area they only track the statistics on foreclosure filings, not completed foreclosures. Theisen’s conservative estimate of the number that actually go through is less than 50 percent, because people catch up financially and salvage their homes, or they do a short sale to avoid repossession.
And now, Housing
Sales & Values »
Local Housing Sales & Values
What It Means ...
“The last quarter, if you compare it to the same one last year, we’re up substantially. But that’s because of a tax credit for the beginning of 2010, and when that expired in July, sales dropped off a ton,” said Jeff Theisen, who’s also vice president of J. Theisen Realty of Eau Claire. “When you look at the year to date, we’re a little off, but we’ve gained a lot of ground and by the end of the year we’re expecting to be about even.”
Theisen added that Eau Claire homes have held values better than the majority of the state, and we’re “in the top 10 percent” for just that. And though we’re not putting up rising numbers, he says several metro areas are still on a sharp decline, such as much of the Southwest.
“It’s pretty much level. Just humming along,” he said. “And flat is a good sign. We’re not going down anymore. But it may be a while before we see the levels we were at. That could be several years.”
To sum up, "Are we
outside the curve?" »
Summing It Up: Are We Outside the Curve?
After being bombarded with statistics and conjecture, Hodek wonderfully summarized the whole situation for us. “[National media] tends to dramatize a little bit. Compared to where things could be, historically and nationally, things could be a lot worse, and [our area] is definitely better off than most.”
Just because your nation, region, or state is doing poorly doesn’t automatically mean your city is, as well. And that seems to be just the case with Eau Claire.
Every time new economic numbers come out, typically every month or quarter, news organizations sometimes compare them to the month before or that same month last year. But in order to really see a trend or a more accurate picture of what’s happening, you have to look over time. So if we’re down from last month, it’s still possible that it’s good news. We could still be up overall and just had a flat month, or we could be dropping less and less, suggesting things are slowly turning around. And the numbers are always relative to an area. Just because your nation, region, or state is doing poorly doesn’t automatically mean your city is, as well. And that seems to be just the case with Eau Claire.
“It could be better,” began Mike Schatz, the city’s economic development director. “We’re still not at the levels of the 90s and early 2000s – but it’s also certainly not disastrous. We’re a pretty conservative community, so our ebbs and flows are not as dramatic. … I think it’s a sign that our local companies are very productive, and I think we’ve weathered the recession as well as most communities. Hopefully in the near future we’re gonna see things pick up in all areas.”
