Wisconsin sees labor force rise

Wisconsin’s unemployment rate ticked up up to 2.9% in May from its historically low 2.8% in April, but that is actually good news.

That uptick wasn’t caused by job losses—in fact the preliminary estimates for May 2022 from the Bureau of Labor Statistics showed a historic high of 3,059,300 Wisconsinites were employed.

What changed in the equation is the number of people looking for jobs, according to Dennis Winters, chief economist at the Wisconsin Department of Workforce Development, during a media briefing Thursday.

“The increase of the rate is the result of the labor force growing more than employment,” Winters said. “The labor force grew by 1,900 in May, whereas the employment grew by 1,300.” 

In other words, the unemployment rate went up because a number of people who had dropped out of the labor force — meaning they were neither working nor looking for work — decided conditions were good enough to re-enter the labor pool and they did so faster than employers could hire them. May was the sixth month in a row that Wisconsin’s total labor force grew.

“We expect both of those trends to continue—the labor force to be continually flat although hopefully gaining, as we go forward, employment is expected to continue to gain,” Winters said. “So you keep maintaining that low unemployment rate, which will probably stay down here near historic lows for the foreseeable future.”

Wisconsin’s labor participation rate (the percentage of people working or seeking work out of the total population) remains high at 66.5%, 4.2 percentage points higher than the national rate of 62.3%. But when divided along sex, race and ethnicity, those subcategories of workers have still not fully recovered to their pre-COVID employment rates.

Surprisingly, one demographic that has returned to the workforce is Baby Boomers, many of whom left during COVID and whom analysts believed would retire permanently. But national data shows that 1.5 million Americans from the Baby Boom generation have returned to the workforce over the past several weeks.

In line with those numbers, unemployment insurance numbers have reached “historic seasonal lows” according to DWD spokesperson Jennifer Sereno. At the end of May they were at a new low at 15,224; one year ago that number was 55,697. For the week ending on June 4, 3,288 Wisconsinites filed initial unemployment claims, down from 7,466 in the same week in 2021.

But much like the impact of the pandemic, the recovery is somewhat uneven. Of the more than 400,000 jobs lost during the initial months of the pandemic, about 98% have been recovered and Wisconsin’s Gross Domestic Product (GDP) has reached an all-time high of $307 billion (in real 2012 dollars), and Winters said the state is seeing growth across the board.

Professional and business services have exceeded pre-pandemic levels and have continued to grow, particularly in professional science and technical services.

“That’s usually good news as an indicator for an expanding economy because those are the professional services and such that are used by third party services that go into business,” Winters said.

Manufacturing has also exceeded pre-pandemic production levels despite a worker shortage, showing high worker productivity. Construction has also been strong also despite a worker shortage, though Winters said the industry could see that slow down, particularly with single-family homes, due to high prices and higher interest rates.

But some sectors are further along in their recovery than others. Hospitality and leisure, which was hit hardest by the pandemic, has recovered 95% of jobs lost, but is still 13,300 jobs short of full recovery. Health care also has lower numbers, which Winters said is due to more services being available online and therefore clinics not having to have as many people on hand.

The biggest impediment to the economy continues to be the worker shortage. Winters said he attended a conference where employers said they were employing a wide range of tools to attract workers, from higher wages and benefits to subsidized child care and even housing. 

Leisure and hospitality are experiencing a “dire” need for workers, said Winters, and part of the issue may be that fewer people are seeking part-time employment.

“Leisure and hospitality employs a relatively large number of people with second jobs and third jobs,” Winters said. “That’s something that’s affecting a number of businesses but particularly leisure and hospitality.”