In the economic game, Minnesota is pulling away from Wisconsin

There used to be a healthy economic competition between Minnesota and Wisconsin. The states were neck-and-neck for years in employment growth and other key indicators. It became even more fun with Wisconsin Gov. Scott Walker’s “Wisconsin Open for Business” rhetoric.

For awhile, it really sounded like Wisconsin was eating our lunch. Back in February, a Wisconsin lawmaker even sent out an “open letter” to Minnesota businesses encouraging them to relocate to Wisconsin in response to Gov. Dayton’s tax and budget proposals.

But as we’ve noted repeatedly in past posts (find a sampling herehere and here) Wisconsin talks a better game than it plays when it comes to economic success. The facts show Minnesota performed better than the Badger State in keeping people employed during the Great Recession and adding jobs in the recovery.

This spring, though, there’s been mounting evidence that, economically, Wisconsin’s not even in the game.

Exhibit A is the state monthly coincident index produced by the Federal Reserve Bank of Philadelphia.

The index is a good apples-to-apples comparison, combing four indicators (nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and inflated-adjusted wages) into a single statistic.

February data showed a marked uptick in the index for Minnesota over Wisconsin. April data showed Minnesota pulling away as Wisconsin staggered.

Here are the data indexed to a common starting point in 2007, before the recession began.

wisconsin.commonindex

The separation between Minnesota and Wisconsin has become even more pronounced this spring. In fact the Philly Fed’s Leading Index forecasts Minnesota’s economy continuing its solid growth the next six months.

Wisconsin? It was one of only five states to show an expected decline.

wisconsin3

I’ve noted in other posts that the data don’t end the discussion about taxes and spending or the effects of fiscal policy on business decisions. Yes, it’s possible the latest Minnesota budget and the new taxes that come with it will send Minnesota businesses running across the border.

Still, no matter what you think of the budget and tax policies of the two states, the bedrock economic data show Minnesota has outperformed Wisconsin for more than a decade and has accelerated its recovery the past three years while Wisconsin has stumbled.

From 1980 through the early 2000s, Minnesota and Wisconsin ran neck-and-neck in these key economic measures.

wisconsin1

The gap between Minnesota and Wisconsin has never been wider.

The Milwaukee Journal-Sentinel wrote recently:

“The most accurate reading of the state’s employment trends show Wisconsin ranks at No. 44 in private-sector job creation in the most recent 12-month period. In the same time frame, also using accurate data, Wisconsin ranks as the nation’s fifth worst in terms of the erosion in private-sector wages, in which the state’s 2.2% decline is twice the rate of the national 1.1% average.

Even in a slow recovery, Wisconsin has been on the caboose. Few if any economists appear to have pinpointed the exact reasons, which has opened the issue to political posturing over economic policy from both sides.”

Wisconsin has a lot of issues.

Economies recover. Wisconsin will see better days. For now, though, the economic competition between the two states isn’t really much of a competition.

  • pdq3

    Well, you didn’t quite say it, so I’ll pose the question:

    Just by eyeball, the biggest recent increase or widening in the gap began around the start of 2011. The lines were separate, but tracing relatively parallel since the official end of the recession in 2009.

    One wonders, was there some change in, say, the relative political landscape of MN and WI in January of 2011? Who was it that took office in the two states at that time?

    A repeat of the FRED graph of the coincident economic activity beginning at that point might be particularly illustrative.

    • Janelle

      MN Gov Dayton was elected in 2010 and started his term in 2011. WI Gov Walker was also elected at the same time. I think this is proof Walker’s policies do not work.

  • Wisconsin Voter

    He’s pretty bad. A lot of people who voted for him in the recall are regretting it now, he promises big and doesn’t show up

  • Daniel Plotkin

    Yeah, but we still got the Axe!