A week after terrorists brought the American economy to its knees, the nationwide economic slowdown is expected to worsen. Wisconsin will most likely feel the shockwaves.
While many believed the state was already headed for a recession, Wisconsin now faces an even bleaker future.
David Ward, a director at the UW-Madison Learning Innovations Center, said the tragedies in New York and Washington, coupled with the sell-off on Wall Street, may cause local economic slowdowns.
“It will have a measurable effect on the Wisconsin economy,” Ward said. “The decline in the markets hurts a level of financial assets, and people will be more cautious in spending and in their financial decisions.”
UW professor of agriculture and applied economics Steven Deller also expressed concerns.
“Wisconsin is much more dependent on manufacturing than other states, which is more sensitive to an economic downturn,” he said.
The stock market decline will also affect Wisconsin residents’ retirement funds.
“It will impact income to some extent, especially those who had money in 401K Funds and pension funds,” said David Blaska, spokesperson for the Department of Commerce.
The overall negative government financial situation could potentially make a long statewide recession inevitable.
“To get us out of the early stages of recession means accumulating a lot of debt,” Deller said. “There is a structural deficit in the state budget, but they’ve been lucky that until now the economy was growing so robust. They were covering up the debt with the economic growth.”
Ward said the airline industry, as well as some other businesses, will be also be affected.
“The effects of the airline layoffs go into airline manufacturing, then suppliers, following all the way down,” Ward said.
The normally strong tourism industry might also be hit hard because of the recession.
“Wisconsin is becoming increasingly dependent on tourists and the tourism economy,” Deller said. “People are going to cut back on luxury-type items, which will affect manufacturing and tourism.”
Blaska said employment within the state was projected to rise by 0.4 percent before last Tuesday’s tragedy. Following last week’s events, however, those figures have become unrealistic.
Deller said the negative impact on the state’s manufacturing industry will result in increased unemployment statewide.
“In the early 1980s, unemployment was up in the double digits, but I don’t think we are going to be hit that hard,” Deller said. “It could tick up to 6.5 percent over the length of the recession, but it depends on how long this recession plays out.”
Analysts predict the government’s $40 billion defense funding increase could provide a minor stimulus for the sluggish economy.
“Heavy equipment manufacturing in the state might benefit,” Blaska said. “Past history shows [military] mobilization does spur the economy.”
However, Deller said while increased military spending might benefit some states, little of that money will find its way to Wisconsin.
“Wisconsin historically has not done very well getting defense contracts,” Deller said. “We don’t have much of a military presence, many bases, or big defense contractors.”
Ward said other industries could work to offset the expected decline in manufacturing and tourism.
“A lot of industries in the state are more stable, such as the paper industry,” Ward said. “We’ve also seen some recovery in agriculture, which is looking a little better right now.”