Farmers still struggling despite state's strong economy heading into 2019

Paul Gores
Milwaukee Journal Sentinel
Wisconsin's economy seems generally strong heading into 2019, but farmers are struggling.

While industry leaders generally agree Wisconsin’s economy is strong and they're  optimistic heading into 2019, the path forward isn't free of peril.

A recession doesn't appear likely in the near term, and deregulation and lower corporate income taxes should help keep the business climate on the upswing, some industry leaders say in the just-released annual “WBA Wisconsin Economic Report” by the Wisconsin Bankers Association.

But at the same time, Wisconsin’s agriculture industry, especially dairy, is hurting, and tariff retaliation by foreign countries is raising the cost of raw materials for manufacturing and housing here. And, across industries, companies in the state are concerned there aren’t enough workers to fill their job openings in 2019.   

“Wisconsin tends to lead the U.S. into a recession and lag it coming out,” said economist Brian Jacobsen. “If recession risks are rising in the U.S., they’re even more critical in Wisconsin. But I think some of the recession risks are overblown, which means full-steam ahead for Wisconsin.”

About half of the 99 top bank executives polled by the bankers’ trade group expect the economy to stay the same next year as it’s been in 2018 — a level 85 percent considered “excellent” or “good.” But a slightly bigger percentage of those who foresee change think the economy is more likely to weaken than grow.

In the WBA Wisconsin Economic Report, which includes sector forecasts from industry experts, Rose Oswald Poels, WBA president and chief executive, characterized 2018 as “a great year for Wisconsin’s economy as well as lending activity.” She noted that bankers are the first to see and understand the state’s economic trends because they are involved with businesses and consumers at ground level.

“Wisconsin’s banking industry saw steady growth throughout 2018, and I expect that trend to continue for most of 2019,” Oswald Poels said.

Tariffs, health care costs, workers

Wisconsin Manufacturers & Commerce, or WMC,  also recently surveyed its members about the economic outlook. More than 200 business executives participated in the December poll.

“It shows that the economy is still strong, but there is less optimism than six or 12 months ago,” said Kurt Bauer, president and CEO of WMC. “Tariffs, health care costs and workforce were the top concerns.”

Bauer said tariffs are driving up material costs, especially aluminum and steel, for manufacturers.

“But the trade dispute is also impacting other areas of the economy, like auto insurance because parts cost more for repairs,” Bauer said. “Thirty-seven percent of WMC members say the trade dispute is having a negative impact on their business.”

However, overall, 84 percent of the executives surveyed by WMC rated the Wisconsin economy as strong or very strong, up from 80 percent in June and 70 percent a year ago.

Bauer also said businesses are struggling to offer affordable health care coverage for their employees, and that a labor shortage in a state with a 3 percent unemployment rate is an issue.

“Seventy-four percent of Wisconsin private sector employers say they are having trouble finding workers,” Bauer said. “That is down from 80 percent a year ago, which is perhaps an indication that the economy is slowing.”

A dearth of workers also was cited by Dale M. Beaty, chief administrative officer of the Wisconsin Farm Bureau Federation.

“Wisconsin farmers need federal immigration reform to maintain a consistent and reliable workforce,” Beaty said in the WBA's Wisconsin Economic Report. “Farmers want the federal government to create an immigration system which allows them to legally employ foreign workers. This is important because there is a shortage of workers in Wisconsin, and very few Americans are willing to consistently do the manual labor required on farms.”

Michael Theo, president and CEO of the Wisconsin Realtors Association, said in the WBA report “there are no immediate alarm bells suggesting a recession is imminent.”

Still, the Realtors organization said, housing sales are flat and prices are rising amid an insufficient supply of existing homes on the market and the moderate pace of new home construction.