The drumbeat of negative news headlines and frightening economic data stemming from the Great Recession no doubt has taken a toll on our collective psyche over the past couple of years.
We’ve grown accustomed to the doom and the gloom. In many cases, we’re almost numb.
As an antidote to all of this malaise, BizTimes Milwaukee set out this month to find some leading indicators that point to an economic recovery that has begun.
Keep in mind, we are not whistling past the graveyard here. The U.S. economy lost 8.4 million jobs since the start of the recession in December 2007. All is not well just yet, and there will certainly be speed bumps and maybe even some dips as the recovery unfolds.
The commercial real estate development market is still on ice, and the financial services sector continues to be wobbly.
However, make no mistake, we are recovering. Most of the latest macro-economic numbers are encouraging:
- The U.S. Labor Department reported that the economy created 162,000 jobs in March, the largest seasonally adjusted increase in nonfarm payrolls in three years. Nonfarm payrolls rose for just the third time in the past 27 months.
- The U.S. manufacturing sector expanded for an eighth consecutive month in March, bolstered by stronger orders and production, the Institute for Supply Management (ISM) reported. The ISM manufacturing diffusion index rose to 59.6 percent in March, its highest reading since July 2004, from 56.5 percent in February. Locally, the ISM-Milwaukee Index rose six points to 62 for the month of March, up from 30 a year ago. Any reading over 50 indicates expansion.
- Activity in the service sector of the U.S. economy also improved markedly in March, indicating that the recovery is broadening out, according to a survey of companies by the ISM. The ISM non-manufacturing index rose to 55.4 percent from 53.0 percent in February. “We are turning the corner,” said Anthony Nieves, chair of the ISM services survey. In the most recent survey, 14 industries reported growth, while only two reported contraction.
- The number of homebuyers who agreed to purchase previously occupied homes rose sharply in February, far exceeding analysts’ expectations, according to the latest report by the National Association of Realtors (NAR). The NAR said its seasonally adjusted index of sales agreements rose 8.2 percent from January to a February reading of 97.6.
While the positive data is comforting, it matters not if the recovery is not felt on Main Street. And Main Street is precisely where our reporters found 10 reasons to believe that the worst is behind us and the economic recovery is picking up steam.
We are seeing improvement in leading indicators across the board, including job creation, the stock market, retail sales, temporary hiring, automobile sales, trucking demand, airport traffic, public relations spending, the mergers and acquisitions market and initial public offerings.
So, read on and take heart. And keep fighting the good fight.
1. More jobs are being created
After several months of heavy job losses during the Great Recession, the U.S. and Wisconsin job markets are finally posting job gains.
The U.S. economy created 162,000 jobs in March, the largest seasonally adjusted increase in three years, the U.S. Labor Department reported. The U.S. economy gained 14,000 jobs in January and lost 14,000 in February.
The U.S. unemployment rate remained at 9.7 percent, the Labor Department said.
“For the first quarter of 2010 as a whole, job growth averaged 54,000 per month,” said Christina Romer, chair of the Council of Economic Advisers. “This is a dramatic change from the first quarter of 2009, when average job loss was 753,000 per month.”
The Wisconsin economy also is starting to add jobs again.
The state added 5,600 jobs in January and 5,200 jobs in February, on a seasonally adjusted basis, according to the Wisconsin Department of Workforce Development. The metro Milwaukee area gained 1,600 jobs during February, according to DWD.
The state’s seasonally adjusted unemployment rate was at 8.7 percent in February.
However, the state still has 95,500 fewer jobs than it did a year ago, and the state’s unemployment rate is still higher than the 7.7 percent seasonally adjusted rate from a year ago.
“We are posting job gains that show Wisconsin is moving toward recovery out of the worst national economic downturn since the Great Depression,” said DWD Secretary Roberta Gassman. “We remain optimistic that our state’s economy will continue to show improvement, opening up greater employment opportunities for many hardworking families who have been out of work through no fault of their own.”
The DWD also recently reported that initial unemployment claims in the state for the first three months of the year were 276,119, down 19.5 percent from the first three months of 2009.
“At the same time that we welcome (the) encouraging labor market news, it is obvious that the American labor market remains severely distressed,” Romer said. “It will take sustained, robust employment growth to bring the unemployment rate down. Further targeted actions to spur private sector job creation are critically needed to ensure a more rapid, widespread recovery.”
-Andrew Weiland
2. Stock market is on the rise
The stock market, led by the Dow Jones Industrial Average, continues on a path of strong recovery.
“The Dow is headed for 12,000 by year end,” wrote Peter Morici, professor in the Robert H. Smith School of Business at the University of Maryland, in a recent report. “Quite simply, Goldilocks has come to roost on Wall Street. For now, short rates will stay low, the yield curve will steepen but not a lot, and overall, the interest rate environment will remain very favorable for stocks. Don’t let employment figures fool you. Manufacturing, especially durable goods manufacturing, is expanding. Businesses have learned to ge4t by with a lot less labor. Manufacturing profitability should improve strongly.”
The residential construction market is improving, as is the non-bank financial services sector, Morici wrote. And while talk in Washington is about increased oversight on the financial services industry, the investment banking and related industries are still booming, leading Morici to believe that the stock market will continue its steady rise.
“We may get a correction this spring, but the bull market will resume,” he said.Milwaukee investment pros agree.
In its most recent customer newsletter, Glendale-based Sadoff Investment Management LLC wrote that the current monetary, psychological, technical and economic/business cycle environments are all positive for high potential and reduced risk in the stock market.
Bruce Bittles, chief investment strategist with Milwaukee-based Robert W. Baird & Co. Inc., also is optimistic about the short-term outlook for the stock market.
“The popular stock market indices continue to hit new recovery highs supported by improving economic conditions and a favorable technical backdrop,” Bittles wrote in a research note. “For now, stocks are enjoying a powerful trend and strong upside momentum suggesting the path of least resistance remains to the upside.
-Eric Decker
3. Cash registers are ringing again in stores
Several retail department store chains, including Menomonee Falls-based Kohl’s Inc., are reporting stronger sales.
For the five-week period that ended on April 3, Kohl’s reported that its sales were up 26.4 percent compared to the same period in 2009 and its sales were up 22.5 percent on a comparable store basis.
“Our March sales results reflect continued consistency as all lines of business and all regions achieved strong positive double-digit comparable store sales increases,” said Kohl’s chairman, president and CEO Kevin Mansell. “Increasing customer traffic remains the driver of our sales performance as we continue to focus on gaining market share.”
In February, the first month of its 2010 fiscal year, Kohl’s reported a 3.7 percent comparable store sales increase.
Kohl’s reported that its comparable store sales for its fiscal 2009 fourth quarter, which ended on Jan. 30, were up 4.5 percent. The company’s net income for the quarter was up 28 percent to $431 million and its net sales were up 8.5 percent to $5.7 billion.
For all of 2009, Kohl’s said its comparable store sales were up a modest 0.4 percent.
“We are pleased that we were able to gain market share in a difficult environment, achieving both total and comparable store sales increases for the year,” said Mansell. “Consumers continue to be financially strained and are looking for value and ways to make their dollars go further.”
At the end of the fiscal year, Kohl’s had 1,058 stores, including 56 that opened in 2009. The company plans to open 30 stores and remodel 85 stores this year.
“We are planning conservatively in our sales expectations, inventory levels and expenses,” Mansell said. “We will be very competitive in order to continue to gain market share. We are focused on the future as we invest prudently in stores, both new and remodeled, and our high-growth e-commerce business, technology and talent to ensure our profitable growth in the long run.”
Other retailers’ comparable store sales for March included: American Eagle Outfitters, up 15.0 percent; Limited Brands Inc., up 15.0 percent; Saks Inc., up 12.7; Bon-Ton Stores Inc., up 11.4 percent; The Gap, up 11.0 percent; Macy’s Inc., up 10.8 percent; Target Corp., up 10.3 percent; Costco Wholesale Corp., up 10.0 percent; and J.C. Penney, up 5.4 percent.
– Andrew Weiland
4. Companies are hiring more temporary help
According to the U.S. Bureau of Labor Statistics, temporary help employment has risen more than 300,000 since September. During the month of March, 40,000 jobs were added in the temporary help sector.
Melanie Holmes, vice president at Milwaukee-based Manpower Inc., said an increase in temporary work placements traditionally has been a leading indicator of both an economic downturn and an economic recovery.
For the past few months, Manpower has seen an increased level in part-time and temporary staffing workers.
“It gives us some reason to cautiously be optimistic that we are headed down the right track,” she said.
An increase in temporary help is usually an indicator because it’s a safe way for businesses to ramp up production again without risking too much investment in human resources if the economy contracts again.
“Temporary employees are employees of the temporary help agency. If things change and a company can’t afford to keep them anymore, they don’t need to fire them. The agency can just reassign them,” Holmes said. “It’s a lot less risky for a company to hire temporarily with the hopes of bringing those employees on full time once they are doubly sure things are going to fully recover.”
Even though a large portion of the temporary jobs were Census workers, Holmes indicated that those workers can still put that job on their resume as work experience, which will help them in their future endeavors.
“They talk about those (census) numbers like they don’t count,” Holmes said. “In my opinion, they do count, and at Manpower 40 percent of our temporary workers get hired full-time eventually.”
Patina Solutions, a temporary help firm focused on placing c-level executives with more than 25 years of experience in part-time positions, has also seen an increase in demand from local companies.
“For us it’s not just a sign that the economy is recovering,” said Mike Harris, chief executive officer of the company. “For us, it has always been about the fact that these executives can provide valuable business insight, and don’t necessarily have to do it full-time. It could be the start of a new way of doing business after the recession too.”
– Alysha Schertz
5. Car sales rev up
Automobile sales in the Milwaukee area continued to climb in March, mirroring increases throughout country.
During March, auto dealers in Milwaukee, Waukesha, Ozaukee and Washington counties sold 4,179 new cars and light trucks, according to the latest information provided by the Automobile Dealers Association of Mega Milwaukee (ADAMM). The March 2010 sales were up 44 percent over February sales.
Nationally, dealers sold about 1.06 million cars during March, a 24-percent increase over sales during March 2009.
In Detroit, General Motors Co. said this week that it sold 188,546 vehicles in the United States in March, up 20.6 percent from the same month a year ago. For the month of March, Chevrolet sales increased 41 percent to 133,165 vehicles, Cadillac sales rose 42 percent, Buick sales rose rising 76 percent and GMC sales rose 45 percent.
Ford Motor Co. reported that its March U.S. sales rose 39.8 percent to 183,783.
The rise in auto sales occurred even though some incentive programs offered by manufacturers expired, said Jim Tolkan, president of ADAMM. Sales of light trucks are particularly encouraging, he said, because trucks often are bought by small businesses.
“It’s my belief that this is more than just a blip,” Tolkan said. “It appears that there are more small businesses that are starting to go back into the truck market. The weather has improved. The employment numbers are improving along with car numbers, which is an indication that things are beginning to pick up.”
There were roughly 14,961 new auto registrations in Wisconsin during March, Tolkan said. About 27 percent of those new auto registrations were in Milwaukee County.
Many auto dealers are feeling more optimistic about their chances for improved sales through the rest of 2010, Tolkan said.
“From all of the dealers I spoke to, most of them were between an eight to a 10 on a one-to-10 scale of their level of optimism going forward on the rest of the year,” he said.
– Eric Decker
6. Trucking company needs more drivers
As demands for products in the retail, automotive and manufacturing sectors have increased in recent months, so too has the need to deliver those goods.
Schneider National Inc., a Green Bay-based provider of trucking, logistic and intermodal services, recently announced plans to hire 2,500 new drivers for its regional fleet this year.
The company has seen demand for its services rise in the past six to eight weeks, said Brad Taylor, vice president in Schneider’s truck load division.
“Truckers are the first to feel a recession, and we’re some of the first to feel it on the upswing,” he said. “As shippers and manufacturers get closer to their end customers, more speed is required and has continued to grow over the last few years. Despite the significant challenges of 2009, we grew our regional business by more than 25 percent.”
Through the Great Recession, many trucking firms went out of business or dramatically cut their staffing levels,. The trucking industry’s lower capacity could help boost revenues for those left standing in the industry if demand continues to rise.
– Eric Decker
7. Airport traffic is flying high
As the economy has improved, passenger traffic at General Mitchell International Airport in Milwaukee rose 34 percent in February compared with a year ago. It was the busiest February on record for the airport.
The airport traffic increase demonstrates that more Milwaukee-area residents are traveling again for business and pleasure.
Increased competition, resulting in new routes and competitive airfares at Mitchell, also helped increase passenger traffic out of Milwaukee.
To meet the rising demand, Mark Travel Corp. hired 50 more part-time customer service representatives in the fall of 2009 after Southwest Airlines entered the Milwaukee market. Mark Travel is currently hiring additional customer care employees in Milwaukee and Orlando and will also be expanding its e-commerce and project management departments.
Michelle Burmeister, public relations manager for FunJet Vacations in Milwaukee, has seen a steady increase of leisure passengers since late in 2009.
“We do business through consumers directly and through travel agencies, and the numbers definitely follow the airline trends,” Burmeister said. “We have definitely seen more and more people traveling and scheduling their vacation destinations.”
– Alysha Schertz
8. PR business picks up
Public relations firms are among the first to feel pain when a recession is approaching, but they are also among the first to pick up business once a recovery begins, according to Carl Mueller, president and founder of Milwaukee-based Mueller Communications Inc.,
“Once recovery starts, companies will first start to rebuild their business, and they do that through marketing a new product or service line,” said Mueller. “What they don’t do is hire on new permanent staff, and so for a period of time they outsource a lot of that additional work to firms like ours.”
Over the last three to six months, Mueller and his employees have seen a steady uptick in current or former clients coming to them with new assignments and increased budgets. They have also seen an increase in new client activity, he said.
“We’ve seen a lot of our current clients coming back to us with bigger budgets which indicates they are getting back on the track they used to be,” he said.
Anne Zizzo, president and chief executive officer of Milwaukee-based Zizzo Group Advertising and PR, started seeing a turnaround near the end of 2009 and continued to see growth during the first quarter of 2010.
“Mostly due to the type of companies we are working with regionally, we are seeing a lot of companies holding their course. We aren’t seeing a lot of aggressive spending, but we aren’t seeing them cut back, and that’s a really good thing,” Zizzo said.
Nationally, Zizzo Group is picking up new clients in the health care industry, as well as the banking sector, she said. Mueller also indicated that those two industries were ramping up business.
Zizzo said her firm has added staff in the first quarter of 2010 and is exploring acquisition opportunities.
“As an ad agency in the Milwaukee community, we are being very bullish on 2010,” she said.
– Alysha Schertz
9. M&A activitity is climbing
The mergers and acquisition marketplace has greatly improved in recent months, giving signs that additional recovery is likely for the rest of the year.
According to the March Global M&A Monthly report by Milwaukee-based Robert W. Baird & Co., M&A activity in the United States increased more than 31 percent in February from the same month a year ago. The dollar value for U.S.-based transactions grew by 544 percent from one year ago to $107 billion.
The middle market within the United States saw larger gains in the volume of transactions closed in February.
In February, there was a 78-percent increase in the number of deals closed from one year earlier, while dollar volume within the middle market rose 75 percent to $20.8 billion.
“The upturn in M&A has aligned with a more positive tone for economic news in the U.S.,” the Baird report stated. “The Institute for Supply Management’s index of national factory activity indicated manufacturing sector expansion for the seventh straight month in February despite dipping from January’s five-year high. A robust market for leveraged loans, fueled by an uptick in activity amongst public companies and financial sponsors, is evident in the return of borrower-friendly terms and increasing leverage ratios.”
-Eric Decker
10. Companies confident about public stock offerings
Three prominent Milwaukee-area companies recently announced they will become publicly traded corporations, a sign that more are putting their faith in the public stock market.
In February, Generac Holdings Inc., the corporate parent of Waukesha-based Generac Power Systems, launched its initial public offering (IPO). The firm’s stock opened at $13 per share when it debuted on the New York Stock Exchange under the symbol GNRC. The stock is now trading in the $14 to $15 range.
Douglas Dynamics Inc., a Milwaukee-based firm that manufactures and sells snowplows and ice removal equipment under the Western Snowplow, Blizzard and Fisher brands, filed for an initial public offering with the Securities and Exchange Commission in January. The firm has not yet completed its public offering.
Sussex-based Quad/Graphics Inc. will become a publicly traded company later this year, when its acquisition of World Color Press Inc. is finalized. World Color Press is publicly traded.
Waukesha-based RedPrairie filed for an IPO with the SEC last fall. However, the company’s plans for a public offering have been put on hold after it was acquired by New Mountain Capital LLC, a New York private equity firm. The company’s IPO filing said it expected to generate as much as $172.5 million in the offering.
-Eric Decker
