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Regional Report: Milwaukee is Bouncing Back on The Strength of Manufacturing

This is an excerpt from the recently released Global MetroMonitor 2011 Report published by the Brookings Institution Metropolitan Policy Program.

Located in the U.S. Midwest, on the Southwestern shore of Lake Michigan, the Milwaukee metropolitan area is the largest regional economy in the state of Wisconsin, home to 1.6 million people, and the 114th largest economy among the 200 profiled in this report. The city and region have a strong industrial heritage, exemplified in locally headquartered Fortune 500 firms such as Johnson Controls and Harley-Davidson.

Similar to the U.S. economy, the Milwaukee area suffered its largest decline between 2008 and 2009. Since then, the metro area has achieved a partial recovery in employment and income. While not surpassing prerecession levels, Milwaukee saw faster growth in 2010-2011 than in 2009-2010. The metro area added jobs at a 2.4 percent rate, reversing declines that started in 2007. Milwaukee's income growth also picked up in 2010-2011, driven by 2.2 percent growth in output, almost double the rate of the previous year.

While not the largest industry in the Milwaukee economy, manufacturing contributed more than 62 percent to the metro area's output growth between 2010 and 2011. Industries producing machinery, electrical equipment, and fabricated metal products drove this manufacturing rebound. Business and financial services output, which represents 34 percent of the metro economy, continued to decline in 2011. Continued weakness in real estate largely drove this downward trend, as reflected in third-quarter metro area house prices at more than 22 percent below peak levels.36

For the first year since 2007, Milwaukee area added jobs between 2010 and 2011. Local/non-market services - education, health care, administrative services, and government - delivered almost three-quarters of job growth. Milwaukee is a strong health care center, with several systems in the region (e.g. Milwaukee Regional Medical Complex, Aurora Health Care, and Wheaton Franciscan Healthcare). General Electric has two business units in Milwaukee (Healthcare Diagnostic Imaging and Clinical Systems) that support this cluster.

While Milwaukee benefited from a growing U.S. economy in 2010-2011, its stronger performance owes more to the evolution of local industries. Three of its largest industries-local/non-market services, manufacturing, and trade and tourism- grew at a faster pace than national industries. These three sectors represented 59 percent of Milwaukee's output and 79 percent of its employment in 2011. The metro area's strengthening performance accounts for its rapid rise in the Global MetroMonitor rankings, from 139th in 2009-2010 to 56th in 2010-2011.

Since 2007, Milwaukee metro area output has seen little volatility, compared with other large metropolitan areas in the world. Encouraging news emerges from the latest quarterly developments in the regional housing and labor market. House prices reached bottom in the second quarter of 2011, increasing slightly in the third quarter, and the unemployment rate dropped to 7.6 percent in September 2011 from 7.8 percent a year earlier. 37 While faster growth is needed for Milwaukee to recoup pre-recession levels, positive growth rates in 2011 are a step in the right direction, and an example of the important role manufacturing played in worldwide metro growth last year.

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