What to expect in 2006

It's time to look into Wisconsin's future.

That's right, all the way to 2006: Slow, steady growth. Continued concern about a shortage of skilled labor. The struggle to contain rising health-care costs. Signs

of renewed vigor in some areas of manufacturing.

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A quick glance at the calendar shows the future is now, so the CRBJ asked business leaders and experts to share their thoughts on what lies ahead for Wisconsin.

Eric Grosso said some areas of the state are on track to move toward the record-low unemployment rates experienced in the late 1990s.

"We're probably reaching a point now in some areas where it's getting quite low and it won't reduce much more than that," he predicted.

Grosso also expects to see continued diversification in counties that have relied heavily on manufacturing. Fields likely to see continued growth as a result include educational services, health services, and business and financial services.

"Just about everywhere and anywhere, those are the growth industries," he said. "And for a lot of places that have had the manufacturing base, that's going to mean probably a lot of retraining and career shifting for some of the workers that are no longer in manufacturing."

Manufacturing companies themselves will continue to contract out duties they used to have in-house such as accounting, human resources and engineering to save time and money, he said.

"I'm pretty optimistic, and I have been for a while," Grosso said. "The state and pockets of the state have proven fairly resilient considering some of the issues that it's been confronted with over the last few years."

UW's Business School will see the first graduates of its new specialized MBA program go into the job market in 2006, its first chance to see how the new program works for employers and graduates.

"It is our expectation that these men and women will be extremely attractive candidates for jobs in their chosen field," Michael Knetter said.

The specialty MBA program allows students to choose from among more than a dozen career specialties before starting the program.

Business remains a popular major on campus, but there is no typical business student at UW, he said. "Some will be Wall Street financiers, some will be marketers for the consumer package-goods giants and others will start their own business," he said.

Knetter said the capital region faces the same major challenges in 2006 that it has for the past two decades.

"Globalization and technological change have put tremendous pressure on prices, profits, wages and employment in two sectors that are disproportionately large in the Wisconsin economy: agriculture and manufacturing," he said. "There is no way for Wisconsin to isolate itself from these forces. We must embrace them and find the opportunity in change."

The Wisconsin Innovation Service Center, which Debra Malewicki oversees, does about 200 new-product assessments every year. There are some patterns she expects to continue, including more new-product submissions from manufacturing companies.

"A number of studies have documented that effective new-product development and manufacturing profitability go hand in hand," she said. "Over the past decade or so, our manufacturers have taken quite a beating, but also we see lots of glimmers of hope, you might say, or glimmers of health."

The innovation center helps companies research the competitive situation for a new product and what market trends are likely to affect demand. Malewicki predicted that the center will continue to see "a lot of health-care-related ideas."

Another development Malewicki expects to continue across the state is communities forming groups to help entrepreneurs and inventors bring new-product ideas to market or start businesses. She said one of the most successful is Juneau County's Inventors and Entrepreneurs Club, which draws up to 150 people to its meetings.

Wisconsin will see some benefit from the 3 percent growth in the national gross domestic product expected in 2006, Donald Nichols predicted.

"There's not a national force that I see that's going to hold us down ... except for the possibility that interest rates could get too high if the Federal Reserve gets scared about inflation," he said.

The state's strength will be its presence in sectors that are doing well, such as machinery, medical equipment, plastics and other export-oriented industries, he said.

But Nichols said slower population growth will play a role in holding back the state's economic growth as Sunbelt states draw a higher number of Asian and Latino immigrants than the Midwest.

Mike Klonsinski said wild cards that might affect manufacturing in 2006 include sharp interest rate increases that might depress business equipment buying and the overall impact of a challenged automotive industry.

The sector is already dealing with rising health-care costs, high energy prices and raw-material price increases.

Still, Klonsinski said manufacturing will continue to drive Wisconsin's economy for the foreseeable future. Manufacturing is the largest sector of the state's economy, contributing more than $46 billion to Wisconsin's gross state product, he said.

"You don't replace or walk away from numbers of that size," he said.

Klonsinski, whose group helps manufacturers streamline their operations and implement new technology, said the pace of new-product development will be an increasingly important number.

"If  Wisconsin manufacturers continue to make the strategic shift from long-run, low-cost products to more innovative, faster, rapid product delivery, they can win," he said.

Klonsinski said Wisconsin's other long-term challenge is having the workers needed to run successful manufacturing operations into the future. Current shortages exist among welders, press operators and computer numeric control machinists, but the industry also faces "an equally disturbing pattern" in the low volume of engineers, managers and even owners.

James Haney agreed that work-force problems, both the supply of skilled labor and managerial labor, are among the most serious facing the state.

"We educate a lot of our kids but they go to Chicago and Minneapolis to find jobs and we have an aging population where the skilled workers that exist are retiring in droves," he said.

Rising health-care costs will continue to be a major problem, Haney said, and he expects to see more employers trying new health-care plans, asking employees to pay more and launching wellness initiatives.

"We're trying to encourage people to move toward consumer-driven health delivery," Haney said. "If you go to the emergency room rather than the doctor's office, it costs everybody a whole lot of money."

It's also an election year, but Haney said it's too early to say what role the economy will play.

"If people are employed and feel secure in their jobs, politics or the people in power are usually rewarded for that," he said. "If they're anxious and feel that their wallet is thinner than it used to be, then look out, I suspect, if you're an incumbent."

Sauk County, called one the "10 Best Places to Live in Rural America" last year by Progressive Farmer magazine, is also one of the fastest-growing counties in the state; its population grew nearly 4 percent from 2004 to 2005.

Karna Hanna predicted the recent completion of the Highway 12 project, which  widened the highway to four lanes, will allow that trend to continue.

"It's faster to go from Sauk City down to Middleton than it is to go from Middleton over to the East Side of Madison," Hanna said.

That population growth will contribute to the area's economy, which already expects to benefit from construction of new or expanded manufacturing facilities in Baraboo, Merrimac, Prairie du Sac and Reedsburg, she said.

But with growth comes challenges, she said, and there is some concern that people who work in the area won't be able to afford to live there. "Housing prices have gone up faster than wages," Hanna said.

David Zach is one of the few professionally trained futurists in the United States and has worked with more than 1,000 clients, including Harley-Davidson and IBM. He is head of Innovative Futures in Milwaukee.

Zach does a daily study of books, magazines, newspapers, coffee-shop discussions and Internet research in an effort to answer the question, "Where do we go from here?" and said that as a futurist, "I know enough not to make predictions."

Instead, Zach offers ideas that "inventors might want to consider while they're busy inventing the future."

•  What problem is this technology trying to solve?

•  Is that my problem?

•  By solving this problem, what new problems am I creating? (This is the most important one for inventors to consider.)

•  Am I using the technology or is it using me?