Consider 2024 the year of the reset, even though it took a while to get there. The national, state, and local economies continued to defy the odds as interest rate easing finally began and the Capital Region got a wakeup call about how much work needs to be done on the housing front to maintain its growth momentum.
Economic forecasts varied, even before the results of the 2024 election were known. Some forecast a mild recession while others, citing the long-awaited reductions of the federal funds rate by the Federal Reserve, believed slow growth would be the worst-case scenario following an initial third quarter report of a healthy 2.8% rise in the gross domestic product (GDP). More confident consumers helped drive third-quarter growth, but then a stunningly poor jobs report for October and significant downward revisions for August and September made economists wonder if the economy had reached a crossroads.
Kurt Bauer, president and CEO, Wisconsin Manufacturers & Commerce, citing WMC’s employer surveys and countless meetings and roundtable discussions with state business leaders, maintains that the top business story of 2024 is what he called the “bipolar economy” punctuated by stubborn inflation, high interest rates, but also solid GDP growth and low unemployment.
There was also the uncertainty and unease caused by what public opinion polls indicated would be a close election in the national popular vote and in the swing states that determine which candidate gets the 270 electoral college votes necessary to win. “Politicians shape policies that impact the economy, and not knowing which party will control the White House, both houses of Congress, or the Wisconsin Legislature leads to varying degrees of paralysis,” Bauer notes.
With the outcome secured in favor of President-elect Donald Trump, a Republican majority in Congress, and continuing Republican majorities in both houses of the Wisconsin Legislature, more certainty emerged about policy direction. Here, then, are the top business and economic stories of the past year and what they portend for 2025.
Capital region review
The potential effects of the local housing crunch became crystal clear when a new regional housing strategy found Dane County must produce roughly 7,000 housing units per year to meet existing needs and keep up with growth — 2,000 units more than what is currently produced annually. In calling for the county and public and private sector partners to devote more resources to housing development, the five-year action plan (2024–2028) asserted the county must produce 139,000 new housing units from 2020–2040 to keep up with demand.
The 189-page report also notes the housing shortage is the result of fundamental supply and demand — the lack of supply to meet growing demand — and is the primary factor driving up costs. The 139,000 figure sounds challenging enough for local officials, home builders, and multifamily housing developers, but Zach Brandon, president of the Greater Madison Chamber of Commerce, believes it’s on the conservative side of what might be needed. Conservative estimates of population growth are among the reasons the area underproduced by thousands of housing units during the high-growth period of the past 20 years.
Brandon maintains that Dane County cannot afford to make the same mistake over the next 20 years or it could meet the same fate of other regions that failed to align their housing and transportation infrastructure with projected growth. By 2050, he notes the region is projected to reach 1 million residents, an increase of 300,000 people from today.
“This is the first time we can see with any real clarity what is coming in the next 25 years, and it will create challenges around housing, transportation, education, child care, the environment, and more,” he states. “There are cities around the country that in the past experienced similar economic trajectories as Greater Madison’s, and none have been able to get this right,” Brandon adds. “We know what is coming, and we have to get ahead of it now.”
The launch of Madison’s new bus rapid transit (BRT) system should help on the transportation front. The east-west route, to be followed by a north-south route in 2028, is served by 60-foot, articulated all-electric buses with dual-side boarding options. It runs from near East Towne Mall to Junction Road on the city’s far west side, with buses running every 15 minutes for the majority of each day.
Madison Mayor Satya Rhodes-Conway has been BRT’s leading evangelist, and Brandon views the service as a step toward alleviating congestion and accommodating the new residents expected to join the region over the next 25 years. “With dedicated priority access, fewer stops, and technology improvements, BRT will produce faster travel times for users while also reducing the number of bus driver hours, yielding a likely break-even impact on [Madison] Metro’s overall operating budget,” Brandon states. “While impactful, BRT is just one piece of a comprehensive strategy to provide enhanced regional transit service.”
A GMCC delegation met earlier this year with U.S. Transportation Secretary Pete Buttigieg, and noted that rapid growth and geographic constraints will require critical infrastructure improvements for the entire Capital Region transportation system, including roads and bridges, buses, bikes, nonstop air service, and intercity passenger rail. Whether the new presidential administration, which has signaled a focus on cost cutting, will accept that message is in considerable doubt.
Meanwhile, the progress of Madison’s most prominent employers continues. Exact Sciences saw its Cologuard Plus cancer-screening test receive U.S. Food and Drug Administration (FDA) approval. The next-generation DNA test is now approved for adults ages 45 and older who are at average risk for colorectal cancer, and will build on the success of the first Cologuard test. Introduced 10 years ago, it has been used more than 17 million times, improving colorectal cancer screening rates in the U.S. The company’s quarterly revenue surpassed $700 million in Q3 2024.
Epic, the electronic health records giant, is building its sixth campus on its 1,700-acre Verona property. Called “Other Worlds,” the new campus will include six buildings and draw inspiration from The Lord of the Rings and other works. The expansion is made possible by the continuing commercial success of Epic software, as more than 300 million patients hold their medical records on Epic’s MyChart and a growing list of health systems adopt Epic software.
With the approval of $607 million tax referendums for the Madison Metropolitan School District — $100 million for day-to-day operations and $507 million to renovate or replace school facilities — Madisonians agreed to tax themselves more for what will hopefully be a corresponding improvement in educational outcomes. Similarly, with the successful passage of the city of Madison’s $22 million referendum, residents avoided having to pay a new infrastructure charge for the time being. The monthly property-by-property “infrastructure special charge” would be $6.35 for a single-family home and is set to go into effect by 2027. It is aimed at helping the city balance its budget in the event the state Legislature does not provide more financial support during biennial budget talks in 2025.
State of technology
Wisconsin’s designation as a Technology Hub focused on personalized medicine and its status as one of just 12 locales across the country to receive funding through the federal Regional Technology and Innovation Hubs program. The $49 million that came with it was not only good news for Greater Madison’s and Wisconsin’s economy, “it validates our standing as a global leader in health innovation,” Brandon notes. “It is not just economic growth as a focus, but this tech hub advances innovation in personalized medicine, health equity, and helping medical professionals understand health disparities.”
For several years, organizations such as the GMCC and BioForward Wisconsin championed the concept of a regional technology hub program, and one result will be to enhance connectivity between Madison and Milwaukee. Lisa Johnson, president of BioForward Wisconsin, called it another milestone for biohealth. The tech hub designation, made possible by the 2022 CHIPS and Science Act, helps add biohealth to Wisconsin’s economic reputation, which has been dominated by agriculture and manufacturing. “It allows us to promote this industry and this state as a technology state that oftentimes is not going to get the publicity that it should have had in the past,” Johnson notes.
The tech hub designation was augmented by Microsoft’s announcement that it will build a $3.3 billion data center in Racine County to focus on AI development. In addition, Gov. Tony Evers in May announced the creation of the $100 million Wisconsin Investment Fund, a public-private venture capital fund that will finance health care, agriculture, and startups in other sectors.
These investments will reinforce the growth of the biohealth industry and its status as an innovation driver. That growth was reflected in the biennial Industry Landscape and Economic Impact report, prepared by TEConomy Partners LLC for BioForward, which found that Wisconsin’s biohealth employers have increased their payrolls by nearly 12,000, or 25%, since 2018, and employ more than 58,000.
In addition, average wages in the state’s biohealth industry reached nearly $104,000, a figure that exceeds the state’s overall private sector average by nearly $43,000, or 70%.
Overall, the industry is estimated to have generated $22 billion in direct economic activity in the state and $37.7 billion in total economic impact from direct, indirect, and induced sources. “I have to tell you, I was surprised and elated by how much more growth that we have versus the U.S. and our key sectors,” Johnson states. “To me, that was a key takeaway and a reason to be really excited about our industry.”
Those opportunities, reflected in the status and growth of biohealth companies such as Promega Corp., GE Health Care’s facilities in Waukesha and Madison, and the multimillion Madison facility investment of Millipore Sigma, have played a significant role in reversing the brain drain in which Wisconsin college grads migrated to the coasts. “This is about health care and every piece of it, whether it’s research reagents, therapeutics, diagnostics, and medical devices,” Johnson says. “They all play a role in improving our health care.”
Remaining on the state’s to-do list is the lack of access to affordable child care, which continues to be a drag on the state’s economy, according to the results of the Wisconsin Department of Children and Families’ Child Care Supply and Demand Survey. It found that nearly 60% of providers across the state have unutilized capacity, such as closed classrooms, due primarily to staff shortages. Providers report that if they were able to operate at full capacity, they could serve up to 33,000 more children.
At the heart of the problem is that Wisconsin child care centers are only able to pay lead teachers an average of $13.55 per hour, which is less than half of the average hourly wage of $28.34 for Wisconsin workers, and combined with few or no benefits, unlivable wages are forcing qualified early care and education professionals to leave the field. Providers reported that a total of 48,000 kids are on waitlists in Wisconsin, which limits the number of parents in the workforce.
Evers continues to press the Legislature to go beyond tax credits and approve a long-term investment in the Child Care Counts Program, which was launched in 2020 with federal pandemic relief dollars and provided more than $750 million in support to child care providers to increase wages, provide benefits, and expand access before funding ended earlier this year.
National picture
In September, when the Federal Open Market Committee cut the fed funds rate, the Federal Reserve’s key policy rate, by 50 basis points, and another 25 basis points in November, it not only represented the first rate cuts since early 2020 (in response to the COVID-19 pandemic), it launched a much-anticipated easing cycle. Even though the fed funds rate is the rate on overnight loans between banks, it didn’t immediately translate into lower interest rates on mortgages — which are more influenced by the bond market — but it has influenced other kinds of consumer loans.
For consumers, the taming of inflation could not have come soon enough. With inflation above the Fed’s 2% target for more than 40 consecutive months, prices have increased 20.3% since 2021, real wages and benefits have fallen 3.4%, and mortgage costs are nearly 80% higher during the same period — adding more hurdles to housing affordability.
A prolonged easing cycle is an attempt to bolster a weakening labor market that is reflected in the meager 12,000 new jobs created in October, and it bodes well for the national economy in 2025.
The presidential election could not have presented a clearer choice, and Trump’s political resurrection — who would have thought it possible after the events of Jan. 6, 2021? — is one of the more shocking political developments in recent times. “I believe it is safe to assume that a second Trump presidency will look a lot like his first term,” WMC’s Bauer states. “Similarly, [Kamala] Harris would have likely pursued policies that track closely to Biden’s term in office.”
Bauer notes there were stark differences between the two competing sets of policies. Harris supported increasing the federal corporate income tax rate from 21% to 28%, while Trump supports lowering it to 20% and to 15% for manufacturers. In Bauer’s view, Harris would have advanced an anti-carbon agenda to address climate change that could have spiked energy costs, similar to what has occurred in Germany, and she would have continued to allow the growth of federal regulations that increase compliance costs for businesses.
In contrast, Trump embraced U.S. energy independence during his first term and required eliminating three regulations for every new one added to the federal register — a practice that is likely to resume via executive order. “The bottom line is that I am more bullish about the economy in 2025 if Washington doesn’t pursue wrongheaded policies that drive up the costs of doing business in every major category,” Bauer states.
Among the notes of caution are warnings about the level of public indebtedness, especially the perpetually ballooning U.S. national debt, now approaching $36 trillion. In addition, one development to watch is the potential effect of higher tariffs on imported goods. During the 2024 presidential campaign, Trump signaled a shift away from free trade and potential tariff adjustments, which could result in retaliatory tariffs on U.S. goods.
AI at the forefront
According to a recent community-wide economic survey conducted by the GMCC with local partner organizations, roughly 50% of businesses that responded say they are using artificial intelligence in some capacity. “The AI landscape is changing rapidly, and it can have both positive and negative consequences for business,” Brandon notes. “For example, we know of at least one local company that has national and international competitors who are utilizing increasingly sophisticated AI-generated scripts to reach new potential clients.”
While other local businesses are becoming more aggressive on the AI front, Epic has been immersed in AI for several years. Now with more than 13,000 employees and counting (with about 370,000 job applications per year), Epic made news during its annual Users Group Meeting in August by noting how AI is driving innovation and improving efficiency for clinicians. Roughly 400 health systems use the company’s predictive models for tasks such as estimating readmission rates, a key factor in hospital cost control, and potentially harmful “drug-drug” interactions.
“This is technology,” says Brandon, “that we will need to understand and lean into as a business community to be successful going forward.”
