Wisconsin Department of Workforce Development’s secretary designee, Amy Pechacek, right, with Gov. Tony Evers at a 2023 DWD event held at the Plumbers Local 75 training center in Madison. Pechacek held a news conference online Thursday where she spoke about the impact of the federal government shutdown on DWD and the state. (Photo courtesy of DWD)
As the federal shutdown drags on, Wisconsin is likely to feel the impact — in employment, in agriculture and in the safety net for workers, according to the state’s labor secretary.
“Right now, we have the ability to continue to operate and our goal is to not disrupt our current workforce programs or state workforce,” said Amy Pechacek, secretary of the Wisconsin Department of Workforce Development, during an online news conference Thursday.
Governments in some other states have started to reduce their workforces, Pechacek said. Wisconsin is holding off on filling vacancies and taking other steps “to try and preserve all of the funding we can so that we don’t have programmatic or employment disruptions,” Pechacek said.
Nevertheless, 75% of the DWD’s $500 million annual budget — three out of every four dollars — comes from the federal government, she said.
The remaining 25% that comes from the state isn’t “just one big pot,” Pechacek added, but funds specific programs. For example, the state workers compensation program, which covers treatment costs and lost income for people injured on the job, is entirely state funded. That includes the cost of administering the program.
But job support services — local job centers, career counseling, unemployment insurance administration, state apprenticeship programs, and the division of vocational rehabilitation for people with disabilities — are “all tied to federally funded programs,” Pechacek said.
“We need the federal government to come together, come up with a funding mechanism and continue to support their obligations to all the states and to all the people to ensure that we can move forward with the economic health and prosperity that we have enjoyed without this chaotic massive interruption,” she said. “The longer this goes, the continued adverse and exponentially worse impacts to our workforce will compound.”
Pechacek’s virtual news conference Thursday took the place of DWD’s monthly report on Wisconsin employment data. The usual reports draw on the federal Bureau of Labor Statistics surveys that poll employers on the number of jobs they have and poll households to calculate the unemployment rate.
The data BLS compiles and analyzes is one of the casualties of the shutdown, Pechacek said, hampering employers, job seekers, nonprofits, economic development agencies and governments.
All of them rely on BLS data “to guide fiscal decision making, determine whether to open or expand their businesses, determine if they’re going to hire or lay off, figure out how to allocate resources, and understand really how best to train their current workforce,” Pechacek said. Without that information, “employers are putting off important decisions, essentially fumbling around in the dark until Congress can get around to turning back the lights on.”
Unemployment claims can serve as one indicator, and Scott Hodek, section chief in the DWD Office of Economic Advisors, said the department is looking at other data sources to fill in some of the missing information. Those sources include various private sector organizations as well as the regional federal reserve banks.
“But really it’s pretty difficult to get an accurate picture of what’s happening,” Hodek said. “It will get more difficult as time goes on.”
Another federal report on inflation is expected to be released soon, even with the shutdown, because the findings are used to calculate annual cost-of-living increases for Social Security recipients, Hodek said.
That report will also figure into the deliberations of the Federal Reserve’s Open Market Committee when it meets at the end of October to decide whether to cut interest rates. The Fed’s dual mission includes keeping inflation as close to 2% as possible while encouraging maximum employment.
“That becomes very difficult to do if you don’t have any of that data to make those decisions,” Hodek said.
Looking at the coming months, Pechacek said, the process of applying for H-2A agriculture visas is on hold. The visas enable about 3,000 migrant workers to come in annually to work in specific seasonal agricultural operations, including planting, harvesting and food processing, she said.
DWD is required to verify that there is a worker shortage in the occupations to be covered, and the U.S. Department of Labor must certify the state’s verification report before the federal government issues the visas, she said, but the federal certification of the state’s report is on hold because of the shutdown.
December and January are the months when the most requests come in for H-2A visas, Pechacek said, so if the shutdown continues for too long, the agricultural employers depending on those workers would be unable to get the needed certification.
Pechacek said the department is also watching to see how many federal employees file for unemployment insurance.
There are about 18,000 federal employees in Wisconsin, and DWD has estimated that 8,000 might be affected by the shutdown. By comparison, she said, one of the largest layoffs in Wisconsin took place in 2018 when a larger retailer shut down, laying off 2,200 employees.
So far, however, there have been just 30 initial claims from federal workers, Pechacek said.
If federal workers who file unemployment claims get back pay when they return to work, however, they’ll have to repay the unemployment insurance fund.
Pechacek noted that President Donald Trump has threatened to permanently fire federal workers in the shutdown as well as to withhold back pay for furloughed federal workers who return to work. Between uncertainty about those threats and court rulings that have blocked some mass federal layoffs, however, “it is really an ongoing situation,” she added.
Pechacek several times criticized Trump and the Republican leaders in Congress for the shutdown.
“The president and congressional Republicans have shut down our nation’s government trying to force massive health care cuts and cost increases to the nation’s working and middle class families and we are in a stalemate,” she said.
“We really need our federal government to return to work so they can restore some predictability and reliability to our economy and continue to be the partner that we need to ensure the economic health and prosperity of Wisconsin workers.”
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