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January 30, 2012 Economic Outlook Luncheon

 

Outlook: Economy will manufacture growth

By NICOLE WESKERNA, Daily Chronicle - nweskerna@shawmedia.com
Created: Tuesday, January 31, 2012 5:30 a.m. CST

SYCAMORE - The economy improved slightly last year, and a Federal Reserve Bank of Chicago representative said Monday a slow recovery likely will continue.

Keynote speaker William Strauss, a senior economist and economic adviser of the Federal Reserve Bank of Chicago, spoke Monday at the DeKalb County Farm Bureau in Sycamore during the DeKalb County Economic Development Corporation's annual economic outlook luncheon. Strauss touched on gross domestic product, manufacturing and the housing market.

A spike in energy prices and the tsunami that hit Japan in March weakened the economic recovery in the early part of 2011, Strauss said. The economy expanded slightly, inflation remains at bay and the risk of a double-dip recession is low, he said.

The country's GDP grew 1.6 percent last year and is forecast to grow another 2.4 percent this year. By 2013, the GDP is forecast to grow about 2.8 percent.

"That's decent, but still very disappointing," Strauss said.

Though the economy has been slow to recover, Strauss had a more positive outlook on the health of the manufacturing sector.

"Manufacturing took a big hit," he said. "Rather than falling 5 percent like the overall economy, manufacturing fell 20 percent."

Growth in manufacturing has been solid since 2009 and has risen strongly over the past 30 months, averaging about a
6 percent growth rate. Strauss said 62.6 percent of manufacturing sector losses have been recovered.

The two manufacturing sectors that took the biggest hits - primary metals and vehicle manufacturing - reflect a decline in vehicle sales. However, those sectors are leading manufacturing's recovery.

During the recession, the manufacturing sector lost about 2.3 million workers, about 330,000 of whom are now back to work. As many as 600,000 manufacturing jobs could be filled, Strauss said, but companies are having difficulty finding skilled workers.

Paul Borek, executive director of the DCEDC, said he shared Strauss's optimism about the growth of the manufacturing sector. He said manufacturing is the largest private for-profit sector in DeKalb County, making it a big component of the local economy.

"DeKalb County manufacturers are expanding, and we're seeing more inquiries from industrial prospects than we were previously," Borek said.

The unemployment rate is expected to tick lower, Strauss said. More than 8.7 million jobs were lost between December 2007 and February 2010. By March 2010 employment numbers began to rise, and 1.64 million jobs were added in 2011.

While the unemployment rate has moved lower in many states, Illinois' rate has crept higher - increasing 0.6 percentage points during the past year.

Strauss said one forecaster predicted the unemployment rate to be at 8 percent by 2013, while another predicted the rate to be about 7 percent by 2014. Historically, the natural unemployment rate has been about 5 percent, but it may be closer to 5.5 percent today.

Strauss said the housing market likely will remain stagnant in 2012, with gradual improvement in the next few years. He noted that housing starts fell to a post-World War II low during the recession.


William Strauss's presentation is available in the Members Only section of the website.

William Strauss and the DCEDC hosts

Guests network around the sign-in table