Economic Forecast Looks Good, Economist Says

The next two years hold promise for the state of the national economy, an economist with the Federal Reserve Bank told area businessmen during a Tuesday luncheon.

Speaking at a multi-chamber of commerce event in Willowbrook, William Strauss, senior economist at the Federal Reserve Bank of Chicago, said all signs point to economic growth over the next two years. The event was co-sponsored by the Chambers of Commerce in Clarendon Hills, Darien, Downers Grove, Elmhurst, Hinsdale, Lisle, Westmont, Woodridge and the Willowbrook-Burr Ridge chamber. 

Strauss predicted the economy would grow at a rate of 3.5 percent to 4 percent over the next two years. While that growth is positive, Strauss said that is half the growth rates following previous recessions in the 1970s and 1980s.

Strauss said he did not need to paint a picture to the luncheon attendees of how much the economic downturn rocked all levels of the economy. But despite that bleak image, the future is positive, he told the crowd of several hundred business people.

“There’s light at the end of the tunnel,” he said.

Strauss said he is seeing growth in all levels of the economy, including manufacturing and housing. However, that is not necessarily translating into lower unemployment numbers. Strauss said there has been some improvement in unemployment, but he is not convinced it’s due to the creation of new jobs. He said he wants to see at least six straight months of 150,000 jobs or more being added.

“Until those numbers improve, consumer spending will remain hesitant,” Strauss said.

Economic growth will translate into job creation, but it will not drastically cut the national unemployment rate, Strauss said. He said the national unemployment rate is still likely to remain above 8 percent by this time in 2012.

Despite continued higher unemployment Strauss said other areas of the economy are improving. He said the lending industry is loosening requirements, which means businesses and individuals will be able to borrow more money.

“This translates into a lot of areas including home and car sales,” he said.

Manufacturing is also in a strong recovery. Strauss said there is a fallacy that the United States is losing the manufacturing industry. He said manufacturing output has expanded over the past 19 months.

“Manufacturing took a big hit during the recession, but since then it’s recovered 60 percent of its losses,” he said. “By the end of next year we should see a recovery of all lost output and a return to record highs.”

He said motor vehicles and heavy metals were the two manufacturing industries that were hurt the most in the recession. However, he said those two industries are showing the most growth of all U.S. manufacturing.

Economic improvements will come, but not all at once, Strauss said. He said some sectors of the economy will strengthen before others will.

Strauss’ predictions rang well with some area chamber of commerce leaders. Tom Althoff, president of the Lisle Area Chamber of Commerce, said he is encouraged by the forecast.

“All the data he shared is encouraging,” Althoff said.

Althoff said he was encouraged by Stauss’ comments on the growth of manufacturing output. Lisle is home to several manufacturing companies including Molex, which makes connectors for electronic equipment.

Althoff said if Lisle’s large manufacturers show strong economic returns, that should have a positive impact on local service businesses as well.

Likewise John Quigley, president of the Elmhurst Chamber of Commerce and Industry, said he was pleased with Strauss’ projections.

“I’ve been using Bill’s assessments for the past two years because he’s been right on track with what is going to recover, when it was going to recover and how it was going to recover,” Quigley said.

Quigley said Strauss’ analysis of the recovery can clearly be mirrored in Elmhurst’s economy. He said Elmhurst took a hit during the recession, but the business community has bounced back more quickly than economies in neighboring municipalities. With stronger signs or growth on the horizon Quigley said he will continue to stress to local employers the need to be proactive in order to be ready for opportunities when they arise.

“The biggest thing is you can finally see the light at the end of the tunnel. We knew there was an end to the tunnel, but this time we can see the end,” Quigley said.