Economic Forecast
Transcript of Economic Forecast
Economic Forecast
OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:
Illinois’ GDP forecast is derived from the
national forecast by allocating output to each
of the 50 states based on employment
shares. So, forecast misses reflect surprises
in the aggregate forecast as well as
unexpected shifts in a state’s GDP share.
Illinois’ economy has been expanding more
slowly than the national economy, a trend
that may continue into 2013.
KEY MESSAGES:
The state’s economy is forecast to speed up
gradually but employment likely will continue
to recover only moderately.
Note: GDP figures are based on quarterly values that are
interpolated from annual GDP estimates using quarterly
employment changes. Unbolded figures are reported actual
values and bold figures represent forecasts.
Sources: US Department of Commerce;
US Department of Labor
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 2
2007 2008 2009 2010 2011 2012 2013 2014
United States
Real GDP
$ billions (fourth quarter) $13,326 $12,884 $12,873 $13,181 $13,441 $13,648 $14,090 $14,654
% change over the four quarters 2.2% -3.3% -0.1% 2.4% 2.0% 1.5% 3.2% 4.0%
Nonfarm employment
Job count (fourth quarter) 137,943,000 135,153,333 129,526,667 130,283,667 132,286,667 134,455,000 136,189,659 138,513,010
% change over the four quarters 0.9% -2.0% -4.2% 0.6% 1.5% 1.6% 1.3% 1.7%
Average monthly change 99,750 -232,472 -468,889 63,083 166,917 180,694 180,694 180,694
I llinois
Real GDP
$ billions (fourth quarter) $586 $572 $564 $577 $584 $592 $606 $626
% change over the four quarters 0.2% -2.3% -1.4% 2.4% 1.2% 1.3% 2.3% 3.2%
Nonfarm employment
Job count (fourth quarter) 5,984,300 5,883,467 5,588,600 5,640,067 5,675,000 5,718,133 5,761,754 5,820,177
% change over the four quarters 0.6% -1.7% -5.0% 0.9% 0.6% 0.8% 0.8% 1.0%
Average monthly change 3,117 -8,403 -24,572 4,289 2,911 3,594 3,635 4,869
The Economy’s Structure
PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES WHAT THE CHART SHOWS:
The figure compares the relative importance of
selected industries to the state’s economy with
the national footprint of each industry (state and
national figures reflect the value added of each
industry as a percent of aggregate state or US
nominal GDP, respectively).
Illinois’ economy has a disproportionate share of
wholesale trade businesses, financial companies,
and professional and technical services.
Real estate is a large 14% of the economy, similar
to the national economy.
KEY MESSAGES:
The state’s outsized exposure to real estate and
finance have been a liability.
The outsized manufacturing footprint will be a
source of support in coming years for Illinois.
Source: US Department of Commerce. Updated through
2011.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 3
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US industry mix
Illinois' industry mix
Bankruptcies
RATIO OF BANKRUPTCY FILINGS TO THE 2007 Q4 NUMBER WHAT THE CHART SHOWS:
The ratio of bankruptcy filing by businesses
and persons to filings in 2007 Q4.
Bankruptcy filings are receding ever so
slightly.
KEY MESSAGES:
Indicators of financial stress are a useful
coincident indication of economic distress.
Source: Administrative Office of the U.S. Courts; Updated
through December 2012..
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 4
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Business bankruptcy filingsNonbusiness bankruptcy filings
All US bankruptcy filings (shaded area)
FRB Chicago Business Survey
REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (2007 = 100) WHAT THE CHART SHOWS:
GDP growth in Illinois and the Federal
Reserve Bank of Chicago’s survey of local
conditions.
Business conditions continue to improve,
according to the Federal Reserve Bank of
Chicago’s survey, but not fast enough to
translate into faster growth.
KEY MESSAGES:
Anecdotal evidence points to at least some
recovery.
Sources: Federal Reserve Bank of Kansas City; US
Department of Commerce. Updated through December
2012 (surveys) and 2012 Q4 (GDP).
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 5
50
75
100
125
150
-4
-2
0
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Illinois real GDP (left scale)FRB Chicago's manufacturing survey (right scale)
Private Business Surveys
REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:
The Business Barometer Index, based on
the survey of purchasing managers, and real
GDP growth in the Great Lakes region (a
reading above 50 means the region’s
economy is growing, while less than 50
means the economy is shrinking.
The index, which is a timely measure of the
strength of the Midwest economy, has lost
momentum in recent months.
KEY MESSAGES:
This index will be a useful leading indicator
of the direction of the economy.
Manufacturing conditions at least are strong
enough to move the economy forward.
Sources: Institute of Supply Management; US Department
of Commerce. Updated through December 2012 (diffusion
indexes) and 2012 Q4 (GDP).
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 6
20
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60
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80
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Illinois real GDP (left scale)
Business Barometer Index, Chicago Purchasing Managers (right scale)
Initial Jobless Claims
RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 2007 Q4 LEVEL WHAT THE CHART SHOWS:
The figure tracks layoffs in Illinois and the
national level of claims.
Weekly layoffs, both the state and national
tallies, are illustrated in the figure as a ratio
to the level of layoffs in the fourth quarter of
2007, prior to the recession.
Illinois’ jobless claims have returned to
normal levels.
KEY MESSAGES:
Layoffs will signal any change in the
economy’s momentum and, for that reason,
the signals from the job market point to an
even better economy in 2013.
Source: US Department of Labor. Updated through
February 2, 2013 (state) and February 9, 2013 (US).
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 7
0.75
1.00
1.25
1.50
1.75
2.00
2.25
0.75
1.00
1.25
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1.75
2.00
2.25
2007 2008 2009 2010 2011 2012 2013
IllinoisUS (solid area)
Economic Growth
REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) WHAT THE CHART SHOWS:
Real GDP growth in Illinois (the line in the
figure) is superimposed on top of US real
GDP growth (bars in the figure).
Illinois has been rebounding, but its growth
has only returned to the pace prior to the
recession, implying that little of the ground
lost during the recession has been made up.
KEY MESSAGES:
Illinois is expected to lag slightly the pace of
the national recovery for a little while.
Source: US Department of Commerce. Updated through
2012 Q4.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 8
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90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
IllinoisUS
Economic Output
REAL GDP LEVEL (RATIO TO 2000 Q4) WHAT THE CHART SHOWS:
The figure illustrates the evolution of real
GDP of the state and the overall US
economy since the fourth quarter of 2000,
the peak of the previous business cycle—
that is, at any point in time the lines trace the
ratio of real GDP to its level in 2000 Q4.
Illinois lagged the national economy in the
last decade and is not expected to make up
that gap for a while.
KEY MESSAGES:
Like the national economy, Illinois has been
in a slow recovery since summer 2009.
Source: US Department of Commerce. Updated through
2012 Q4.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 9
0.95
1.00
1.05
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1.25
1.30
1.35
1.40
1.45
1.50
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US
Illinois
Employment Growth
NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 12 MONTHS EARLIER) WHAT THE CHART SHOWS:
Job growth in Illinois, compared with the
national average.
Employment in Illinois is rebounding
somewhat more slowly than the national
jobs recovery.
KEY MESSAGES:
Job growth is matching that in the previous
recovery.
Source: US Department of Labor. Updated through January
2013.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 10
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90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
IllinoisUS
Employment
NONFARM PAYROLL EMPLOYMENT (RATIO TO THE 2000 Q4 LEVEL) WHAT THE CHART SHOWS:
The figure illustrates the evolution of
employment in the state compared with the
nation since 2000 Q4, the peak of the
previous business cycle. The lines trace out
the ratio of employment at the time to
employment in 2000 Q4.
Illinois’ job count never reached the peak
levels of the previous business expansion
and now recovers from a hole that remains
five percent below 2000 levels.
KEY MESSAGES:
The job market is recovering but gains are
likely to be slow for a while.
Source: US Department of Labor. Updated through January
2013.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 11
0.91
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US
Illinois
Intrastate Employment
NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2000 Q4 LEVEL) WHAT THE CHART SHOWS:
Employment trends across the state.
Employment in most communities is on the
mend. The mid-section of the state seems to
be struggling.
KEY MESSAGES:
Most communities are beginning to feel the
state’s recovery.
Source: US Department of Labor. Updated through
December 2012 (state) and January 2013 (US).
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 12
0.83
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2001 2003 2005 2007 2009 2011 2013 2015
US forecast
US
Peoria
Bloomington-Normal
Lake County-Kenosha
County
Kankakee-Bradley
Springfield
Davenport-Moline-Rock
Island
Chicago, Joliet,
Naperville, II-Wi-In
Chicago-Joliet-
Naperville
Champaign-Urbana
Rockford
Decatur
Danville
Illinois forecast
Illinois
Unemployment
UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) WHAT THE CHART SHOWS:
Unemployment rate trends in Illinois,
compared with the national average.
Illinois’ unemployment rate soared to about
11½ percent in the recession, a worse
performance than that of the national
economy. It dropped quickly when growth
picked up and is down to around 9 percent.
KEY MESSAGES:
The unemployment rate is the single best
indicator of the relative economic
performance of a region and by this
standard the local economy is weakening,
like the national economy.
Recent trends in the unemployment rate
imply the economy continues to recover.
Source: US Department of Labor. Updated through
December 2012 (state) and January 2013 (US).
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 13
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1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Illinois
US (shaded)
Relative House Prices
RATIO OF THE STATE’S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q2 = 1.0) WHAT THE CHART SHOWS:
The figure tracks the relative price of houses
in the state versus the nation—that is, it
reflects the ratio of the state price index to
the national house price index, with that ratio
set to unity in the summer of 1995. A drop
in the line means that house prices in the
state lag the national trend. States that did
not suffer from speculative conditions saw a
decline in the relative price of houses in this
last decade.
Illinois’ real estate prices mirrored the
national run-up and then followed the market
down as well.
KEY MESSAGES:
Inflated housing conditions are now history.
Source: FHFA. Updated through 2012 Q3.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 14
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Real Estate Markets
HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q2 LEVEL) WHAT THE CHART SHOWS:
The figure tracks the cumulative percentage
deviation in house prices since 1995 in
selected local markets and compares those
with the national average.
The correction of inflated house prices in the
last decade now appears to be winding
down.
KEY MESSAGE:
House prices are beginning to stabilize now
that they have returned to historically
affordable levels.
Sources: FHFA; Standard & Poor’s. Updated through
2012 Q3.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 15
0.75
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1.25
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1.75
2.00
2.25
0.75
1.00
1.25
1.50
1.75
2.00
2.25
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
US
Lake County
Bloomington
Kankakee
Chicago
Danville
Decatur
Champaign-Urbana
Peoria
Rockford
Springfield
Chicago (Case-Shiller)
New Home Building
HOUSING STARTS (RATIO TO THE JULY 1990 LEVEL) WHAT THE CHART SHOWS:
New home construction in Illinois, compared
with the US average level of construction.
Illinois’ building activity may be beginning to
stir.
KEY MESSAGES:
New home building is beginning to stir
nationally but this is only now becoming
visible in Illinois.
Source: Census Department. Updated through December
2012.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 16
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USIllinois
Office Markets
PERCENT OF OFFICE SPACE THAT IS VACANT WHAT THE CHART SHOWS:
Office building conditions in Chicago,
compared with the national average.
Office vacancy rates are beginning to drift
down.
KEY MESSAGES:
Commercial real estate conditions should
begin to improve in 2013 as the local
economy firms.
Source: CB Richard Ellis (formerly CB Commercial Property
Information Systems), Office Vacancy Index of the United
States. Updated through 2012 Q3.
February 19, 2013
Regional Perspectives: Illinois Economic Outlook
Commercial Banking 17
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Chicago metropolitan area
All metropolitan areas (shaded area)