Overall positive outlook for Lake County’s economic future
By Frank Abderholden firstname.lastname@example.org @abderholden January 20, 2014 1:16PM
William Strauss, senior economist with the Federal Reserve Bank of Chicago, gives Lake County Chamber of Commerce members some good news about the economy at the 7th annual Economic Forecast at the College of Lake County's University Center in Grayslake. | Frank Abderholden/Sun-Times Media
The United States produces 24 percent of the world’s manufacturing output.
The U.S. accounts for only 5 percent of the world population.
In 1970, the U.S. produced 25 percent of the world’s manufacturing output.
“Little has changed over this 40-year period,” said William Strauss, senior economist at Federal Reserve Bank of Chicago, in terms of production, but increases in efficiencies and productivity drastically reduced the number of workers in manufacturing from one in three after World War II to about 1 in 11 workers today.
Federal Reserve’s new Board Chair
New Federal Reserve Board Chairman Janet Yellen takes over in February. Strauss said that it will be interesting to see what kind of changes to policy are made.
This is the 100th anniversary of the Fed and Tellen is the first woman to hold the chairmanship and the first former vice-chairman to ever attain the top spot.
Updated: February 22, 2014 6:03AM
A senior economist at the Federal Reserve Bank of Chicago told Lake County Chamber of Commerce members that they can expect some steady economic growth in the coming years, but nothing spectacular, and a slow decline in unemployment.
“This will be one of the better years,” William Strauss said Friday at the 7th annual Economic Forecast at the University Center of Lake County in Grayslake. “Unemployment is edging slower, inflation is well contained and manufacturing is better than trend,” he added, referring to expected growth.
In addition, Lake County Board Chairman Aaron Lawlor of Long Grove told the crowd that the county will continue to focus on infrastructure improvements so whatever economic growth materializes, it isn’t hindered by inadequate road systems to move people and product. Over the next six years, $569 million will be spent on reducing traffic gridlock, which is on top of this year’s budget of $126 million, the largest in county history.
U.S. Rep. Brad Schneider, D-10, of Deerfield, said he would use his position on the small business committee to help family businesses. He also said he would keep pushing for more bipartisanship agreements to unlock the gridlock in Washington.
Schnieder said the 10th congressional district is the third largest manufacturing district in the country.
William Strauss has been with the Federal Reserve Bank since 1982 and his chief responsibilities have been analyzing the Midwest economy and the manufacturing sector. He also teaches at DePaul University and the University of Chicago Graham School of General Studies.
“The outlook is for improvement ... but not substantial,” he said, referring to U.S. economy.
“Employment will improve. There were 2.2 million jobs created last year and I expect to see 3 million jobs this year,” he said, although the troubling aspect of the job market is the number of people who have dropped out. “We may wait two and half to three years before we see the economy generate enough jobs.”
In the industrial or manufacturing sector, the story is all about productivity. There used to be one in three workers in manufacturing after World War II and now it is more like one in 11, Strauss said. Since the end of the recession, manufacturing has only recovered 24.5 percent of its workforce that was laid off, output was another story.
“Ninety-one percent of the output has been brought back, but only 24.5 percent of the work force,” he said. “It’s the fact we allow our firms to take advantage of productivity improvements. The efficiencies were great enough, even with higher labor costs, to remain competitive in the global sense.
“I expect we will hit an all-time record high sometime this year,” he said of manufacturing output.
He also has heard of companies complaining that competitors have been “poaching” their workers.
“That’s a good sign. That is a sign we look for in a market that is heating up,” he said.
The energy industry also appears to be moving in a positive direction, even though oil has remained around $100 a barrel. Natural gas on the other hand is a third cheaper than it used to be because of hydraulic fracking and other extraction processes. Strauss said he expects that will result in more and more transportation vehicles moving to natural gas.
“If it’s successful, you’ll see the whole fleet get turned over,” he said. “Overall, it means manufacturing and the way we move goods will become more efficient. It’s going to make us a better place to do business.”
Strauss noted that some analysts have said inflation is going to start climbing fast and soon, but he doesn’t agree.
“It’s expected to remain below two percent,” he said, for this year and next.
Area housing prices are trending higher and new home construction increased to 1.1 million projects last year compared to 928,000 the year before, he reported. New home construction is expected to reach 1.4 to 1.5 million by 2016.
He credited the stock markets success for helping calm people’s nerves, pointing out that the S&P 500 is up 30 percent.
The Gross National Product, which had its biggest drop since the Great Depression, should see some decent growth, “but nothing spectacular,” Strauss said.
He said the rate of growth during the last 18 months was 2 percent, but it should have been three percent.
As for the State of Illinois, he said the state’s tax rate is now on par with neighboring states, even with recent increases. He cautioned that addition tax hikes or budget cuts could be in the future because the state is still saddled by massive debt.
“Illinois is in worse fiscal shape than any state in the nation,” Strauss said.