Illinois’ economy will recover along with the nation’s as COVID-19 pressures lift, but it’s going to be a slog for us, with the state unlikely to return to its previous employment level until at least 2023. That’s the bottom line of a new forecast prepared by Moody’s Analytics for the Illinois Legislature’s fiscal unit, a report that is
Illinois’ economy will recover along with the nation’s as COVID-19 pressures lift, but it’s going to be a slog for us, with the state unlikely to return to its previous employment level until at least 2023.
That’s the bottom line of a new forecast prepared by Moody’s Analytics for the Illinois Legislature’s fiscal unit, a report that is pretty dour, projecting Illinois in the long run will continue to markedly lag the nation and even the rest of the Midwest until it gets its finances in order and reverses its population drain. Read the report below.
“The near-term outlook for Illinois closely resembles that for the U.S.,” says the report for the Illinois Commission on Government Forecasting & Accountability. “The economy will begin recovering in earnest in mid-2021, and by the end of the year the unemployment rate will clock in at just under 6 percent,” in line with the national average but a bit higher than our Midwest neighbors.
That would be a bit of an improvement over 2020, when Illinois’ performance generally tracked that of the Midwest and other states, but fell behind by the end of the year. Illinois’ unemployment peaked at 16 percent in June 2020, and averaged 8.4 percent in the fourth quarter.
Chicago is a relative bright spot, given that many workers were able to do their jobs remotely and thus keep their income steady. But Lake County is emerging from the recession a bit more slowly than its counterparts, with clear weakness in downstate communities such as Peoria and Rockford, the report said.
While the mid-term view is optimistic, “It will be at least 2023 before the (local) economy is back in full swing,” Moody’s says. “It will take at least that long for the Illinois labor market to recover the 400,000 jobs it is still down since the pandemic hit, get everyone who left the workforce during the pandemic back in and reduce the unemployment level to the pre-crisis level.”
Illinois’ unemployment rate in January 2020 was 3.6%. In December, the latest data available, it was 7.6%.
Chicago again should be a statewide leader in the long term, despite “muted” tourism and meetings that hit the hospitality and lodging industries hard. (Fourth-quarter hotel occupancy in the city averaged 32 percent, compared with 73 percent fourth-quarter 2019).
Among the pluses on the horizon: What Moody’s suggests will be a continuing return of companies and headquarters to the urban core and a loosening of national restrictions on immigration, a key source of new residents here.
However, the report adds: “The success of the state’s economy, and particularly that of the Chicago metro area, will depend on the strength of its tech sector, including computer systems and design and biotechnology. Tech companies that can meet the needs of Illinois’ manufacturing base will also be successful.” Logistics is a strength, too
Ultimately, it says, “Illinois has what it needs to remain a top business center, as long as it can solve the fiscal problems that are eroding its edge in the competition for talent, jobs and capital.” The state has a high educational attainment level, superb transportation links and below-average costs.
But unless fiscal pressures—specifically, soaring pension costs—are solved, “The state will grow a step behind the Midwest average and a few steps behind the nation over the extended forecast horizon,” the report concludes. “Over the next five years, employment in Illinois is forecast to increase 6.7 percent, below the 7.7 percent increase for the Midwest and 8.8 percent rise nationally.”
Another report issued today by Moody’s Investors Service, a sister company to Moody’s Analytics, sets Illinois unfunded pension liability as of last June 30 at $317 billion, up 19 percent from previous year, driven largely by falling interest rates. That’s the highest in the country and amounts to 37 percent of Illinois’ annual economic output, the bond-rating firm says.
Ouch! And is anybody in Springfield going to do anything about that? We’ll see if Gov. J.B. Pritzker or anyone else has an answer.