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


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


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


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



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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



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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



50

75

100

125

150

-4

-2

0

2

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6

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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



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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



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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.


2012 Q4.

February 19, 2013



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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.


2012 Q4.

February 19, 2013



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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



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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



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.


December 2012 (state) and January 2013 (US).

February 19, 2013



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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.


December 2012 (state) and January 2013 (US).

February 19, 2013



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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



0.8

0.9

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1.1

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0.9

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1.1

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



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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



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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



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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)

economic forecast

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