Commission on Government Forecasting and Accountability
HOUSE
Donald Moffitt, Co-Chair
SENATE
Donne Trotter, Co-Chair
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August 2016 Monthly Briefing
ECONOMY: UNSCRAMBLING ILLINOIS EMPLOYMENT PICTURE
Edward H. Boss Jr., Chief Economist

The task of influencing the economy has been placed with the Federal Reserve, emphasizing labor market conditions with targets set for the unemployment and inflation rates. Latest data show Illinois unemployment fell to 5.8% in July, down for the third consecutive month. This would appear to be good news. Labor market conditions, however, are more than an unemployment rate. While employment rose in July it was more than offset by a larger decline in the labor force, thus lowering the unemployment rate. The data is conducted through the Household Survey that count all who did any work at all during the survey week.

The Establishment Survey data comes from private nonfarm businesses, federal, state and local governments and cover about one-third of all nonfarm payroll employees. Since most jobs originate from new businesses, however, it can be some time to be included. A larger problem is double counting those working two jobs. This impact may be even greater as stagnant wages have sent many looking for another job while many part-time workers are having their hours cut by employers wanting to avoid having to offer health care under the ACA mandate.

National payroll employment recouped all the jobs lost in the last recession within five years. Payroll employment in Illinois didn’t recoup the recession-lost jobs until early this year and Household employment has yet to do so. There are many measures that influence the strength or weakness of the labor markets; one is the lowest labor participation rate since the late 1970s.

After being close at the end of 2007, Illinois’ unemployment rate has widened its gap with the nation, and particularly with the Midwest. Latest data show the national unemployment rate at 4.9%, the Midwest at 4.5% and Illinois at 5.8%. A good part of the difference lies in the manufacturing. As the recovery got underway in mid-2009, Illinois saw steady improvement in manufacturing jobs through the fall of 2012; however, it began to weaken, reaching in July its lowest level since the Spring of 2011. Thus, it appears that while employment is likely to continue to rise in Illinois, the gap with the nation and the Midwest is likely to remain.

REVENUE: AUGUST REVENUES UP MODESTLY ON MIXED RESULTS
Jim Muschinske, Revenue Manager

Overall base revenues increased $84 million in August as results were mixed among the various revenue sources. August benefited from two extra receipting days.
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Through August, base receipts are down $26 million, reflecting a rather inconsistent revenue picture early in FY 2017. While both personal and corporate income taxes have somewhat disappointed, sales tax receipts at least posted respectable early returns.

As mentioned earlier, gross corporate income taxes have deviated from usual receipt patterns and are off $67 million, or $57 million net of refunds. Gross personal income tax is virtually flat, although dipping slightly with a $6 million decline. A higher refund percentage in FY 2017 does increase the falloff to a larger $18 million year to date. Despite the early performance of income taxes, sales taxes managed to grow in line with modest expectations as receipts are ahead of last year’s tepid pace by $43 million.

Overall transfers are down $72 million at this point of the young fiscal year. As stated earlier, this year is without a transfer from the Refund Fund which added $77 million last August. While the lottery transfer is ahead of last year pace by $18 million, other transfers are down $9 million and riverboat transfers are off $4 million.

Despite federal sources growing $91 million thus far, average monthly performance would have to increase over the remainder of the fiscal year even to hit the Commission’s very modest projection.