Commission on Government Forecasting and Accountability
Robert Pritchard, Co-Chair
Donne Trotter, Co-Chair
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May 2017 Monthly Briefing
Edward H. Boss Jr., Chief Economist

The national economy is expected to accelerate in the second quarter following a gain of 1.2% in the first quarter, the weakest growth in a year. IHS Economics project a gain of 3.4% in GDP in the current quarter. At the same time, Illinois has lagged not only the national economy but the Midwest even more so. Indeed, little seems to have changed since Moody’s report on Illinois done for the Commission in January. “The state trails the nation in most metrics and political gridlock is imposing significant costs. The jobless rate has resumed its descent after rising last year into 2016, but much of the decline owes to a sharp drop in the labor force and population losses.”

It might seem that progress on reducing the state unemployment rate is a welcome sign. In April the rate dropped to 4.7% from 4.9%. However, the drop was due to a decline in the labor force as population declined and workers dropped out of the labor market while the number of those employed edged down. Another Illinois employment measure is nonfarm payroll employment which showed a drop of 7,200 jobs in April following an 8,900 decline the month before.

In recent days the headline in the Chicago Tribune was Shrinking Chicago. It pointed to Chicago as the only city of the nation’s top twenty to lose population. Moreover, this was the third consecutive year in a row and the drop last year nearly doubled that of the year before. While tourism appears to be doing well, the outflow of residents may have more to do with those seeking increased job availability, while those at home experience record high property taxes, among the highest sales taxes in the country as well as rising and expanding County taxes. Other influencing factors include the spread of crime into areas not seen there before as well as gun violence. Other state data include declines over the past year in both new car and truck registrations and in single-family housing permits, a precursor to housing starts, as well as the decline in the labor force.

At this time, there is little evidence to suggest that recent patterns that developed over the first 5 months of the year will change much in the months ahead. A budget resolution could help remove some impediments while continued population outflow could impair consumer spending, the largest sector of GDP. Thus, Illinois’ economy is likely to continue to trail both the nation and Midwest.

Jim Muschinske, Revenue Manager

Overall base revenues grew $144 million in May. While personal income tax and sales tax posted decent monthly gains, continued weak corporate income taxes erased much of that advance.
Despite three consecutive months of decent growth, with only one month remaining in the fiscal year, base receipts are off $955 million, or 3.5%. As discussed in earlier briefings, receipt weakness is widespread, and has resulted in disappointing performances in the key areas of income and sales taxes as well as federal sources.
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