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

In judging the direction of the U.S. economy it seems clouded by divergent movements in key measures of its performance. Real GDP slowed in the first quarter, rising a modest 0.7 %, the slowest pace since the first quarter of 2014. However, it is based on incomplete data, subject to revision, and repeats a pattern of a weak first half of the year followed by a healthier second half. Still, the first quarter growth was less than expected and follows last year’s meager growth of 1.6%, the slowest since 2011.

The largest GDP component is the consumer. Real personal consumption expenditures edged up a modest 0.3% in the first quarter from 3.5% in the final quarter, and 2.7% for all of last year. At the same time, despite softer sales, consumer prices firmed. In contrast, while the pace of economic activity slowed, the employment picture strengthened. March’s unemployment rate fell to 4.5%, the lowest rate since May 2007. At the same time, the stock market continues to reach record levels and confidence measures are strong and rising.

Similar divergences appear in Illinois. The unemployment rate fell to 4.9%; the lowest in a decade. On the other hand, nonfarm payroll employment fell for three consecutive months. It dropped by 8,900 in March and, as population declines, there are fewer payroll jobs than in 2000. Recent gains in manufacturing jobs also have retrenched. The Midwest March unemployment rate was 4.3%, below the national rate of 4.5% and 4.9% in Illinois which, in turn, was higher in all but 2 of the 12 states.

There are even wider disparities within metro areas. While unemployment rates fell from a year earlier in all but one, six reported job increases while eight reported fewer jobs. The highest rate was Rockford at 8.3%, while the lowest was the Chicago-Naperville-Arlington Heights area with a rate of 4.2%, followed by Bloomington at 4.3%. Four metro areas had rates below 5% while seven had rates between 5% and 6.5%. In looking ahead, while it appears that economic growth will recover from the initial first quarter reading, there is little reason to expect, absent major policy changes, any improvement from the anemic growth of the past few of years. In this context Illinois is likely to continue to lag both the nation and Midwest with widely divergent trends.


REVENUE: STRONG FEDERAL SOURCES MITIGATE WEAKNESS
Jim Muschinske, Revenue Manager

Overall base revenues grew $216 million in April. The gains reflect strong reimbursable spending in April, with subsequent federal source receipts growing $319 million for the month. Unfortunately, most other revenue sources experienced disappointing results, particularly the “Big Three” of personal, corporate, and sales taxes.

With only two months remaining in the fiscal year, despite two consecutive months of growth, base receipts are off $1.098 billion, or 4.3%. As discussed in earlier briefings, the receipt weakness is widespread, and has resulted in disappointing performances in key areas such as income and sales taxes as well as federal sources.