September 2015 Monthly Briefing
ECONOMY: ROLE OF MANUFACTURING
Edward H. Boss Jr., Chief Economist
In the first decade of the 2000’s the manufacturing sector, and therefore manufacturing jobs, continued to decline as the U.S. saw it replaced by jobs centered in the service sector. By the start of 2015, however, the decline had been stemmed. The loss of high-paying manufacturing jobs at the expense of generally lowered-wage service jobs, not only has been a major factor behind stagnant wages overall, but also widens the disparity between income classes, particularly affecting the middle class.
By the beginning of this year it was clear that the continuous loss of manufacturing jobs was beginning to abate. There was much hope of resurgence in the so-called rust belt centered in the Midwest. Even so, the improvement was not equally shared. While several Midwestern states were showing respectable manufacturing job growth, in the 12 months ended August 2015, Illinois manufacturing jobs increased by a modest 41,200, a gain of only seven tenths of 1% and has held virtually unchanged since May.
The turnaround in manufacturing jobs can be explained in part by the sharp drop in energy prices. Ultimately, however, it will take rising demand from improved world economic growth. This does not seem likely anytime soon. China has reduced its demand, parts of Europe have slowed, the economies of Russia, Venezuela, Brazil, and other large oil producers have been sharply affected by the steep decline. According to press reports, Caterpillar has seen its demand reduced for engines and equipment used on oil rigs, and mining, as well as construction equipment and announced it would lay off 10,000 or more workers. Thus, Caterpillar joins Mondelez, Walgreens, and Kraft with roots in Illinois having recently announced large layoffs.
The effect of recent developments in the manufacturing sector on jobs was depicted in the latest ADP National Employment Report. Private sector employment rose by 200,000 jobs in September, in line with recent months. The only sector to decline was manufacturing, which fell by 15,000 jobs but was more than made up for 35,000 new construction jobs, 39,000 in Trade/transportation/utilities, 15,000 in financial activities, and 29,000 new jobs in Professional/business services. Thus, it appears the overall employment gains of recent months remain on track.
REVENUE: RECEIPTS CONTINUE TO REFLECT LOWER INCOME TAX RATES
Jim Muschinske, Revenue Manager
Overall base revenues fell $382 million in September. Comparatively lower income tax rates, related income tax diversions to the education and human service related funds account for the decline.
Through the first quarter of the fiscal year, base receipts are down $987 million. The drop reflects comparatively lower income tax rates as well as the one-time nature of some pharmaceutical court settlements recovered by the Attorney General‘s Office last fiscal year.