‘Tepid’ economic recovery could last years
By Cindy Wojdyla Cain email@example.com April 29, 2012 8:38PM
Updated: June 1, 2012 8:05AM
ROMEOVILLE — During most recessions, the economy acts like a tennis ball.
“The harder you throw it down, the higher it bounces,” said William Strauss, senior economist and economic adviser for the Federal Reserve Bank in Chicago.
But there will be no quick bounce back for the most recent recession, which lasted from December 2007 to June 2009, said Strauss, who was the keynote speaker on Thursday at the annual Romeoville Economic Forecast Forum.
He said the Great Recession, as it has been dubbed, has led to a “tepid” recovery that could last years. This recovery is slower because it involved bloated financial and housing markets, he explained.
“We had too much consumption that led us into this,” he said. “That pendulum had swung too far. We had too many homes being purchased. We had too many vehicles being purchased.”
So there is no pent-up demand to help the economy recover quickly as there was in previous recessions, he said.
Strauss predicted unemployment will fall from the current 8.2 percent to only 8 percent by the end of the year. In 2013, it will be just barely below 8 percent.
The economy only grew at 1.6 percent last year, well below the normal 2 to 2.5 percent, Strauss said. Growth is expected to hit 2.4 percent this year and 2.7 percent in 2013, Strauss reported.
Housing in particular will languish with a glut of available homes and fewer housing starts than the normal 1.5 million a year, he said. The only thing that will pull housing up is the country’s 1 percent annual population growth, which should lead to more young adults seeking homes of their own.
One “sweet spot” in the recovery is manufacturing growth. While manufacturing dropped 20 percent, four times the drop in overall growth, during the recession it has bounced back quickly and strongly with 6.7 percent growth for the past 33 months, recovering 74 percent of its decline.
Manufacturing should remain strong with 3.5 percent growth this year and 3.3 percent growth next year, which is good for the Midwest, Strauss said.
And it’s good for Romeoville, too, said City Manager Steve Golden. The village expects
$276 million in new industrial development this year alone.