Illinois economist: Future not so bright

January 8th, 2008 at 11:46pm Aaron Chambers

Edward Boss, an economist for the General Assembly’s fiscal agency, reviews economic indicators in a recent report and predicts little to no growth:

As shown, even the most likely scenario shows the economy recording no, or zero, growth in the final three months of 2007 while the next most likely, hard landing scenario, shows the economy declining for three consecutive quarters through the first half of 2008, clearly a recession, before a weak recovery occurs in the second half of the year.

Boss continues with a parallel to a 1970s economic slump:

Not only is there concern over the weakening pace of economic growth, but it is occurring at the same time that prices have shown an accelerated pace of increase. This combination suggests a period of “stagflation”, the worse of both worlds as the economy stagnates while inflation increases, and the unemployment rate rises. The term stagflation described conditions in the 1970s. Inflation seemed to feed upon itself as consumers began to anticipate continuous price increases and increased spending. In return, this increased demand pushed up prices further, which led to higher wage demands, labor contracts that included cost of living increases, and government that pegged entitlement spending such as social security payments to increases in the consumer price index. The later increased government spending swelled the budget deficit that pushed up interest rates that increased costs for business and consumers even further. Together with high energy costs and interest rates, business spending weakened and unemployment rose.

Nationally, unemployment is on the rise. Local unemployment, in particular, is near 6 percent. More on local unemployment here.

Entry Filed under: illinois economy