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Moody’s: “Illinois is in decent shape” but there’s trouble ahead

Friday, Feb 21, 2020

* Moody’s summary as prepared for COGFA

Illinois is in decent shape for a state facing a slowdown in manufacturing, poor agricultural conditions, and numerous demographic and fiscal problems. The economy is doing better than it has in some time. Several private-sector industries are strengthening, and greater fiscal certainty and growth in tax revenues have allowed the public sector to recoup some jobs. After declining for most of the year, the unemployment rate dipped to an all-time low of 3.7% in December despite a stable labor force. The tight labor market coupled with a better jobs mix is helping to preserve big gains in average hourly earnings.

Most economic gauges point to a performance gap with the Midwest and the U.S. The comprehensive count of jobs from the Quarterly Census of Employment and Wages indicates nonfarm employment growth over the past year was weaker than suggested in the survey estimates. Income growth in key industries such as healthcare, professional/business services and manufacturing was slower than average in 2019. The U.S. trade war with China has taken a toll on the industrial and agricultural parts of the state.

Falling mortgage rates and relatively high affordability have barely offset the effects of adverse changes to the federal tax code and weak population trends. Multifamily housing has propelled almost all the growth in residential construction during the current business cycle. Single family house prices have climbed just 1.5% over the last year, the smallest gain in the Midwest and half the national increase. Home sales are decreasing, and construction remains sluggish.

An array of factors that juiced industrial production and factory job growth in 2018 have all but played out, including federal fiscal stimulus, customers’ rush to stock up before tariffs took effect, and increased demand for oil extraction equipment. Illinois can keep advancing without a positive contribution from manufacturing, but the rest of the economy will have to do its part. Illinois will be hard-pressed to match the U.S. pace of growth in any industry, but the state will lean increasingly on healthcare and professional/business services to power job and income gains. Transportation/warehousing, a vanguard of job growth during this expansion, will expand more slowly in coming years. Consumer industries such as retail and leisure/hospitality will pitch in a bit less as the shrinking population weighs on demand. Population loss and troubled state finances will limit Illinois’ long-term potential.

* Hannah Meisel

The report warns lawmakers not to count on another “April surprise” — a $1.5 billion income tax windfall that allowed Pritzker to drop a plan to defer $800 million in pension payments and impose a bevy of new taxes last year. […]

Business leaders and conservatives frequently lament that the cost of doing business in Illinois is too high. But Moody’s said Illinois’ outlook is “tarnished primarily by its budget woes and weak population trends, not its high costs relative to nearby states.”

“Business costs in the state are lower than they are nationally and have trended downward for the past few decades,” according to the report. “Overall costs are similar to those in Ohio, lower than those in Michigan and Wisconsin, but higher than those in neighboring Indiana and Iowa.”

Moody’s analysis found that while businesses in Illinois tend to pay less in taxes and utilities, “labor is on the expensive side” in part because of the “still-high presence of unions.”

- Posted by Rich Miller        

19 Comments
  1. - RNUG - Friday, Feb 21, 20 @ 3:25 pm:

    In other words, the same challenges as other mid-western non-sunbelt states.

    I didn’t read the rest of it, but Rivian might be a bright spot in all this if everything comes true.


  2. - Generic Drone - Friday, Feb 21, 20 @ 3:30 pm:

    More union bashing ahead.


  3. - Grandson of Man - Friday, Feb 21, 20 @ 3:34 pm:

    “The U.S. trade war with China has taken a toll on the industrial and agricultural parts of the state.“

    Thanks a lot, Trump. What does it say about people who put their blind faith in a multiple-bankrupting, pathologically-lying narcissistic carnival barker?

    “Business costs in the state are lower than they are nationally and have trended downward for the past few decades”

    Were the IPI and other like people lying to us? Noooo.

    “labor is on the expensive side”

    Thanks for admitting that unions boost wages and benefits. The IPI and like people try to convince us that prosperity comes from stripping labor rights. America has Third World income inequality thanks in large part to income gains made by the wealthiest and reduced unionization. Thankfully in Illinois we protect union rights, and the benefit is seen in higher incomes.


  4. - Jibba - Friday, Feb 21, 20 @ 3:38 pm:

    “Business costs in the state are lower than they are nationally”

    What? How can this be so since businesses have complained so bitterly for so many years.

    Moody’s says the budget is the problem. Raise sufficient revenue to pay the bills. That is that path out of the woods.


  5. - Donnie Elgin - Friday, Feb 21, 20 @ 3:41 pm:

    “Raise sufficient revenue to pay the bills. That is that path out of the woods”

    Other people’s money works wonders


  6. - Oswego Willy - Friday, Feb 21, 20 @ 3:53 pm:

    === Other people’s money===

    We’re all taxpayers, even folks you don’t like to acknowledge, lol


  7. - Birds on the Bat - Friday, Feb 21, 20 @ 3:53 pm:

    Moody’s apparently didn’t get the optimism memo.


  8. - Bashooka - Friday, Feb 21, 20 @ 3:55 pm:

    “Chicago’s . . . housing market is among the weakest in th top US metros”.

    Seems like it’s not a “crisis” after all.


  9. - Grandson of Man - Friday, Feb 21, 20 @ 3:55 pm:

    “Other people’s money works wonders“

    It sure does, like all the public goods and services you use for which others paid.


  10. - Earnest - Friday, Feb 21, 20 @ 3:56 pm:

    >Illinois is in decent shape for a state facing a slowdown in manufacturing, poor agricultural conditions, and numerous demographic and fiscal problems.

    Is anyone else blushing at the blatant flattery?


  11. - Donnie Elgin - Friday, Feb 21, 20 @ 4:02 pm:

    “Illinois is in decent shape for a state facing a slowdown in manufacturing, poor agricultural conditions, and numerous demographic and fiscal problems”

    Condemned with faint praise


  12. - Pick a Name - Friday, Feb 21, 20 @ 4:03 pm:

    Trump economy even helping Illinois.


  13. - Oswego Willy - Friday, Feb 21, 20 @ 4:07 pm:

    === Trump===

    … commuted Rod Blagojevich, who tried to extort a children’s hospital.

    You’re welcome.

    ===… not its high costs relative to nearby states.===

    Inconveniently true…


  14. - 47th Ward - Friday, Feb 21, 20 @ 4:08 pm:

    ===Trump economy even helping Illinois.===

    Maybe you missed this part:

    “…a state facing a slowdown in manufacturing, poor agricultural conditions,…”

    And all of that being paid for with borrowed money. You probably think the Chinese are paying the tariffs too.


  15. - Grandson of Man - Friday, Feb 21, 20 @ 4:10 pm:

    “Trump economy even helping Illinois.”

    “The U.S. trade war with China has taken a toll on the industrial and agricultural parts of the state.”

    You need reprogramming.


  16. - JB13 - Friday, Feb 21, 20 @ 4:15 pm:

    – Moody’s analysis found that while businesses in Illinois tend to pay less in taxes and utilities, “labor is on the expensive side” in part because of the “still-high presence of unions.” –

    Don’t worry, businesses. Soon, you’ll get to pay higher taxes and utilities, too. Can’t let our businesses miss out on the fun.


  17. - Ducky LaMoore - Friday, Feb 21, 20 @ 4:17 pm:

    “Trump economy even helping Illinois.”

    Let us all bow down and thank the Donald for the benevolent free market which never ever was here before. Eisenhower, Nixon, Reagan, Bush 1 and 2 were a bunch of commies. How could we survive without the precious 2.1% growth bestowed by our federal government?


  18. - @misterjayem - Friday, Feb 21, 20 @ 4:24 pm:

    Trouble ahead?

    Trouble behind.

    Sorry, Rich, that notion just crossed my mind.

    – MrJM


  19. - Ebenezer - Friday, Feb 21, 20 @ 4:29 pm:

    @MrJM
    Better watch your speed.


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