Fed adviser: Steady as she goes for economy

The economy will expand steadily over the next two years – and enough for the average consumer to notice.

Though it won't be a stratospheric bounce back, growth this year and next will be solid, William Strauss, senior economist and economic adviser at the Federal Reserve Bank of Chicago, told Lake County business leaders Tuesday.

Demand for goods will emerge, employment will rise modestly and the credit spigot will begin to flow more freely, prompting businesses to consider investing, he said.

“More importantly, it will feel tremendously better,” he told a lunch crowd at the annual economic forecast program presented by the Lake County Chamber of Commerce at the Lincolnshire Marriott Resort.

While the process has been muted compared to recoveries from deep recessions of the past, the outlook is solid going forward, he added.

After eight years, Midwest unemployment has dropped to match the rest of the country, and companies appear ready to pull the trigger on hiring, according to Strauss. This should lead to a gradual decline in unemployment, he said.

“We're going to see much better job growth in 2011 than we did in 2010,” he said. “Growth is accelerating, so we'll see some better improvement.”

While no “break out” sector is anticipated, manufacturing has been recovering well and is expected to grow at solid pace the next two years. Auto sales also are expected to improve at a modest pace, Strauss said.

And while the affordability of housing has improved dramatically because of a 25 percent drop in prices, consumer attitudes for buying a home remain low. The drop in home prices appear to be close to the bottom, Strauss said, but the housing market remains “extremely weak” and the forecast is for a very slow recovery.

Locally, Lake County Partners, the county's development arm, has fielded many more inquires during the past six months and notched some successes, including the $38 million FedEx Ground sorting and delivery facility in Grayslake, said William Whitmer, vice president of economic development for the group.

He said a proposed “innovation zone” near Great Lakes Naval Station also would generate jobs.

Maureen Riedy, president of the Lake County Convention & Visitor's Bureau, said hotel occupancy was up 14 percent in 2010 and modest increases in business and leisure travel are expected this year.

In response to an audience question, Strauss said recent income tax increases have brought Illinois more in line with neighboring states, but that spending cuts also need to be examined.

Suzi Schmidt, former longtime county board chairman, who in November was elected state Senator in the 31st District, agreed.

“The culture has to change in Springfield,” the Lake Villa Republican said after the event. “They're going to have to cut. You can't tax your way out of this.”