Senior economist William A. Strauss told a business crowd Tuesday in Lake County to expect the economy to remain status quo as we move along into 2013.
"It's déjà vu all over again," said Strauss, an adviser in the economic research department at the Federal Reserve Bank of Chicago. The outlook for the U.S. economy is "to expand at a pace around trend in 2013 and above trend in 2014," said the keynote speaker at the 6th Annual Forecast Luncheon held by the Lake County Chamber of Commerce.
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He told a crowd of about 125 people at the Cuneo Mansion and Gardens in Vernon Hills that most of us remain cautious when it comes to the economy. "People don't want to go out on a limb for fear that something may go wrong," he said.
Strauss said there are several positive aspects related to the economy including home prices that are slowly increasing along with the stock market and commercial real estate rates. However, he believes that the path of the current recovery is restrained compared with past depression recovery cycles.
Strauss said employment is expected to rise moderately with the unemployment rate edging lower.
"Employment fell by over 8.7 million jobs between December 2007 and February 2010. Since then it has added just over 2 million jobs over the past 12 months," he said. The unemployment rate is expected to improve slowly and by the end of next year it should be at 7 percent, he said.
Strauss said manufacturing jobs have been rising, adding 490,000 jobs. "But they have only recovered 21.4 percent of the jobs lost during the downturn," he said. The recovery has been broad-based with vehicle and primary metals manufacturing leading the way. "And Midwest manufacturing has been outperforming the U.S. during the recession," he said.
When it comes to the inflation rate, Strauss expects that the slackness in the economy will lead to a relatively contained rate. "Inflation is expected to rise to 1.9 percent this year and 2.2 percent next year," he said.
The economist said his main concern for the upcoming year is taxes. "The federal government's top tax rate has varied widely over the past 80 years although government receipts has been relatively stable," he said.
The per capita share of the federal debt is nearly $53,000. Strauss shook his head, stating that the average person has a mere $7,000 to $8,000 saved for retirement.
Members of the audience said Strauss gave an interesting view of the state of the economy. "He always gives a very realistic view," said Paul Isaac, who creates energy efficient programs for North Shore Gas.
Dale McFarland of Key Lime Cove in Gurnee agreed. "I thought it was fascinating. It's nice to have someone who can speak intelligently about the economy. It's always a breath of fresh air," he said.