Economist paints bleak picture at Lake Co. forum

Senior Economist William A. Strauss joked that he was thankful there were no children in the Lake County crowd Monday afternoon because some of the economic charts he was about to show "were pretty scary."

Strauss, an adviser in the economic research department at the Federal Reserve Bank of Chicago, was the keynote speaker at a Forecast Lake County meeting which drew a crowd of more than 220 people.

The opening joke was the only funny aspect of the talk, which painted a dismal picture of the recession. He explained that experts say the typical recession lasts about 11 months. The one we're in, which started about 12 months ago, is expected to last 18 to 21 months, he said.

"It's going to be long," Strauss told the attendees of the event sponsored by the Lake County Chamber of Commerce. He believes the 7.8 percent national unemployment rate could get up to 8.4 percent.

"Employment has fallen by 3.6 million jobs over the past year," he said.

He said vehicle sales were down 19 percent in 2008.

Strauss expects consumer spending will continue to decrease as corporate profits decline, leading to a stock market that will keep seeing significant losses. "People are not feeling very wealthy," he said.

However, he expects the U.S. will see recovery sooner than other parts of the world.

He also addressed the dragging housing outlook and the tightening credit market.

Strauss, who joined the Federal Reserve Bank in 1982, believes that we are closer to the bottom of the housing correction than the top. He added that mortgage rates are low and attractive, but that consumers are having a more difficult time obtaining loans.

"Housing affordability has improved dramatically. And the home prices haven't bottomed out yet," he said.

One positive aspect that Strauss addressed is the energy crisis and that oil prices are dramatically lower than six months ago. Not that long ago, we were paying more than $4 a gallon for gasoline. Now we're below $2. "That's more money in the consumer's pocket," he said.

Taking an optimistic angle, he said it's natural for the economy to grow.

Participants at the chamber luncheon said the overview was interesting, but not news they had not heard before. Many were hoping for more positives.

"It's going to be a long year," Beth E. Ragsdale, a vice president at First Midwest Bank in Waukegan, said after the meeting. Strauss spoke about how things would pick up in 2110. "But it's only February," said Ragsdale, a resident of Lake Villa.

"It's a lot of what we've heard before. It's obvious the economy is struggling and this is a long-term problem. People are looking for a short-term fix," said Nelson Tate, an independent insurance broker in Gurnee.