Economist paints optimistic picture at forum

Senior Economist William A. Strauss compared the economy with the weather Wednesday afternoon.

"It's pretty chilly right now, but in a few months, it will warm up," Strauss, an adviser in the economic research department at the Federal Bank of Chicago, said during the keynote address at a Forecast Lake County meeting at Key Lime Cove in Gurnee.

The economist gave a much more optimistic outlook than last year when he called economic charts "scary."

He painted a more positive picture at the Wednesday event that drew about 160 people, mainly members from the small-business community.

"After facing the worst economic downturn since the Great Depression, we're looking at an economy that has begun to expand," he said.

He cautioned, however, that the expected future economic growth will be "muted" and slow.

He said the recovery period is under way and that unemployment will be the biggest challenge in the year ahead. Strauss pointed out that the number of jobs lost in the downturn was huge.

"We lost over 5 percent of our work force," he said, adding that he expects the unemployment rate to peak this quarter.

Strauss, who joined the Federal Reserve Bank in 1982, said he was eager to hear President Barack Obama's State of the Union address. He hoped the president would talk about how more of the country's focus needs to be placed on community colleges as a way to prepare the work force.

"Community colleges are the best pulse you can get. They are the pipeline that need to be supported," he added.

Strauss told the crowd that he has an upbeat view of housing and manufacturing.

Some audience members questioned his bullish outlook on manufacturing. He explained that technology has allowed the U.S. to remain strong in this arena.

"Our technology and economy allow manufacturers to be globally competitive," he said.

He pointed out that light-vehicle sales collapsed 21 percent in 2009 over the previous year. Yet, production of these vehicles has been cut by 34 percent, causing very lean inventories.

"The inventory to GDP ratio has fallen to record low readings," he said.

When it comes to housing, he sees that demand has picked up slightly.

He added that home sales have been moving higher, in part because of the tax credit, expected to expire in March.

While he said housing starts have fallen to a post World War II low, he said mortgage rates remain "attractive" and that home price declines have been large.

However, he said "lending standards for mortgage loans remain tight."

For the most part, participants at the Lake County Chamber luncheon found the overview, positive, helpful and insightful.

"It was more optimistic than I expected," said Jack Creagh of Buffalo Grove.

"I thought it was great. It's good to get the pulse on the economy," said Tony Guagliardo of Gurnee.

Lisa Hays of the Community Action Partnership of Lake County agreed. "It was interesting. It seemed positive," she said.