Economist: Growth taking root after harsh recession
Like the first flower buds blossoming after the long, brutal winter, the economy is showing signs of growth after an equally long, brutal recession, economist Diane Swonk told a group of DuPage County business and government leaders Tuesday.
Swonk was one of a number of experts who spoke to about 700 members of the business community at the fifth annual DuPage Regional Business Outlook in Oakbrook Terrace. Swonk, chief economist and senior managing director at Mesirow Financial in Chicago, used the analogy of the end of an extreme winter season to describe what she sees as positive signs for the economy this year.
"The winter displaced our economy, but in the aggregate, it did not destroy it," she said. "The U.S. economy came to a standstill in the first quarter, but we're going to catch up and we're already beginning to see it."
One of the key signs of economic recovery is appreciating home values, she said. And while values are not at pre-recession peaks, they are moving up.
"It means for the first time since this crisis took hold, we can now tap the equity in our homes," Swonk said.
However, she added, people are tapping into their equity to remodel or repair homes instead of moving upward, which she said is due to a lack of available first-time homebuyers.
Companies are also beginning to invest in their businesses, something that has not been done for several years, she said.
"Corporations are willing to put money into the business," Swonk said. "Instead of just repairing the equipment they have, they're willing to buy new equipment and expand.
"And that's extremely important because without that, we do not have a future," she added.
All of this has led to an uptick in the manufacturing and construction industries, which in turn has created more jobs that are putting people back to work, she said.
While being careful not to single out Illinois, Swonk noted another positive sign nationally was state and local governments reducing what she called "fiscal drag" by reducing taxes, allowing companies to spend more on things like infrastructure or personnel.
"Last year we lost 1.5 percent of economic growth due to higher taxes at the federal level and a decline in spending," she said. "We still have deficit problems, but it is narrowing now."
While she was optimistic about the current signs of economic growth, Swonk cautioned that a major issue that can affect the future is unemployment. A key is getting long-term unemployed -- especially the Millennial generation -- back into the labor pool, she said.
"We've lost teenagers, we've lost young people," she said. "Are we giving up on Millennials? These are the kids who are coming back home. These are the kids with the student debt that keeps them awake because if they default on that debt they will never gain access to a mortgage in this country.
"A lot of people don't think Millennials are good enough to do anything," she added. "They can change the world, and they want to.
"We have a bit of tail wind, and now we can catch up to the problems we face and also have momentum," Swonk said. "It's not enough to heal all the wounds from our recession, but it's something more than what we're seeing so far."