Moody’s Analytics Releases Economic Forecast for Illinois Amid COVID


Illinois’ economy will recover soon, but the economic woes that plagued the state before COVID-19 will slow that recovery and increase the risk of further problems, according to a Moody’s Analytics report released on Wednesday.

The report prepared for the General Assembly’s Committee on Government Forecasts and Accountability, or COGFA, said a stronger economic recovery in Illinois will begin in mid-2021, largely thanks to a widespread deployment of vaccines.

“The strength of Illinois’ near-term recovery will depend on how quickly it can safely pursue a sustainable reopening of businesses, and it will depend on how effectively the virus is contained statewide and nationwide, ”the report says.

However, Illinois’ recovery from the COVID-19-induced recession will be hampered by long-standing issues facing the state, which have been made worse by the current recession. Moody’s said rising pension debt, shrinking tax base, direct spending needs and declining tax revenue would make it harder for the state’s economy to rebound relative to other neighbors. to the Midwest and to the nation.

Moody’s said there had already been early evidence of this slow recovery because “Illinois’ recovery was later than most at the end of 2020” and job and income growth was already slow in the state before the pandemic.

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Over the past year, Illinois’ economy has made significant progress since the economy shut down last March. April’s unemployment rate hit 17.2%, which fell to an average of 7.3% in the last three months of 2020. Moody’s said it is expected to drop to 6% by the end 2021 – higher than other Midwestern states but in line with the national average.

The report says it will probably be until 2023 at the earliest before the state’s economy “resumes”. The state must recover 400,000 lost manufacturing jobs and reintegrate those who left the workforce. The hard-hit service and hospitality sectors will also take longer to get back on their feet.

“The economy is expected to quickly enter a prolonged period of strong growth as people let go of their fear of getting sick and start doing what they did before the pandemic again,” Moody’s said.

Sam Toia, president of the Illinois Restaurant Association, said getting to a point where people feel safe will be crucial in bringing his industry back.

“We have been wiped out in the last year, but we are definitely seeing the light at the end of the tunnel,” he said.

Toia also pointed out that 2023 was the time when he believed the restaurant industry could return to what it was before the pandemic, as so many jobs have been lost.

“People are going to be careful with their money and careful with their health,” he said.

However, the Illinois tax woes that existed before the pandemic are troubling signs for bringing Illinois business back to life in the long run.

“Despite Illinois’ benefits, the state’s financial woes threaten to discourage businesses from relocating or staying in the state. The state’s outlook is mainly tarnished by its fiscal woes and weak demographic trends, not by its high costs compared to neighboring states. Illinois businesses tend to pay more taxes than those in neighboring states and labor is expensive, ”the report says.

Although this recession has been difficult, the report says the recovery is expected to be faster than after the Great Recession.

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“Illinois has what it needs to remain a premier business center, as long as it can resolve the tax issues that are eroding its advantage in the competition for talent, jobs and capital,” the report said. report, highlighting a strong agricultural industry and growth. in the Chicago business environment.

Mike Doherty, senior economist for the Illinois Farm Bureau, said 2021 is shaping up to be a positive year for crop production with prices rising thanks to purchases from China. He said the agriculture industry does not expect any direct payments from the government like in 2020, but higher prices are expected to keep incomes high.

In Springfield, the health care industry and state jobs have been a lifeline for the city for the past year or so. Illinois did not cut as many jobs in the state as other states, and the health care industry was a “lifeline” for the people of central Illinois. Moody’s says healthcare will remain important after the pandemic as many people seek care for issues they have carried forward in the past year.

But like the rest of the state, the problems that existed before COVID-19 could worsen economic conditions. The report notes that Springfield was one of the 10 most remote cities in the Great Lakes region in 2019.

“Springfield’s economic future depends almost entirely on Illinois’ ability to repair further damage to its already weak fiscal position by the pandemic,” Moody’s said.

Springfield was a major convention destination before the pandemic. Toia said the revival of this industry will help other businesses recover.

“The conventions and the fans in the stadiums are also driving people to the restaurants and I’m not sure we’ll be at 100% capacity for the summer,” he said.

Michael Jacobson, president of the Illinois Hotels and Lodging Association, said lifting restrictions on conventions and events is the only way the hotel industry is starting to see a turnaround in Illinois.

“In a market like Springfield, up to half of a hotel’s income depends on meetings and conventions. Until these gradually pick up on a larger scale, the recovery will be longer for our industry, ”said Jacobson.

Jacobson said half of a hotel’s income comes from hosting events, which are typically scheduled six months to a year in advance. As other states ease restrictions on gatherings, Jacobson said conventions are ditching Illinois for places where they are more likely to be able to host their event.

“People don’t realize that each hotel is individually owned and operated. These are individuals who use this as an investment and risk losing everything, ”said Jacobson.

Springfield Mayor Jim Langfelder wants the state to adjust its guidelines on gatherings to help the city’s economy recover.

“Even though our staff at the Convention & Visitors Bureau work hard to book these conferences, with occupancy limits still in place and the openness of neighboring states, it hurts Springfield. Even the General Assembly vote to fail. not meeting in Springfield and choosing to stay away has an impact on our local economy, especially our downtown stores, restaurants and hotels. Our city is also heavily dependent on leisure travel and this is impacted when we reopen does not match our measures, ”Langfelder said in a statement.

For some companies, the economic recovery comes too late.

“A lot of damage has already been done and there is no quick fix,” said Illinois Chamber of Commerce President Todd Maisch.

Maisch said lawmakers must direct federal aid to small businesses and tackle corporate liability protection to protect them from lawsuits alleging a customer or employee has obtained COVID-19 at the company. to help the state’s economy rebound.

Given the poor economic performance in 2020, the likely but gradual reopening of sectors of the economy would lead to positive economic growth. The report predicts that gross state revenue for fiscal years 2021 and 2022 could reach 4 percent. It would likely be behind the national rate, however.

Moody’s warns that Illinois also has the possibility of encountering issues related to the pandemic.

“There is still the risk that the financial damage from previous closings coupled with weak consumer spending translates into a major wave of business failures, keeping the unemployment rate high for longer,” the report said.

Jacobson said it was too early to say how many hotels would survive the other end of the pandemic, but he is already seeing signs of hotel foreclosures.

Combining the long-term economic fallout from the pandemic with the current fiscal challenges Illinois faces, Moody’s said Illinois is in an undesirable position for 2021, even with the onset of a likely economic recovery.

“In the midst of population losses and significant pension commitments, Illinois enters 2021 in a relatively unfavorable position. A broader slowdown, a lower-than-expected stimulus bill or a resumption in emigration would set the economy back, ”the report said.

Moody’s Investor Service rates Illinois’ credit at Baa3 with a negative outlook. This is a level above the junk rating.

Maisch said the aid approved by Congress may give the state time to resolve long-standing problems that Moody’s will hamper the state’s economic recovery, but that resolving them will come down to finding the political will. legislators to make changes.


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