By ELYSE KELLY for the Illinois Radio Network
SPRINGFIELD, Ill. (IRN) — As national output declined for the second quarter in a row, concerns of a recession rekindle.
The U.S. Gross Domestic Product (GDP) fell at an annual rate of 0.9% from April through June this year, pushed by high inflation as consumers cut back. In the Land of Lincoln, the University of Illinois’ Flash Index declined for the third straight month, dropping to 105.5 compared to 105.7 in May.
Illinois Chamber of Commerce president and CEO Todd Maisch says the state is seeing slowdowns in certain industries.
“Technology, who had been racing ahead with hiring, is now starting to scale back, is now actually starting to rescind job offers that they made a couple months ago,” he told the Illinois Radio Network.
When consumers pull back, Maisch said, the impacts hit smaller businesses first.
“Small businesses that are discretionary spending, whether it be restaurants or even movie theaters or what have you – I would be most concerned about those folks who would be exposed to a consumer to think inflation is here to stay,” he said.
Maisch said there is a psychology to inflation: once people believe they need to economize, that belief doesn’t turn off quickly just because gas prices fell 20 cents.
Not all industries are pulling back, however. Logistics and transportation can’t hire enough people, Maisch said.
“That is an area that will remain strong until this oversupply of certain goods gets unwound,” he said.
Access to quality workers will remain the biggest drag to GDP for the next several years, Maisch thinks.
Shrinking GDP two consecutive quarters is the technical definition of a recession, but the Biden administration is questioning the long-held standard pointing to the inconsistencies in the current economy.
Maisch pointed out the administration had some valid arguments as the economy is certainly experiencing a unique set of circumstances.
“The big disconnect is the job market versus what the nominal growth or lack of growth in the economy is,” he said.
Arguments against a recession include the fact that some segments of the economy are holding up and the job market remains strong.
The job market, however, is a little more complex than that, Maisch said.
“We are in a very unique labor market we’ve never seen before and when you take into account things like labor participation rates, are we in uncharted territory in terms of historical perspective on what the unemployment rate should be when we’re in recession versus where it is now?” he said.
Whether or not Illinois and the country is in a defined recession, Maisch believes most people are convinced the economy has hit the bottom and it is merely a question of how long it will continue there.
“Overall, it’s not great news that we’re technically in a recession, but I think the good news is that most people think it’s going to be pretty shallow and hopefully doesn’t last very long,” he said.
