CHICAGO | The local manufacturing sector has been surging lately, but overall economic growth in the U.S. has been slow and anemic, according to an economist who spoke Thursday.
Manufacturing had been growing at a rate of 0.2 percent – basically not at all – at the beginning of the year, Federal Reserve Bank of Chicago Senior Economist William Strauss said. But over the last five months, industrial growth accelerated to 6.6 percent.
"It was a tremendous surge that took place," Strauss said to a crowd of business people at a Calumet Area Industrial Commission lunch Thursday. "With January, at this point, we'll have to wait and see what happened. When interpreting January we'll have to factor in this crazy weather. The data is seasonally adjusted but it's seasonally adjusted for the typical winter experience, not when Atlanta is shut down for a day."
Strauss gave an update on the economy and the state of Midwestern manufacturing at the Ridge Country Club. The types of manufacturers that are concentrated in the Midwest have been thriving for a change, he said.
"For the last couple decades, computers have been growing at double digit rates compared to everything else," Strauss said. "But now vehicles parts are doing well. Thirty percent of the vehicles made in this country are produced in the Midwest. They require primary metals, and it benefits steel, aluminum and fabricated metal products."
Overall U.S. gross domestic product grew at a rate of 2.7 percent in 2013, which was a little better than anticipated, Strauss said. The U.S. economy is currently the strongest in the world, producing 24 percent of the total economic output as compared to China's 16 percent. People do not realize how strong U.S. manufacturing still is, because it produces more high-end products instead of the consumer goods that make "Made in China" labels highly visible.
The U.S. economy should continue to grow at a slow pace, but disappointing job numbers in recent months and and an increase in discouraged workers dropping out of the labor force have raised concerns. Strauss said the slow rate of job creation and stubbornly high unemployment numbers gave him plenty of reason to drown his sorrows "with a stiff glass of Scotch."
During previous downturns, the economy rebounded at a much quicker pace, he said. The country lost 8.7 million jobs during the downturn, and only 7.8 million new jobs have been restored. Companies are as productive as they were before the downturn, but have only brought back a fraction of the jobs they shed.
"Maybe companies got a little fat before the downturn," he said. "Maybe they had workers who weren't the best. They were able to trim off that fat and become meaner and leaner. The companies that did survive are tougher than ever before. Utilization is back to 79 or 80 percent, and we should start to hear more stories of companies running out of space and needing to expand."