Dubow’s worries are an allegory for the crosscurrents whipping a recovering, but still COVID-disrupted economy haunted by labor force turmoil, supply chain bottlenecks, and pessimistic but free-spending consumers. Inflation is at a four-decade high, workers are quitting in record numbers and COVID presents another wild card: the omicron variant.
Nevertheless, economists are projecting more growth in 2022—3.7% after a 5.6% gain in 2021, according to the Organisation for Economic Co-operation and Development. A Federal Reserve Bank of Chicago survey of economists has unemployment dropping below 4% by the end of 2022, and inflation subsiding to 2.5% from 6.1% during 2021’s fourth quarter.
Here, the numbers won’t be so rosy because of the Chicago area’s relatively higher dependence on manufacturing, business travel and convention attendance, among other factors.
“I’ve got to tell you, our general outlook for Chicago is not great, mainly because of the manufacturing sector,” says Oxford Economics Senior Economist Barbara Byrne Denham, who also lists retail and construction as areas that won’t recover to pre-pandemic levels by the end of 2022. Oxford projects metro GDP expansion at 4.3%, below its 4.4% U.S. forecast, on account of stagnant population growth, public finance woes and, compared to the coasts, a smallish tech sector. The 5% net decline of the city’s office sector is nearly twice the U.S. average and isn’t expected to recover lost jobs until late 2023.
The University of Illinois Flash Index—a weighted estimated average of growth rates in corporate earnings, consumer spending and personal income—is little changed in recent months after recovering to pre-pandemic levels.
“Chicago has a lot of downsides of the pandemic still haunting it,” says Diane Swonk, Grant Thornton’s chief economist.
Like much of the U.S., Chicago is counting on a jump-start from infrastructure spending, which could rival what it was during the New Deal as a share of gross domestic product. Illinois is promised $17 billion or more on top of $45 billion approved by the state in 2019 for the Rebuild Illinois infrastructure program. But how much of that will be felt by the end of 2022?