Illinois’ Economy Ranked #34th | 2008 Great Recession

How Illinois’ economy lost $34bn during the 2008 Great Recession

The Illinois economy is the 5^th largest in the country, and back in 2007 Q4 its Real Gross Domestic Product (Real GDP) was worth $673bn. The national economy had peaked in that quarter before the financial crisis precipitated what has become known as the Great Recession. By the time the US economy bottomed out in 2009 Q2 it had lost $634bn of Real GDP equivalent to 4.3%. To put some context on that, in 18 months the country essentially lost an Illinois economy, one which employed 6.3m people in December 2007.

Illinois’ economy declined by 5.1% during the recession, and was ranked 34^th compared to other states. Real GDP fell by $34.1bn to $639.2bn. The aggregate value of employee income fell by 2.6% between 2007 and 2009.

The Real Gross Domestic Product data is collated by the Bureau of Economic Analysis (BEA). Real Gross Domestic Product (Real GDP) is the value of total economic output adjusted for price changes (i.e. either inflation or deflation). The BEA provides Real GDP data by industry sector and by state. The objective of this post is to reveal the impact of the Great Recession on the industry sectors that contribute to the entire state Real GDP.

Twelve states managed to increase their Real Gross Domestic Product during the 2008 recession. These states tended to have a large mining sector in their economy, a large finance and insurance sector, a large government sector, or a disproportionately large combination of these.

Illinois’ economy is structured differently. Its largest sector was manufacturing in 2007 Q4, with a Real GDP value of $89bn and the second largest was the real estate, rental and leasing sector which was valued at $85bn. The finance and government sectors were the next two largest but its mining sector was its smallest, contributing $2.2bn to Real GDP in 2007 Q4.

The Great Recession Growth Index Table for 19 Private Sector Industries in Illinois

The Great Recession commenced at the end of Q4 2007 and ended in Q2 2009. Using Real GDP in Q4 2007 as Index 100 the following table shows how the nineteen industries changed over this 6 quarter period.

In Illinois’ economy seven industries increased their Real GDP in the Great Recession

Nationally 6 industries increased during the recession, but in Illinois the Real GDP of 7 of the 20 industries increased. The six industry sectors to increase nationally were:

• The mining sector, which increased by 18.7%;
• The agriculture, forestry, fishing and hunting sector, which increased by 16.4%;
• The finance and insurance sector, which increased by 9.5%;
• The educational services sector, which increased by 7.5%;
• The healthcare and social assistance sector, which increased by 6.1%;
• The government sector which increased by 1.7%.

These sectors all increased in Illinois’ economy too, as well as the real estate, rental and leasing sector though it fell by 1.9% nationally.

Seven sectors increased their Real GDP in Illinois during the 2008 recession

The seven sectors of Illinois’ economy to grow during the recession were:

• The agriculture, forestry, fishing and hunting sector which increased by 16% and $666m to $4.8bn, compared to an increase of 16.4% nationally, due to a boom in commodity prices in 2008 that was sustained for some sectors into 2009. Nationally this Illinois performance ranked 24^th in this sector compared to other states;
• The educational services sector was ranked 10^th in Illinois as it increased by 10% and $807m to $8.9bn, when nationally it increased by 7.5%. Aggregate employee income in this sector increased by 18.3% between 2007 and 2009;
• The mining sector increased by 7.3% and $159m to $2.3bn, but aggregate employee income fell by 4.8% between 2009 and 2007;
• The real estate, rental and leasing sector’s 2008 recession performance in Illinois was ranked 8^th compared to the other states. It was the second largest sector in 2007 Q4 behind manufacturing but it grew by 5.2% adding $4.4bn to Real GDP as it increased to $89.1bn in 2009 Q2, whereas nationally the sector fell by 1.9% at the same time. By the end of the recession it was the largest sector in the Illinois economy, though it should be noted that employee income fell by 14.5% between 2009 and 2007;
• The healthcare and social assistance sector increased by 4.7% and $2.1bn to $45.7bn. This ranked 42^nd compared to other states as the average increase in this sector was 6.1%;
• The finance sector grew by 1.7% and $940m to $57.6bn, and is the 4^th largest sector in the Illinois economy. Nationally this sector grew by 9.5% during a recession despite starting it. Bailed out by the taxpayer, the sector grew and added $85bn to Real GDP during a recession it caused; at the same time $252bn was wiped off the US manufacturing sector. Illinois’ finance and insurance sector underperformed in comparison, was ranked 33^rd nationally and aggregate incomes in the sector fell by 8.7% between 2009 and 2007;
• The government sector is the third largest in Illinois but it just about increased by adding only $26m to Real GDP, increasing it to $69.2bn for the sector. Nationally this sector grew by 1.7% and Illinois’ government sector ranked 42^nd compared to other states. Aggregate incomes did increase by 6.5% from 2009 to 2007

Illinois’ Private Sectors where Real Gross Domestic Product decreased during the Great Recession

The wholesale trade sector lost $9.1bn during the 2008 Great Recession, the biggest loser

Nationally the three sectors hit the hardest were the construction sector (down 18.8%), the wholesale trade sector (down 16.5%) and the manufacturing sector (down 12.9%). Between them, their Real GDP fell by $23.8bn in Illinois during the recession.

• The construction sector in Illinois was hit the hardest, falling by 24.3% and $7.4bn to $23bn. This was ranked 42^nd compared to other states and aggregate employee income fell by 14.1% between 2009 and 2007;
• The wholesale trade sector is Illinois’ 5^th largest sector, and it fell by 16.9% and $9.1bn to $44.8bn, a performance that was ranked 37^th Aggregate employee income fell by 5.3%;
• The manufacturing sector fell by 8.3% and $7.3bn to $81bn, a decline that meant the real estate sector replaces it as Illinois’ largest. Nationally the sector fell by 12.9% so the performance ranked 16^th compared to other states. Aggregate employee income fell by 11.3%.

These may be the biggest losing sectors in absolute terms but other sectors underperformed compared to other states.

• The utilities sector was ranked 44^th after it fell by 13.3% and $1.6bn compared to a fall of 9.4% nationally;
• The administrative and waste management services sector fell by 11.5% and $2.5bn compared to an 8.8% decline nationally. Only in Michigan, Delaware, Florida and Connecticut did the sector decline by more than in Illinois. Aggregate employee income fell by 8.8%;
• The retail trade sector fell by 11.5% and $4.5bn to $34.5bn, compared to a 7.4% fall nationally. Only in Florida, California, Arizona and Nevada did the retail sector fall more steeply than in Illinois. That means the retail trade’s worst performances were in three of the five largest states, (Illinois, Florida and California). Aggregate employee income fell by 8.3%;
• The professional scientific and technical services sector fell by 4.5% and $2.4bn to $50bn, a performance that ranked 44^th in an industry that declined by 2.4% nationally.

Employment market

Illinois’ potential labor force at the end of 2007 totaled 6,713,750 with 6,343,767 in work and 369,983 unemployed, equivalent to 5.5%. The unemployment numbers rose to 698,523 in June 2009, equivalent to 10.5%, but it continued to rise until it peaked at 743,295  (11.2%) in January 2010 at which point 373,312 jobs had been lost since December 2007. By June 2009 Illinois’ labor force totaled 6,641,371 and 5,942,848 were in work.

By April 2017 the number unemployed fell to 307,031, equivalent to 4.7% of the workforce.