Economic analysis painted a generally positive, if somewhat uncertain, picture of 2025 during the Forecast Lake County Luncheon Thursday, with Thomas Walstrum, an economist with the Federal Reserve Bank of Chicago, walking local business leaders and officials through an assortment of economic data from S&P Global.
“I would call it a good forecast,” Walstrum said. “GDP growth is near trend; unemployment is low. There’s the potential for a bump in inflation … but overall, I’d call it a forecast for solid growth.”
Walstrum said the forecast is made with numerous assumptions on potential future policies from the incoming presidential administration, which is poised to take over Monday. It is “too soon to say much” about the technical aspects of any policy changes and their impact on the economy.
“If we’re going to sit down and write down a forecast for 2025, you have to put big error bands around it,” he said.
There were some issues raised during Thursday’s presentation. The Chicago area and the broader Midwest region strongly emphasize manufacturing. Looking at data going back decades, Walstrum said that while manufacturing isn’t necessarily declining, it represents a steadily shrinking percentage of the country’s GDP.
That means that while the Chicago area will continue to grow economically, it will be at a slightly lesser rate than the U.S. as a whole, Walstrum said.
“Chicago is the economic capital of the Midwest, and because the Midwest is manufacturing-intensive, that pushes down the forecast for long-run growth in the Midwest and Chicago,” he said.
There is some good news in the short-term, however, with interest rates expected to come down and help bring a bump in manufacturing.
The other issue looming in the data was facing the country at large — an aging population. Employment growth is expected to slow to nearly zero in the coming years, Walstrum said, reflecting the exodus of Baby Boomers from the workforce.
This stagnation in employment growth won’t necessarily correlate with a stagnation of economic growth however, Walstrum explained, with productivity growth, drawing from technological advancements, driving GDP growth.
