Statewatch: Illinois

Economist:

The president’s home state, like many others, is grappling with an ailing economy. But it also suffers its own brand of affliction. For most of December and January Illinois was consumed by the scandal of Rod Blagojevich, the governor who allegedly tried to sell Mr Obama’s Senate seat. Now Mr Blagojevich’s appointee, Roland Burris, has admitted that he tried to raise money for the governor while seeking the seat, a fact he omitted from testimony in January. A Senate investigation is under way. The distraction is unwelcome.

Illinois entered the recession already weak. The state had never regained the employment levels of November 2000. The government had long been sunk in dysfunction. By May 2008 relations between legislators and the governor in Springfield, the capital, were so frayed that the legislature sent Mr Blagojevich a budget with a projected deficit of $2.1 billion. The governor did not lower spending enough to meet available revenues, explains Dan Hynes, the state’s comptroller.

That Illinois is faring better than Michigan, Ohio and Indiana is small comfort. Last year the number of foreclosures there jumped by 55%. Illinois’s unemployment rate was 7.6% in December compared with a national average of 7.2%. Matters will probably get worse. During the commodities boom, exports of farm equipment and construction machinery from companies such as Caterpillar and John Deere helped boost the state’s economy. That support is now dwindling. Geoffrey Hewings, an economist at the University of Illinois at Urbana-Champaign, explains that Illinois is apt to enter business cycles later than the country, but that its downturns are usually deeper and longer. The state lost 100,700 jobs in 2008, 73,600 in November and December alone.

The recession has affected each part of the state differently. For much of 2008 Peoria and its surroundings remained relatively prosperous. Since the 1980s industries such as health care and business services had expanded. Without any housing bubble to burst, the area’s median home price even inched up last year. Nevertheless, Caterpillar looms large, and its job cuts have shaken the region. Of Caterpillar’s 22,000 layoffs, at least 1,500 are in greater Peoria. Rick Doty, the president of the local United Auto Workers union, has a Barack Obama commemorative plate on his desk and big hopes for the stimulus. “If Obama’s stimulus gets moving with the infrastructure,” he contends, demand will rise for Caterpillar’s heavy machinery. Mr Obama, during his visit to East Peoria, claimed that the stimulus might spur Caterpillar to rehire workers. Later Caterpillar’s chief executive admitted that many cuts would remain.

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