Bistate recovery trails U.S. rate

http://www.stltoday.com/business/local/article_83c34dad-640e-55d2-95b3-4a1d2c9f8827.html

Both Missouri and Illinois suffered in the Great Recession. Now they're falling behind in the recovery.

Economic growth was slower than average in both states in 2010, and is expected to stay that way for years to come, according to a pair of new reports out Tuesday.

The Commerce Department said that Missouri's economy grew a little more than half as fast as the nation as a whole in 2010; Illinois' grew at about three-fourths the national rate. This comes after steeper-than-average declines in 2009, and growth rates that have generally lagged the nation for a decade.

And it doesn't appear they'll be catching up any time soon. A second report, from forecasting firm IHS Global Insight, predicts that personal income will grow more slowly in both states than in much of the country at least through 2016.

This makes sense to Fred Giertz, an economist at the University of Illinois. Both states have relatively slow-growing populations, and without adding people, it's harder to grow your economy. He notes that the unemployment rate in Illinois, at 8.6 percent in April, is slightly lower than the nation's right now — a relatively rare thing.

But, Giertz says, the recovery has been "very, very slow." He keeps a monthly index of tax receipts in Illinois, a sort of first read on income and spending in the state, and an early indicator of its economy. That index has climbed for 12 straight months, yet it's still below the point suggesting healthy growth.

In Missouri — where the St. Louis area makes up at least 40 percent of the state's $244 billion economy — growth has been lagging for a long time. Adjusted for inflation, economic output per person actually fell slightly in the 2000s, while growing nearly 7 percent nationwide.

There are many reasons for this, said Jim Diffley, an economist with IHS who studies regional economies.

Part of it is slow population growth, and part of it is simply the mix of businesses in the state. Looking ahead, he expects that places with strong high-tech manufacturing and business service sectors will thrive. Regions that depend on construction and retail spending will continue to lag.

"You need to be on the cutting edge of the things that are in demand tomorrow," he said.

Of course, that's easier said than done.

In April, Missouri officials wrapped up a six-month-long study of the state's economy, with a panel of business leaders recommending a focus on sectors such as advanced manufacturing, biotech and financial services. David Kerr, head of Missouri's Department of Economic Development, has said that the plan will be refined and rolled out over the next few years, but that they would start right away.

They're working on implementation now, said DED spokesman John Fougere, and he said the new numbers highlighted the need for a new approach. "This is exactly why Gov. Nixon launched the process," Fougere said.

Meanwhile, St. Louis-area business groups such as the Regional Chamber and Growth Association have criticized state legislators for their inability to reach a compromise on reforming development tax credits — which in turn has stalled new incentive programs to help Missouri's science, IT and air cargo industries.

But, Giertz said, there's only so much government can do. It can establish a stable tax climate, build roads, provide good schools. The rest is really up to the private sector.

"Governors get blamed and governors take credit," he said. "But most of what happens happens because of the dynamics of a state and region. We are what we are."