CHICAGO – Relative to what he presented last year at GAAS 2011, William Strauss, senior economist and economic advisor, Federal Reserve Bank of Chicago, says he believes the economy has continued to expand, but not by much.
 
"We’re looking at an economy that will continue to grow, slightly on trend or a little better than trend, but nothing to write home about," Strauss said.
 
There are risks on the near-term horizon, but they are external to the U.S., such as the European recession and the slowing of the economy in China, Strauss noted.
 
In the U.S., we’ve had three years of economic growth since mid-2009, but it has been tepid, Strauss said. The economy expanded by just 2.1 percent over the past year, due in large part to the recession, and historically, recoveries tend to be a bit weaker he says.
 
According to the May 10 blue chip report, the economy is expected to grow at 2.3 percent this year, just slightly better than last year. The forecast path of current recovery is relatively muted compared with past deep recession recovery cycles.
 
"All we’ve done is match past performance, creating large gaps between where we are and where we should be," Strauss said, speaking of lackluster growth in labor rates as an example.
 
One bright spot however, is manufacturing, according to Strauss. More than 73 percent of the output loss has been recovered from the manufacturing sector, he says.
 
"I remain very optimistic on manufacturing," Strauss said. "Manufacturing capacity utilization has been rising since 2009. It’s going be a very attractive place to bring new business. Ever increasingly, we’re hearing about firms adding capacity, expanding facilities, buying equipment."
 
Strauss also noted the fact that while manufacturing jobs have been rising, we have only recovered 21.1 percent of the jobs due to an increase in productivity. "We continue to be more and more efficient," Strauss said.