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Flash Index up slightly in May; Unemployment continues to impede growth

After climbing by more than a full point in April, the University of Illinois Flash Index held relatively steady in May, rising just one-tenth of a point to 105.9. 

The reading is the highest for the index since August 2007 when it stood at 106.The jump in the index to 105.8 in April from 104.7 the previous month was due to unusually large final tax payments, however the state’s unemployment rate remains high which is putting a drag on the state’s recovery, according to economist J. Fred Giertz of the University’s Institute of Government and Public Affairs.

The rate fell in April from 9.5 percent to 9.3 percent, but it remains higher than one year ago and is still well above the 7.5 percent national jobless rate. During the long and slow recovery from the 2007-9 recession, growth in output has not been sufficient to bring down unemployment quickly because increases in productivity have limited the need for additional workers,” Giertz said. “Growth will need to accelerate to get back to pre-recession levels."

Two components of the index (individual and corporate income tax receipts) were down in real terms compared to the same month last year while sales tax receipts were up by a small amount, Giertz said. The Flash Index is a weighted average of Illinois growth rates in corporate earnings, consumer spending and personal income. Tax receipts from corporate income, personal income and retail sales are adjusted for inflation before growth rates are calculated. The growth rate for each component is then calculated for the 12-month period using data through May 31, 2013.