The resurgence of the University of Illinois Flash Index continued in January, rising to 105.9 from its 105.7 level last month. This reading approaches the post-recession high of 106 from June and September of 2021.
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Illinois’ unemployment rate fell to 5.3% from its 5.7% level the previous month and 8% a year ago. Fourth-quarter national gross domestic product rose by 6.9% in real terms. Similarly, the components of the Flash Index (individual income tax, sales tax, and corporate tax receipts) were all up in real terms compared with the same month last year, with especially large percentage increases in corporate and individual income tax collections.
“These strong indicators of economic performance pose a perplexing picture since the emergence of the omicron COVID-19 variant, supply chain disruptions, weakness in financial markets, and the emergence of serious inflation paint a darker image,” said University of Illinois economist J. Fred Giertz, who compiles the monthly index for the Institute of Government and Public Affairs. “There are unanswered questions about whether the relationship of Illinois tax revenues and state economic performance have become untethered; only time will tell.”
Most observers do expect a cooling of the national economy in 2022, in part, because of a paring of expansionary fiscal and monetary policy.
“The strong performance of Illinois revenues has apparently not escaped the notice of Gov. J.B. Pritzker. The governor reportedly plans to call for a one-year, one-billion-dollar tax cut, only 15 months after the failure of a constitutional amendment that would have allowed the state to bring in more revenue through a graduated income tax structure,” Giertz said.
The Flash Index is a weighted average of Illinois growth rates in corporate earnings, consumer spending and personal income as estimated from receipts for corporate income, individual income, and retail sales taxes. These 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 January 31, 2022. Nearing two years since the beginning of the COVID-19 crisis, ad hoc adjustments are still needed because of the timing of the tax receipts resulting from state and Federal changes in payment dates.
