From the Commission on Government Forecasting and Accountabilityj
SUMMARY
Illinois’ economy weakened in the second half of 2025, with trade policy changes dealing a disproportionate blow to manufacturing-dependent parts of the state.
The pace of year-over-year job and income growth is behind the below-average midwestern pace.
The breadth of job creation across industries has narrowed, which is consistent with the national picture.
In Illinois, healthcare, financial services, information, transportation/warehousing, construction and government employment are up year over year.
Retail, manufacturing, and professional/business services are performing especially poorly.
For the last three months for which data are available, Illinois’ unemployment rate averaged 4.5%, compared with 4.2% in the region and 4.4% in the nation.
The decline in Illinois’ jobless rate can be attributed primarily to a decrease in the labor force rather than stronger job creation, as household employment has gone flat.
Illinois’ economy will underperform the Midwest and the U.S. in the coming year.
Employment will be essentially unchanged from the fourth quarter of 2025 to the fourth quarter of 2026,
and gross state product and income will increase less than elsewhere.
Though the economic drag from higher tariffs will abate somewhat, the uncertainty around trade policy will be slow to lift, which will weigh on growth in states such as Illinois.
The state will be a step behind the Midwest average and a few steps behind the nation in job and income growth over the long term.
Below-average population trends and deep-rooted fiscal problems such as mounting pension obligations and a shrinking tax base represent the biggest hurdles to stronger economic performance.
Persistent out-migration will weigh on the strength of employment and income gains.
