Still hurting Midwest serves as backdrop for Bush speech on economy

CHICAGO -- President Bush's choice of the Midwest as the backdrop for a speech yesterday touting the nation's economy put the spotlight on a region with an improving but still-mixed economic performance.

While much-changed from the depressed Rust Belt of years past, the manufacturing-intensive Midwest has some big trouble spots to go with its numerous successes and has the weakest regional economy, economists said.

Manufacturing activity has increased for 31 straight months, and nearly 4.5 million US jobs have been created in that period -- numbers the White House promoted on the occasion of Bush's address to the Economic Club of Chicago. But the US automobile industry has been hammered and manufacturing jobs continue to be lost, hitting many Midwest workers hard.

Economist Diane Swonk said there remains ''some rust around the edges," primarily because of problems involving automakers and their parts suppliers throughout the region.

''There is a lot positive going on in the manufacturing sector," said Swonk, chief economist for Mesirow Financial, a Chicago-based firm. ''The problem is in the Midwest we have an Achilles' heel, and it's specifically in Detroit with auto production."

The ongoing loss of manufacturing jobs has been a sore spot throughout the region, as Bush acknowledged.

''Look, I know the manufacturing industry got hit hard here," he told the audience of corporate executives, including the CEOs of such local corporate giants as Kraft Foods Inc., Allstate Corp., McDonald's Corp., and Wm. Wrigley Jr.

Focusing only briefly on the Midwest, he pointed to the creation of jobs nationwide and the decline in unemployment, and said manufacturers will benefit if trade restrictions around the world are eased as he has urged.

Carl Tannenbaum, chief economist at LaSalle Bank, said the region's economy is characterized by a dichotomy: the travails of Ford Motor Co., General Motors Corp., bankrupt auto parts maker Delphi Corp., and others on the one hand and the strength of various nonauto-manufacturing sectors on the other.

''I don't think it's completely incongruous," he said of Bush's decision to come to Chicago to talk up the economy. ''There are some very good manufacturing stories right here in the Midwest."

Among the success stories is Boeing Co., which on Thursday announced a record number of airplane orders for 2005 and is headquartered just a few blocks west of the hotel where Bush spoke. The housing boom has benefited makers of wallboard and building materials, such as USG Corp., which is located several blocks south.

Midwest parts suppliers and Asian car manufacturers also have fared well, and so have producers of heavy machinery, including Peoria, Ill.-based Caterpillar Inc., and manufacturers involved in the defense and machine-tool industries, among others.

Areas of the Midwest dependent upon the domestic auto industry are lagging badly, however. Several are still struggling to overcome the loss of jobs to outsourcing or better technology.