Q2 2012 Chicago, Illinois Commercial Real Estate Economy

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Q2 2012 Chicago, Illinois Commercial Real Estate Economy

The Chicagoland economy is improving, but has a long way to go to recover the jobs lost during the recession. According to Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm wage and salary employment was a modest 30,900 (0.8%) higher in June 2012 than it had been in June 2011. The private sector shows a gain of 35,700 jobs (1.1%) for the period, but the June 2012 private employment total remains 180,800 lower than it had been in June 2007. During the past decade there have been wide divergences between CES data and household-based data from the BLS, which includes self employed, freelance and contract workers. By this measure the number of employed residents of the Chicago area increased by a stronger 87,900 (2.0%) during the most recent May-to-May period. In many other parts of the country, in contrast, employment as measured by the CES is now rising faster than employment as measured by household data.

Others have noticed the strong improvement as measured by household-based data. “Chicago’s job market is doing better than most major cities,” according to NBC News. “Right now there are 28,000 more people with jobs in Chicago compared to a year ago, and the number of workers looking for a job dropped by almost 20,000. Houston was the only U.S. city that created more jobs than Chicago.” And rising transit ridership provides another measure of economic activity that implies stronger growth. “Combined ridership on buses and trains was up 10.5 million rides, or 4.0%,” according to Crain’s Chicago. “That’s similar to what happened last year, when ridership hit the highest level in 20 years, more than 532 million. Overall, in the year ending June 30, ridership is up about 22 million rides, or 4.3%, compared with the year earlier. The rise is greater on trains—about twice as much as on buses.”

The Chicago area economy is very diverse, nearly matching the U.S. distribution of employment by sector except for a relatively small Government sector and a relatively larger Professional Business Services sector. Professional and Business Services posted the largest year-over-year employment gain as of June with an increase of 24,000 (3.8%), including an increase of 9,300 (6.8%) in the Employment Services industry, which includes temporary workers and often foreshadows trends in permanent employment. The Government sector, on the other hand, lost 4,800 jobs (1.0%), and fiscal pressure slowed the growth of the government subsidized Educational and Health Services sector to just 2,900 jobs (0.5%).

CES data for other sectors was also mixed. The Manufacturing sector added 7,900 (2.4%) jobs year-over-year in June, with the Food Manufacturing industry up by 1,900 (4.3%). The Wholesale Trade sector gained 2,300 jobs (1.2%) from June 2011 to June 2012, while the Transportation and Warehousing sector added 1,300 (0.8%). The weakest industrial sector continued to be Construction, which lost another 6,100 jobs (4.9%) year-over-year in June, reflecting weakness in consumer-driven sectors overall. The Retail Trade sector lost 7,400 jobs (2.0%), including a decrease of 1,500 (2.1%) in the big-box General Merchandise Stores industry. The Leisure and Hospitality sector, however, added 10,800 (3.1%).

Population and income growth remains limited. BLS data shows an increase of 26,000 (0.5%) in the Chicagoland labor force in the year to June 2012, but this is less than the loss of 39,600 (0.8%) recorded during the previous 12 months. Overall population growth is modest here at 0.4% to 0.5% per-year (30,000 to 40,000) according to Moody’s Economy.com, good for the Midwest but just half the U.S. average percentage gain. Household average income is higher than the U.S. and Midwest averages, due in part to the high-paid Financial Activities sector, but is up just 1.4% year-over-year as of the second quarter according to Moody’s Economy.com. CES data show a gain of just 800 jobs (0.3%) in Financial Activities in the year to June.