Volume 6, No.2
Summer 2000

Feature Articles:
Work Life Estimates

Chicago's Place in the Metropolitan Area Economy

Book Review:
Socioeconomic Data for Understanding Your Regional Economy: A User's Guide

Mass Layoffs

Archives

Chicago's Place in the Metropolitan Area Economy:
Why the City Still Matters
By: Richard Reinhold

At the start of the 1990’s, many felt that Chicago’s role in the metropolitan area was gradually declining as jobs and people continued to move out of the City and into the suburbs and collar counties. But recent economic data provide evidence that this pattern has been reversed and, in fact, that Chicago has enhanced its position in the six-county Chicago metropolitan area. We will describe Chicago’s recent economic history and discuss why the City is still critical to the economic success of the entire region. The data used in this article were taken from the Illinois Department of Employment Security’s Where Workers Work publication and the Local Area Unemployment Statistics (LAUS) program.

Chicago Began its Slow, Steady Recovery

In 1993, total private sector employment in Chicago was at its lowest level on record (1,085,006) and nearly one in ten people in the civilian labor force (9.6 percent) were unemployed. Six years later, Chicago reported its highest employment level in nearly a decade (1,146,000) and its lowest unemployment rate in 25 years (5.4 percent).

How did Chicago make this recovery? The bulk of the job growth in Chicago between 1993 and 1999 was in Services (see table). Most of the gains in Services were in Business Services (SIC 73)—including jobs in temporary help services and computer programming/data processing firms—as well as Engineering, Management and Related Services (SIC 87). In 1999, Services represented 43 percent of all employment in Chicago, as compared with 33 percent of all jobs 10 years earlier. Unfortunately, the expansion has not reversed Chicago’s declines in Manufacturing (-32,000 jobs) and Wholesale Trade (-7,000 jobs).

Although growth in Services employment has been strong, Chicago’s overall job growth during the current expansion has not been record breaking. For example, during the 1980’s expansion (1983-1989), total private sector employment in Chicago grew by 89,000 or 8 percent. By comparison, during 1993-1999, a comparable six-year period, employment rose by 62,000 or 6 percent.

The Expansion's Impact on Unemployment

Chicago’s current economic expansion is also reflected in the strength of its labor market. Between 1993 and 1999, the Chicago unemployment rate fell by more than four percentage points, or from 9.6 percent to 5.4 percent (see table). This decline was more than a percentage point greater than what was reported in the entire metropolitan area and nearly a point lower than the decrease for the non-Chicago part of the metropolitan area. This trend was the opposite of what occurred in the 1980’s expansion, when the non-Chicago part and the total metropolitan area reported larger unemployment rate decreases than Chicago. Chicago’s labor force has grown modestly since 1990 (0.3 percent), unlike what occurred in the 1980s, when the total labor force decreased by 2.8 percent between 1979-1989. Also, the percentage of the total population employed has increased slightly since 1990, rising from 44 to 45 percent.

How Chicago's Economic Success Benefits the Rest of the Metro Area

There appears to be a linkage between job growth in Chicago and the rest of the metropolitan area during the 1990s. The non-Chicago part of the metropolitan area was seemingly unfazed by the economic slow down of the early 1990s, experiencing job growth at the same time Chicago was in the depths of the recession. However, the annual job growth rate for the non-Chicago part of the metropolitan area rose from an average of one percent during 1991-1993 to three percent during 1994-1999 when Chicago was pulling out of the recession.

Also, since 1993, Chicago has created a large proportion of the jobs in Services, the fastest growing industry sector. Chicago produced 31 percent of all new Service jobs in the metropolitan area, including 56 percent of all new jobs in Engineering, Management and Related Services and 34 percent of all new jobs in Business Services. This is remarkable given that Chicago produced just 15 percent of all new jobs in the Chicago metropolitan area during that same six-year period.

The metropolitan area benefits from Chicago’s economic success in many other ways, some more obvious than others. Job growth in Services, especially those in the information technology sector, helps all job seekers in the metropolitan region, not just Chicago residents. Sustained job growth in Chicago also lessens the need for residents to commute to suburban areas for work, thereby curbing road congestion and reducing environmental costs associated with heavy motor vehicle usage. Also, as the economic expansion in Chicago continues, the level of public expenditures for welfare and other social services should decline.

Concluding Comments

We are not suggesting that the current economic expansion means that Chicago no longer has serious economic problems. For example, we don’t know to what extent the expansion has benefited residents in the poorer areas of Chicago in terms of better paying jobs, lower unemployment, increased wealth and so on. The 2000 Census data to be released during the next few years should shed light on most of these issues.

We do contend that the current expansion in Chicago is historic, not simply because of its duration but also because it challenges long held beliefs about Chicago’s economic future. As of 1999, Chicago exceeded its 1991 employment level and had 95 percent of its pre-recession (1990) employment. If the expansion continues at its current pace Chicago should exceed its 1990 total private jobs level within five years, reversing its decades-long pattern of structural decline.

Richard Reinhold, a frequent contributor to the ILMR, has worked at IDES since 1992 and currently holds the position of Manager of Local Area Unemployment Statistics (LAUS). His education includes a master’s degree in economic development from the University of Illinois at Chicago.