Chicago area’s economic recovery lags other urban areas, study finds
Metro Chicago’s economic recovery is weaker than in most major urban areas worldwide, held back by slow employment growth, according to a Brookings Institution report.
Assessing annual growth in GDP per person and in employment levels from 2013 to 2014, the think tank ranked the 14-county Chicago region No. 203 among the world’s 300 largest economies. This is a marginal improvement from Chicago’s ranking at 208 in Brookings’ last study two years ago.
Unlike 60 percent of the metropolitan areas, this region still has not returned to pre-recession levels by those two measures, according to the report released Thursday.
“Chicago is still kind of lagging, especially if you look at its global peers,” said Joseph Parilla, lead author of the report. “This reinforces the urgency the region has in terms of making the right investments and the right policy decisions in order for key industries to be successful going forward.”
The Chicago region, which includes counties in southern Wisconsin and northwest Indiana, saw a 0.7 percent rise in GDP per capita, better than the U.S. average of 0.4 percent, according to a Brookings analysis of Moody’s Analytics data.
Employment levels grew by 0.8 percent, half the 1.6 percent rate nationwide.
“2014 was not kind to Chicago’s labor market,” said Kurt Rankin, economist at PNC Financial Services in Pittsburgh.
Rankin said manufacturing employment likely will finish flat for 2014 while employment in other key sectors — transportation, finance, professional business services — grew at rates below the national average.
Metro Chicago acts as an artery for manufacturing in the upper Midwest, providing transportation, financing and business services, Rankin said.
“Even though there has been recovery, what we’re seeing is getting back to pre-recession conditions,” he said. “It’s not until new business expansion begins that Chicago will catch up and accelerate to where it is normally, right in line with U.S. growth,” he said.
The Brookings report combines the GDP and employment measures when ranking cities. It is a narrow snapshot and not intended to reflect a region’s livability or global competitiveness. Rather, it aims to look at how economic forces are shaping the world’s largest metro areas since the end of the recession in 2009, Parilla said.
The report, “Global MetroMonitor 2014: An Uncertain Recovery,” found divergent trends among the world’s metro areas.
Faring best were urban areas specializing in commodities, even as commodities prices fell worldwide.
The recent slide in oil prices likely changes that picture, one economist said.
“I was talking to our partners in Texas yesterday, and as high as they were flying until midyear, they are beginning to see a little bit of a retreat,” said Carl Tannenbaum, chief economist at Chicago-based Northern Trust.
Regions with strength in utilities, trade and tourism performed well, Brookings found. In contrast, urban areas with high concentrations in business, financial and professional services grew more slowly, Brookings found. Those sectors are key in Chicago.
The increased regulation of financial sectors after the 2008 crisis “has taken some steam out of the industry,” said Tannenbaum. Conversely, it has helped firms involved in auditing and regulatory counsel.
Metropolitan regions in countries with developing economies, including many in China, saw the fastest growth rates in the Brookings report, in part because they are working from much smaller bases. Four U.S. areas — Austin and Houston in Texas; Raleigh, N.C.; and Fresno, Calif. — were among the 60 fastest growing, as were London and Manchester in England.
Washington-based Brookings says the fast growth rates of developing-economy metropolitan regions are significant in the highly competitive global economy.
“These places are on a trajectory to reach their potentials,” Parilla said.
Chicago “already is a good place to live, it’s already wealthy,” said Parilla, adding that he considers it on par with the 10 or so most important regions in the world. Its GDP per capita was $57,624 in 2013, placing it No. 36 among the 300 metro areas.
Real estate firm Jones Lang LaSalle, which markets itself as JLL, this week ranked Chicago No. 8 among top cities worldwide in the amount of commercial real estate investment attracted by the region. In the first three quarters of 2014, Chicago lured $9.1 billion in investment, it found.
London topped the list with $26.6 billion while second-place New York attracted $26 billion, according to the Chicago-based firm.
Next in line were Tokyo, Paris, Los Angeles, Boston and San Francisco. Chicago ranked No. 6 a year earlier.
While the Chicago area is finding it tough to compete with regions that have strength in such key sectors as tech or energy, it is faring a lot better than many Rust Belt counterparts, Tannenbaum said.
Its educational institutions, transportation assets, teaching hospitals, convention business and small-business base have helped move the city forward, he said.
“I’m hoping one of these days we won’t be stuck in the lower third of a 300-city ranking,” he said.
Mayor Rahm Emanuel’s office did not respond to a request for comment, nor did officials at World Business Chicago. The nonprofit, led by Emanuel, acts as the city’s economic development arm and works with other agencies on regional growth efforts.
kbergen@tribpub.com
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