EDC INITIATES NEW ECONOMIC INDEX . . .

SHIFT IN INDUSTRIAL BASE AND
GROWING ECONOMIC DIVERSITY
CHARACTERIZE CHICAGO

The emergence of several strong industrial sectors and an increasingly diverse commercial base have been the driving force behind Chicago's economic growth in recent years, according to a new study analyzing local and national economic forces and trends.

Compiled by the Strategic Planning Committee of the Economic Development Commission (EDC) of the City of Chicago, the report shows the local economy has grown substantially, experiencing notable employment increases in the finance, insurance, real estate and services industries, among others.

With nearly a 50 percent decrease in unemployment over the last five years and a 27 percent increase in building permits from 1987 to 1988 alone, the city has maintained growth consistent with national economic trends and even surpassing nationwide averages in some key areas.

While manufacturing has declined, the "Chicago Economic Update" report reveals the city's industrial base has shifted dramatically since 1975 and is now more diversified than it has ever been. An analysis of employment and business statistics for Chicago industries shows that chemicals, air transportation, insurance carriers and apparel, among others, have become key players in the city's economy and are growing at a faster rate than national norms.

The "Chicago Economic Update" report is based on information compiled from a first-of-its-kind Chicago Economic Indicators (CEI) database developed for the EDC by NCI Research, a nonprofit research organization specializing in economic development.

"Creation of the database will — for the first time —allow the Strategic Planning Committee to monitor, evaluate and forecast the city's economic performance by industrial sector based on hard, empirical evidence," says Ronald J. Gidwitz, chairman of the Economic Development Commission and Helene Curtis, Inc. Gidwitz also indicated that the CEI database will play an important role for the EDC as it continues its work to better focus Chicago's economic development strategies.

Chicago's Economy

Several key economic indicators, including employment rates, sales tax revenues, and office vacancy and absorption rates, among others, offer tangible proof of Chicago's economic health.

Overall, the city's unemployment rate has declined from over 12 percent in 1983 to 6.8 percent in March 1989, according to the report. In comparison, the national unemployment rate for March 1989 was 4.9 percent, increasing slightly to 5.2 percent in April.

From 1983 to 1986, all major industry sectors in Chicago reported employment increases with the exception of manufacturing and wholesale trade, which declined by 7.2 percent and 2.6 percent respectively. The finance, insurance, real estate and services industries enjoyed the largest employment gains during this time period. These three industry sectors have added over 19,000 jobs to the Chicago economy during the 1983-1986 period.

While Chicago has long been known for its strengths in the communication, financial and services industries, several others including air transportation, insurance and legal services have emerged as economic stand-outs in the city's business climate. Employment growth in these industries between 1983 and 1986 was 33.2 percent for air transportation and 21.9 percent for insurance and legal services, the report notes. In addition, sizable employment gains were reported in lumber and wood products (10 percent), furniture (10 percent), chemicals including drugs and cosmetics (14 percent), and stone, clay and glass products (7 percent).

"During the past 10 to 15 years, Chicago has undergone a remarkable transformation," says Marshall Field's Philip Miller, co-chairman of the Strategic Plan-

September 1989 / Illinois Municipal Review / Page 23

ning Committee. "From a city being led by its manufacturing sector Chicago has grown to become a more balanced city economically, with strengths in finance, insurance and real estate (F.I.R.E.) and services, as well as manufacturing."

Another important indicator of economic strength, sales tax revenue increased 6.3 percent from 1987 to 1988, with retail trade in the city showing strong signs of healthy expansion. Specifically, growth is evident in agricultural garden supplies (12.7 percent), lumber and hardware (10 percent), general merchandise (9.2 percent) and eating and drinking establishments (8.3 percent).

"Chicago has long been one of the nation's retail centers," Miller continues. "With infrastructure improvements planned for State Street, the ongoing expansion of Michigan Avenue, and as mall development continues throughout the city, we anticipate a vital and profitable retail environment in the years ahead."

Manufacturing Outlook

Although its employment share has declined to 21 percent from 30 percent since 1975, manufacturing continues to represent an important part of Chicago's employment base, according to the report.

"Despite an apparent decrease in manufacturing employment in the city, some manufacturing sectors have actually grown in output as streamlined production and increased automation have made these industries more cost efficient," says Milton Hill, the EDC's director of strategic planning. In fact, in several manufacturing operations employment decreases can actually be attributed to shifts from manual to service-type positions within those industries as job roles are redefined. The steel industry serves as an example.

Contributing to the city's shrinking manufacturing base, says Hill, are a trend toward suburbanization and the relative growth or decline of these industries at the national and metropolitan levels. "It's a given fact that these factors will affect changes in the city," he says. "However, it's important to note that the city's 7.2 percent decline in manufacturing employment has been more than offset by its increased employment share in services from 23.5 percent in 1975 to 31.5 percent in 1986."

Diverse Economy

At the same time Chicago's services industries have taken off, several other local businesses have experienced rapid growth to become the city's leading areas of specialization. These industries include brokers and services, air transportation, legal services, investment offices, insurance carriers, banking, printing and publishing, real estate, and education services, among others.

Unlike many other Midwest cities, such as Detroit which specializes in one industry, Chicago's economic diversity puts the city in a strong competitive position with the nation's other industrial markets.

Through targeted strategic planning and a sensitivity to Chicago's economic strengths and weaknesses, the Economic Development Commission has made a commitment to foster continued business expansion, says Gidwitz. "The EDC was created to provide guidance to the Mayor's office in identifying ways to strengthen Chicago's economy by contributing to business retention and attraction.

"This initial report lays the foundation for developing long-term economic strategies, and this and follow-up studies will enable the EDC and the city to more closely target our policy prescriptions to enhance Chicago's competitiveness."

The "Chicago Economic Update" is the first in a series of reports on developments in the Chicago economy, and provides a quantitative and qualitative analysis of development resources, employment trends, and other economic factors influencing business growth in Chicago and the greater metropolitan area. •

Page 24 / Illinois Municipal Review / September 1989