Experts say the Great Recession ended four years ago; Chicagoans know better
BY DAVID ROEDER Staff Reporter firstname.lastname@example.org June 9, 2013 6:34PM
Greenwell is President of Reliable Plating on the near west side of Chicago. Thursday June 7, 2013 | Alex Wroblewski~Sun-Times
The economic sector summary
What contributed to Midwest growth in the spring?
Construction and real estate: Multifamily construction was robust, and home sales volumes and prices rose. Foreclosures and tight inventories remain drags. Commercial construction and leasing demand picked up.
Banking and finance: Demand for loan processors rose with mortgage business and lenders easing credit standards slightly.
Inflation: Cost pressures were manageable, as commodity prices generally declined.
Agriculture: Heavy rain alleviated effects of last year’s drought. Corn and soybean prices were expected to drop this year as the crops comes in.
What held back the growth?
Consumer spending: It rose slightly in April and May, but was heavily based on promotions. Low-priced items got the traffic.
Business spending: Growth slowed to a crawl. Companies cut their inventories and capital spending as some cited concern about Obamacare and taxation.
Manufacturing: Performance is uneven, with increase in imports hitting domestic steel market and heavy equipment makers scaling back. Home sales helped appliance and furniture companies.
Sources: Federal Reserve Bank of Chicago, Sun-Times reports
Updated: July 11, 2013 6:14AM
The statisticians say the Great Recession ended in June 2009. Most Chicagoans know better.
They know that the biggest economic calamity since the Depression has long overstayed its appointment, throwing the long-term unemployed into a dark emotional place and leaving businesses leery of hiring and capital spending.
The putative recovery is now four years old and yet it has produced a gain of only a third of the 350,000 jobs the Chicago area shed during the recession, which cost the region about 9 percent of its total jobs.
That’s a deficit of a quarter million jobs in the region since late 2007, according to Labor Department data. Nationally, the jobs deficit over the same period is about 2.7 million, and unemployment continues to be high.
The official U.S. jobless rate, released Friday, rose one tick to 7.6 percent in May compared with April. Illinois jobless rates will be updated for May later this month. The Chicago area last registered a rate of 9.4 percent in April, backsliding from the 8.7 percent in April 2012.
William Strauss, senior economist at the Federal Reserve Bank of Chicago, said it’s no wonder people still feel like the job market is in a funk. Many people have been unable to get the work they used to qualify for, and the old-time mobility that used to energize urban markets has been curtailed, he said.
One positive sign in Friday’s jobs report was the addition of 420,000 people to the U.S. labor force of 155.7 million. Economists said more people are attempting to find work, an indicator of higher confidence.
But that hasn’t changed the harsh nature of the labor market.
Strauss said people often feel stuck in place, either because of dim career prospects or an underwater mortgage. Housing has been a star performer in the economy of late, but he said underwater mortgages are still a drag on the market.
“It’s fairly clear the housing market is coming back, but I believe the growth won’t be anything like what people experienced before,” he said. “There are still a lot of things holding the market back, including the problems of getting a mortgage.”
Another issue is that the low-skill jobs that haven’t disappeared or been shipped overseas have gone upscale, requiring higher levels of training. “You have a portion of the population being locked out of the job market,” said Anne Edmunds, regional vice president in Chicago for the employment agency ManpowerGroup Inc.
Experts see a patchy recovery here, something hardly worth the name in many business sectors. It has also sidestepped many lower-income areas.
On Chicago’s Southeast Side, Leonard Szwajkowski can peer out over bleak commercial streets from his office as president and CEO of Royal Savings Bank. He said his low-to-moderate income area is being left behind.
“It’s time. It’s really past time to get something going here. There has to be some type of engine for job growth that comes here,” he said.
One possibility, he said, is talk of a multi-university teaching hospital. The old U.S. Steel South Works site on the lakefront is slated to become new homes and a retail complex, although that work could take a generation.
In the meantime, Szwajkowski said he sees no evidence of business expansion in his bank’s loan applications, which consist mostly of mortgage refinancings. “Our biggest problem is unemployment and a large number of people who have just given up looking for work,” he said.
On the Near West Side, commercial activity hums by comparison. One of its longtime businesses is Reliable Plating Corp. at 1538 W. Lake, where President Jim Greenwell said orders have improved through the first five months of 2013.
But he’s worried about what’s ahead. The work from his 75-employee company shows up in brands such as Mercury Marine and Harley-Davidson and he needs customers and suppliers within easy reach. More are moving farther from a city with high costs for doing business, Greenwell said.
“For business on the West Side, the future is looking a little bit bleak,” he said. “We have the threat of substantial property tax increases and water rate increases for industry.”
Nervousness in the executive suite tends to show up in a key bit of Chicago economic data, the monthly Chicago Purchasing Managers index from the Institute for Supply Management-Chicago. It’s a widely watched measure of expected business volume that can move the stock market.
The index has wavered in recent months, jumping in May to 58.7, its highest point since March 2012. But the increase came from a 3 1/2-year low in April: 49.0.
Selected comments that the institute provides from survey participants underscore the doubts. “Lately the months start good and then end bad,” was one remark.
Factors that help the recovery include pickups in construction and real estate. Low inflation and interest rates are helping consumers and corporate profit margins.
“Real estate is warm if not hot. Bidding wars are back on some homes,” said Carl Tannenbaum, chief economist at Northern Trust Corp. “It’s a response to low interest rates, and the stock market’s performance is putting a lot of money back in people’s pockets.”
The hitch is whether consumer confidence can rise much when the employment market is tenuous. Job security in some places has gone the way of the mimeograph machine.
ManpowerGroup’s Edmunds said companies increasingly have “built into their business model a portion of contract labor,” people they can add or let go as they see fit.