Chicago's economy: A look ahead

Three analysts weigh in on the region's fortunes—and what to watch in 2020.

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It might be a new decade, but experts say Chicago's economy is still hounded by the same old problems.

Business and political leaders in the new year will have to continue to contend with declining revenue, widening inequality and a gaping public employee pension hole. That's on top of uncertainty on the national level, specifically a trade war with China that's hammered the Midwest economy.

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It's not all bad, though: Growth in high-skilled sectors like data and tech has allowed Chicago to reassert itself as a global city. Big-name tech companies—including Google, Uber and Amazon—announced major expansions here last year. And Chicago's renowned universities continue to draw in and keep top talent, furthering growth in high-skilled jobs.

Crain's spoke with three seasoned observers of the Midwest's economic and public policy scene about their thoughts on the city's fiscal health: Geoff Hewings, founder of the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign; Teresa Cordova, director of the Great Cities Institute at the University of Illinois at Chicago; and William Sander, professor emeritus of economics at DePaul University and a current economic consultant for the Federal Reserve Bank of Chicago. Their New Year's resolution for Illinois? Pay down the pension liability.

Read the conversation, which has been edited for clarity, below.

CRAIN'S: Let's start with the good news. What are the highlights of the Chicago economy? Are there any sectors that are growing?

GEOFF HEWINGS: We're not doing badly. We have a very low unemployment rate; we are creating jobs at a healthy rate, although not a dramatic one. While we've never expanded at the rate of New York or Seattle, I'm honestly not sure that we want that. I don't think we need to be the fastest-growing metropolitan economy—we just need economic growth that's manageable. Part of the draw of Chicago is its affordability. We've got enormous assets in that regard, and they're necessary conditions to help us achieve economic growth.

TERESA CORDOVA: We have a large and growing logistics sector, which, given Chicago's location, makes sense. But it's also important that we're sensitive to the impacts of this incredible growth in what's a very highly skilled sector. Who's left out of this growth, and how can we make sure they're included? I commend Mayor Lori Lightfoot for acknowledging in her economic plan that there's a need to invest and grow jobs in Chicago's South and West sides, but we will have to do more.

WILLIAM SANDER: People have too negative of a view about Chicago—we're not Detroit. Don't get me wrong, we're not doing great, but we are experiencing moderate economic growth. Part of the reason for that is that we have a substantial economic base bolstered by a huge number of college-educated workers wanting to come and live in the city. College graduates have ranked the city as one of their top places to work, likely because not only is this a world-class city, but it's also an affordable one.

Chicago saw revenue declines in fiscal-year 2018 and 2019. If there is some growth as you say, why are we still struggling to fill budget holes?

GH: 79彩票注册网址The state's overwhelming pension debt and uncertain political situation have made it difficult for Chicago to unlock its full economic potential. Corruption probes, pension debt and a lack of political will to do anything about it really make businesses think twice about setting up shop in Chicago versus, say, Milwaukee. Chicago is not going to benefit from the enormous locational advantages that it has because it's going to be fighting issues over which it doesn't have a great deal of control.

TC: 79彩票注册网址Since the mid-1970s, more and more people—particularly African Americans—have been increasingly left out of the economy. The decline of manufacturing and other middle-income jobs led to the creation of geographic pockets of chronic joblessness that just becomes entrenched for decades. And today there are incredible disparities. We did a report showing that while Cook County leads the nation in white employment, we also lead in black joblessness. The people leaving the state are disproportionately African American. This inequality affects economic growth, and it will only get worse unless we do something.

WS: The pension liability really puts a damper on growth. We already have some of the highest local and state taxes in the country, which affects the business climate. Plus, net migration out of Illinois makes it harder because it means less people are contributing to the economy. I don't think we know why people are leaving the state, but it seems that a lot of this "exodus" is driven by an aging population of retirees looking for sunnier states.

What's the most important thing elected officials can do to jump-start the local economy?

GH: Politicians need to have the political will to take this pension issue head-on and come up with a 10-, 15-year plan to pay down the debt. We have this dilemma where we want to stimulate the economy through things like infrastructure plans, but that short-term economic jolt also means we're not paying our pension obligations and are making things worse down the line. We need to be sure that we spend our revenue in a way that both addresses our financial obligations and invests in job growth.

TC: We need to properly invest in education at all levels, pre-K through higher ed. Economic growth is dependent on education, and we can't afford to take any shortcuts. We have a problem in sectors like manufacturing, for example, because employers are having trouble finding workers with the right skill set. School teaches critical thinking skills that are fundamental to innovation, and a quality education is the best way to access the job market.

WS: 79彩票注册网址Addressing the pension issue is fundamental. All states struggle to some degree with pension liabilities, but it is acutely worse here. We have no choice but to pay it, and the longer we put it off, the more expensive it's going to become. It's complicated, though, because real action requires changes to the whole system. Politically, that's hard, but the alternative is even harder on the taxpayer.

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