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May 23, 2016
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The Chicago region's recovering labor markets

CMAP's regional economic indicators microsite features key measures of metropolitan Chicago's economy and, where applicable, compares these measures to peer metropolitan areas.  The accompanying Policy Update series supplements the indicators by examining the complex factors that affect our region's economy.  This Policy Update examines labor market conditions in metropolitan Chicago, and the region's recovery from the 2007-09 recession.  

One fundamental indicator of a region's economic health is the unemployment rate.  Changes in the national economy and shifts in local industry composition have a significant effect on a region's workforce, which, in turn, affects regional prosperity.  The 2007-09 recession was one of the most severe economic downturns since the 1940s, leading unemployment to peak at 10.0 percent nationwide and 11.4 percent in the Chicago metropolitan area.  Although our region's economy has been slow to recover, employment trends in recent months have been positive.  

This Policy Update uses several measures to explore the recovery of national and regional labor markets.  The national unemployment rate has now been at or below 5.0 percent since October 2015, and a growing proportion of Americans are either working or looking for work.  Metropolitan Chicago's unemployment rate, currently at 6.4 percent, has risen in recent months as an increasing number of residents re-enter the labor force to look for work. This Update includes data for the Chicago metropolitan statistical area or MSA, which encompasses 14 counties, including Kenosha County in southeast Wisconsin and several counties in northwest Indiana, along with state-level alternative unemployment measures.  Statewide alternative unemployment measures show a sizeable decrease in discouraged workers and part-time workers seeking full-time work.  The region's growing labor force, coupled with statewide decreases in discouraged and involuntary part-time workers indicates a stronger labor market that, after nearly seven years, is close to being fully recovered from the recession. 

National and local trends

In recent months, the U.S. labor market has marked several positive milestones.  The most recent U.S. Department of Labor jobs report notes that, for the week ending May 14, 2016, the number of individuals filing first-time claims for unemployment benefits has remained at or below 300,000 for the last 63 weeks, the longest such streak since 1973.  Furthermore, as of April, the U.S. economy marked its seventh straight month with an unemployment rate at or below 5.0 percent.  This is significant not only because it is in line with pre-recession rates, but also because it meets the U.S. Federal Reserve's target unemployment rate.  Economists also note that workforce participation -- the proportion of the U.S. population that is either working or looking for work -- hit a two-year high in March (although participation declined slightly for the month of April).  Unemployment in metropolitan Chicago reached a post-recession low in August 2015 at 5.5 percent.  Contrary to recent national trends, however, the region's unemployment rate has grown since August, rising from 5.5 percent to 6.4 percent as of March 2016.  This unemployment increase is not necessarily a bad sign for the region's economy, however, because it has coincided with an increase in the size of the region's labor force.

Metropolitan Chicago's growing labor force

Since August 2015, the total number of people in metropolitan Chicago either working or looking for work has grown by roughly 124,000.  This exceeds the region's pre-recession peak and is also a historical high; the region's labor force is now the largest it has been since the Bureau of Labor Statistics began measuring metropolitan labor force sizes in the early 1990s.  A growing labor force suggests that an increasing number of the region's residents believe that the job market is improving.   

Discouraged and underemployed rates also declining

Alternative unemployment measures provide further details about the health of the Illinois labor market (data are not available at the metropolitan level).  CMAP's previous Policy Update on alternative unemployment measures noted that the U.S. Bureau of Labor Statistics maintains six different estimates of unemployment.   The most commonly used definition of unemployment, known as U-3, includes people who do not have a job and have actively looked for work in the past four weeks.  This definition can be expanded to include a number of different groups, such as discouraged workers (measured as U-4) or underemployed workers (U-6). 

During the recession, Illinois saw a sizable increase in both discouraged and underemployed workers.  The estimated number of discouraged and underemployed workers statewide has fallen by roughly 40 percent since 2010.

Looking forward

The improving health of metropolitan Chicago's labor market is a welcome sign for the regional economy.  Data show that more people are either working or looking for work, both nationally and regionally.  Alternative unemployment measures for Illinois show significant strides in eliminating labor market slack.  Employment rate fluctuations over the short term are a common occurrence.  Over the long term, metropolitan Chicago can enhance its global competitiveness by ensuring a strong connection between the region's education and workforce development systems and its growing industry clusters.  GO TO 2040 emphasized monitoring indicators of the region's vitality as a key component of promoting this connection.  CMAP will continue to track unemployment and labor force trends and evaluate the needs of the region's economic clusters

 


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