The Chicago Metropolitan Agency for Planning's (CMAP) 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 growth trends of advanced industries in Chicago and peer metropolitan areas since the end of the 2007-09 recession.
Innovation is a fundamental driver of economic growth. Estimates by the Organization for Economic Cooperation and Development show that, in developed economies, roughly half of all economic growth can be attributed to the creation of new ideas, products, and processes. GO TO 2040 highlighted metropolitan Chicago's numerous innovation-supporting assets, including research institutions, a diverse mix of industries, strong civic organization and foundations, and their relationship to economic growth.
At the beginning of August, the Brookings Institution released an update to its national advanced industry growth analysis work, which serves as a proximate measure of innovation across U.S. metropolitan areas. The report tracks employment growth in 50 "advanced" industries that fall into one of three categories: energy, manufacturing, and services. With productivity rates nearly twice as high as rates in all other industries, advanced industries have a high likelihood of developing innovations that contribute meaningfully to economic growth. Advanced industries conduct extensive research and development and contain high concentrations of workers in science, technology, engineering, and mathematics (STEM) fields.
The report found advanced industry growth trends between 2010-13 contrasted with growth over the last two years (2013-15). Since 2013, employment growth in the nation's advanced energy industries has stagnated amidst slowing global economic growth and low energy prices. Meanwhile, advanced manufacturing industries continue to add jobs thanks to a growing automotive industry. Nevertheless, advanced manufacturing employment growth has slowed in the last two years, in part due to a strong dollar and concurrent weak global demand. Contrary to trends in manufacturing and energy, advanced services industry growth has increased in speed in recent years thanks to growing demand for digital services such as computer programming and data processing.
To a large extent, these trends are also playing out in the Chicago region, with advanced manufacturing employment growth slowing and service industry growth picking up. The remainder of this Policy Update focuses on advanced manufacturing and service industry growth among Chicago and its peer regions. Advanced energy employment trends are not covered here since northeastern Illinois does not have a large base of advanced energy jobs.
Chicago area sustained modest growth in manufacturing
Since the end of the recession, advanced manufacturing growth among the Chicago region and its peer metropolitan areas has been sluggish. Advanced manufacturing employment grew by 0.6 percent per year in the region between 2010-13 and fell to 0.3 percent per year between 2013-15. Although employment gains during each period were relatively small, the region's advanced manufacturing employment growth outperformed that of Los Angeles, Boston, and New York – all of which have seen employment declines in advanced manufacturing since 2010. As of 2015 there were roughly 142,000 advanced manufacturing jobs in the seven-county region.
Between 2010-15 the region had a net gain of 3,500 advanced manufacturing jobs. The largest contributor to advanced manufacturing job growth nationwide and in the region since 2010 has been the automotive industry, with northeastern Illinois' motor vehicles and parts manufacturers adding 3,300 jobs over the last five years. Because of the length of its supply chain, automotive industry growth has a positive effect on a number of other Chicago region industries, such as fabricated metals, machinery, and plastics manufacturing. Other notable growing advanced manufacturing industries in the region include medical equipment and pharmaceutical manufacturing, both of which added jobs at a rate faster than the national average. The medical equipment manufacturing industry added 800 jobs between 2010-15, growing to 11,700 jobs, and the pharmaceutical manufacturing industry added 700 jobs, growing to 17,100 jobs.
Strong growth in services across peer metropolitan regions
The Chicago region has seen strong growth in its advanced service industries since 2010 and shows no sign of slowing. In the last five years the region has added over 38,000 advanced service industry jobs with the cluster growing to a total of 236,000 jobs in 2015. Advanced services growth in the region has matched growth rates in peer service economy regions like Boston and New York and exceeded growth in Los Angeles and Washington, D.C.
As is the case with advanced manufacturing, job growth in advanced services has been fueled by a handful of high-growth industries. The region's computer system design and service industry, which includes computer programming and software development, added over 17,000 jobs between 2010-15, growing from 46,000 to 64,000 jobs. The region also saw robust growth in the management consulting industry, which added over 12,000 jobs over the last five years growing from 60,000 to 72,000 jobs.
Looking forward
Since the end of the recession the Chicago region has experienced slow but consistent growth in its advanced manufacturing industries and more robust growth in its advanced services industries. The fast growth of advanced services relative to advanced manufacturing in our region reflects the broader trend of our nation's labor force becoming increasingly service-oriented. While our region is adding more advanced service jobs, it is important to note that manufacturing remains a major part of our region's economy. According to Moody's Analytics, metropolitan Chicago's manufacturing industry output has grown every year since the end of the recession in 2010 and hit an all-time high of $74.8 billion in 2015.
CMAP's planning and policy analysis for ON TO 2050 will continue to focus on innovation. Advanced industries are significant drivers of growth due to their ability provide unique products and specialized services that connect the region's clusters to markets around the world. Going forward, CMAP will continue to study how the region can build on and leverage its embedded advantages, such as its deep talent pool, unparalleled transportation infrastructure, and diverse industry clusters.