Wednesday, August 29, 2012

A closer examination of Chicago's industries

It is no secret that employment opportunities are a big draw for any city.  Recently criticisms of Chicago's economy have begged the question:  what exactly is it that you do here?  Thankfully the Bureau of Labor Statistics has some resources we can use.  First, a comparison between Chicago and Houston.  They make apt comparisons because they are similar in population and they are both centrally located (both are in the Central time zone).  Chicago is center north and Houston center south.

Chicago's year over year construction took a huge dive.  Compare that with Houston, which saw a fairly large construction increase.

As you can see, Houston also profits from Mining and Logging, an industry that is really the accident of geography.  Many cities like Chicago and New York don't have anything to mine or log nearby, while other cities like Los Angeles and Houston do.  I should also note that Leisure and Hospitality went up considerably more in Houston than in Chicago.  Education and Health Services went up more in Houston than Chicago.  Even manufacturing saw better numbers for Houston.  Really the brightest spot of comparison for Chicago was Professional and Business Services, which saw greater growth than Houston.

Keep in mind that Professional and Business Services was a strong point for Detroit as well.  These graphs should be taken in context.

I hope you noticed the difference between this chart and the Chicago and Houston charts.  Detroit only has 7 categories.  Chicago has 10 and Houston has 12.  Los Angeles has 11 categories.  It would seem that a greater diversity of industries leads to a healthier overall economy.

One should keep perceptions of a city's economy in line with the statistics.  Despite all the bluster of Hollywood as a "calling card" industry, Los Angeles is a manufacturing town.

As you can see, L.A. tops the list with more manufacturing jobs than Chicago.  And you can also see manufacturing jobs took a tumble everywhere, but Houston was the only major manufacturing center to keep losses in the single digits.  Thus far I have had difficulty parsing the numbers on Houston to determine how much of Houston's manufacturing jobs are in the petrochemical industry, aerospace, and semiconductor industries.  Additionally I have no good statistics on how much of Chicago's manufacturing jobs are auto manufacturing or metalworking (or Detroit and L.A. for that matter).  Recent news stories suggest that Houston's manufacturing is tied to the petrochemical industry.

And as much as L.A. is thought of as an entertainment mecca, good numbers on Hollywood's role in L.A.'s economy are hard to get but the best I can gather is 8.2%.

Also keep in mind that New York is still a top 10 manufacturing city.  In fact it represents 16% of all private sector employment in New York, a not insignificant number.

Thus we can see that a key to having economic success in a city is not a "calling card" industry but rather having a diverse set of industries, especially in industries that are growing.  Nationwide oil and gas extraction is a booming industry, so being located in that region would be really beneficial to your city.  And this apparently spills over into manufacturing as well.  Auto manufacturing and various metalworking industries have been in terminal decline for about 30 years.  And while iron mining isn't quiescent in the upper Midwest it is a shadow of its former self.

As a counterpoint to this, much of Chicago's economic malaise is tied to the decline of manufacturing.  For Chicago, manufacturing itself was initially an accident of geography that lead to its meteoric rise.  Chicago happened to be located in a region rich with iron ore and copper, as well as lumber, coal, and navigable bodies of water.  As it happened the iron and copper mining exhausted themselves and the region's manufacturing lost their comparative advantage.

Much like New York, Chicago has found that as manufacturing declines it relies more heavily on these other industries to pick up the slack.  The challenge for Chicago, as with New York, is for the seeds of new industries to take root.  For New York, the tech sector is ramping up in "Silicon Alley".  Chicago, as usual, is want to follow in New York's footsteps.

No comments:

Post a Comment