Chicago manufacturing study finds mixed results

BY BRADY CREMEENS | Special to Watchdog.org

CHICAGO — America’s “Second City” finds itself behind most other large metropolises in its manufacturing growth, a new study reveals.

More specifically, Chicago’s manufacturing and export sectors aren’t recovering from the recession as quickly as other major metropolitan areas.

Research conducted by the British-based HSBC Bank — the world’s largest bank — and the Chicago Council on Global Affairs shows that while Chicago ranks fourth in the nation in the value of exported goods and services, it ranks 40th in rate of export growth since 2009.

The report, titled “Revival in the Heartland: Manufacturing and Trade in Chicago,” lays out the history and prevalence of the Windy City’s manufacturing and export industries; where it’s been, where it is now and where it might be headed.

According to the report, manufacturing accounts directly for $6.4 billion in wages in Cook Co. and its neighbors. Plus, each manufacturing job is responsible for a “spin-off” of another 2.2 jobs, adding approximately 800,000 additional jobs to the economy.

“Manufacturing dominates Chicago’s trade,” the report states. “Despite two recessions, total exports from the Chicago region have more than doubled since 1997, with manufacturing accounting for two-thirds or more of the total. The role that manufacturing and trade play creates stability and growth opportunities for the Chicago region.”

While the city’s manufacturing industry may be seen as struggling compared to other large cities in America, the report says it’s still a massive industry and makes up a large portion of the overall economy.

The report states the manufacturing sector’s influence relative to other sectors has grown in Chicago over the past two decades, even as it has shrunk on the national level. However, it also discovered that while manufacturing makes up two-thirds of Chicagoland’s exports, it falls behind even Houston — a much smaller city — by more than $11 billion last year.

Brady Cremeens is a reporter with the Watchdog affiliate, Illinois News Network.

Mark Denzler is the vice president and COO of the Illinois Manufacturers Association and says one reason Chicago may be growing more slowly than other cities is its poor approach to business policies.

“High taxes, high workers compensation rates, heavy regulatory burden, all of these things contribute to slow business growth,” Denzler said. “And that doesn’t even touch the mess the state’s finances are in. When businesses and employers see an unstable fiscal situation and a business climate that ignores what hurts and helps, it’s very hard to see steady growth.”
Chicago boasted more than 400,000 manufacturing jobs in 2013, down from about 800,000 in 1990 but enough to keep it competitive with New York and Los Angeles since the recovery began in 2009.

“Chicago remains a center of industry,” the report states. But “it’s a different sort of industry from its days as the ‘City of the Big Shoulders.’ Manufacturing in the post-industrial era is seen as a producer of innovation, as much as of products. And the volume of growth by manufacturing companies coming to the region affects the city, its people, and its exports.”

Richard C. Longworth is a senior fellow at the Chicago Council on Global Affairs who participated in HSBC’s panel discussion and said the region isn’t creating new industries as much as it’s expanding upon established industries with new methods of technology and efficiency.

Longworth said the key to growth is to continue finding new ways to innovate.

“We’re still producing as much steel as we ever have,” he said on the panel. “And we’re exporting a whole lot of it, but we’re doing it using extremely advanced methods like digital manufacturing. Most of the industries that are surviving and growing are doing so because they’re willing to adopt new processes and technologies to approve upon their product.”

According to the report, the Chicago region exported $66.2 billion in goods and services in 2013 — a significant increase from the $53.9 billion exported in 2012.

Senior Vice President and Managing Director of the Midwest Region of the HSBC Bank Steve Trepiccione said there is cause for optimism when it comes to the region’s economy.

“More than half of the exporters in the Midwest have told us they expect to grow their business in the next year,” Trepiccione said in a panel discussion on the report. “That’s consistent with what our report says today.”

The report suggests breaking down bureaucratic red tape from the local and state governments, strengthening the city’s infrastructure and working to create a more skilled workforce as ways to address the areas where Chicago’s manufacturing and export industries fall short.