But as welcome a sight as those office-dwellers may be, a downtown containing only half of the workforce that once reported to the office each day is still a challenging environment for building owners, retailers, restaurateurs and folks in the business of moving people around, like cabbies and even public transit agency execs. As Crain’s Ally Marotti reports, downtown restaurant operators are questioning when—or even if—the lunch business will ever fully bounce back. Meanwhile, Crain’s Greg Hinz has shed light on the fiscal cliff that looms just ahead for the Regional Transportation Authority: a budget shortfall of $730 million a year by 2026, as ridership is expected to remain depressed in the new world of hybrid work. And Crain’s real estate reporters Alby Gallun and Danny Ecker have spent much of 2022 chronicling the mounting pain on office landlords, a cohort whose prospects don’t appear much brighter in 2023 as rising interest rates promise to intensify the wave of mortgage defaults that have already rippled through the Loop.
Crain’s is publishing a sector-by-sector economic outlook for 2023, and troubling signs abound:
• Rising prices are dampening sales at stores and restaurants, while higher interest rates are driving many buyers from the housing market.
• With recession fears looming, many companies are playing it cautious, delaying major expansions or hiring campaigns, even as many employers struggle to fill open positions.
• In health care, hospitals expect more pain in 2023 as labor shortages persist and budgets keep shrinking.
• Local tech companies are also bracing for a slow year, after 2022 brought an end to the bull market that peaked during the pandemic. Following a trend that’s played out even at some of the nation’s biggest tech giants, Chicago companies in the tech space laid off more than 2,500 employees in 2022, according to Crain’s data, and the horizon still looks chilly for tech employment looking ahead into 2023.
• In aviation, the industry’s hopes for a full recovery have hit turbulence as interest rates rise and inflation bites into profits. Pent-up leisure travel demand lifted airlines such as United back to profitability last summer, but lagging business travel was slower to rebound than expected. With a recession on the radar and execs accustomed to connecting via Zoom, business travel isn’t likely to come roaring back anytime soon.
• The Federal Reserve’s battle to squelch inflation by raising interest rates, meanwhile, is taking its toll on the banking and finance industry.
All that said, there are some glimmers of cautious optimism to be found in the data. Manufacturers and consumer packaged goods companies, for instance, tell Crain’s that orders are holding up and, particularly in the food business, double-digit price increases have resulted in only single-digit volume declines for some brands. More broadly, the unemployment rate remains at historically low levels, a boon for job-seekers.
Even so, those who are old enough to remember the Fed’s last big inflation-fighting campaign in the early 1980s likely also remember the devastating impact those moves had on the economy, and on manufacturers in particular. So there’s real reason to be minding costs and staving off unnecessary spending until the picture gets clearer.
Despite those headwinds, Chicago executives interviewed for Crain’s Small Business Outlook 2023, a survey conducted in late October, sounded guardedly upbeat about the path ahead for their respective businesses. Half of these leaders expect their revenues to rise in the year ahead, while 27% expect revenues to stay the same and 24% expect to experience declines. For those forecasting growth, they see opportunities in cultivating new customers and markets as well as improving existing customer relationships. Godspeed to them, each and every one.
Unless you, dear reader, are a member of the Federal Reserve board, there’s likely precious little you can do to control what happens next in Chicago’s economy—or the nation’s, for that matter. But other public policy makers do have some say in how things unfold in the next 12 months—none more so than Illinois Gov. J.B. Pritzker, who along with his fellow Democrats at the Statehouse must do all they can to create better conditions for business at this crucial crossroads. Holding on to Illinois’ automotive manufacturing clusters—the Stellantis plant at Belvidere and the massive Ford assembly campus on the city’s Far South Side—must be Priority No. 1 for the Pritzker administration. Second to that, but just by a fraction, is the need to up the state’s game when it comes to capturing new investment in the next-generation electric vehicle and battery business. Too many opportunities have slipped through our fingers as vehicle and battery makers have bypassed Illinois for more hospitable spots in Michigan, Indiana, Ohio and beyond.
Similarly, the hard work of cleaning up the city and state’s balance sheets will do much to improve our competitiveness in the race for investments of all kinds—not just automotive manufacturing. And, as always, public safety is a crucial, bottom-line lifestyle issue for employers who are already here and those who are on the hunt for expansion. Illinois can’t afford to let 2023 be a repeat of 2022 on that front.
