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November 2017 Market Update

November 2017 Market Update | Steve Cain, RPBG Director - Writer / Editor
November 8, 2017
 
The latest jobs report came out on Friday. It showed 261,000 new jobs created in October, a welcome reversal of the job losses that occurred the prior month. In fact, the October report revised the September numbers, shifting from a negative (minus 33,000) to a positive (plus 18,000) net new jobs. Unemployment also fell from 4.2% to 4.1%, the lowest it has been since December 2000, nearly seventeen long years ago!
 
The October jobs report is certainly good news for the economy. Part of the reason the October number was so big is the same reason the September number was so low. You may recall we had some interesting weather late summer and early fall this year with three major hurricanes wreaking havoc on the economies of the Texas and Louisiana Gulf Coast, Florida and Puerto Rico. The devastation caused by these storms temporarily put a lot of people out of work. No one expected all of these job losses to be permanent, and the October jobs report is one measure of the ongoing recovery from those weather events.
 
But the trend is still clear. With the upward revision in job numbers for the month of September, the US economy is now in its 85th month (that’s seven years and one month) of positive job growth. This is an impressive number by any measure, and represents one of the longest stretches of job growth the country has ever experienced.
 
If there is any bad news in these job and unemployment numbers, it is that the distribution of these new jobs remains uneven, and is not widespread across the country. The Chicago area seems to be a good example of both the good and the bad of this trend. While the Central Area booms, the rest of the city and region are not doing as well. Overall, the Chicago area economy is growing, but at a slower rate than the nation and most other large metro areas. 
 
One indication of this trend is housing values. While a few downtown and near-downtown zip codes have seen housing values recover to pre-recession levels, most of the rest of the city and suburbs have not. The downtown economy may be the region’s golden goose, but it is not large enough to lift the whole region. Previous large job losses in manufacturing, and current weakness in retail, continue to hobble many parts of the Chicago area. The region’s growing economic sectors are simply not dominant enough to completely make up for the weaker sectors across all areas of the city and suburbs.
 
In my own experience, we have seen weaker demand and declining effective rents for our few remaining available apartment units in Rogers Park and other far North Side neighborhoods. Some of this is simply due to the time of the year. The pre-holiday months of November and December are often the most difficult time of the year to find tenants. 
 
But some of this seems to be due to a shift in the market. After years of steady rent growth and strong demand, the market appears to be tilting from a landlord’s market to a tenant’s market. We have had to reduce rents and are still seeing tepid interest. These observations are anecdotal and personal. I can’t say that other property owners have been experiencing the same thing. But the pain is real – we are having a harder time renting units.
 
Perhaps the continued economic expansion will rev things up in Chicago again and the spring leasing season will bring a return to stronger demand and increasing rents. I, for one, am holding my breath. The national trends do not apply equally to all places. Chicago is not Austin or Seattle. We are just going to have to live with that reality… and keep hoping Amazon chooses us for their next headquarters!
 

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