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Ups and Downs - Spring 2021



Five months into 2021, I think we can all agree that things are looking a lot better for the city, the country and the economy than they did this time a year ago. Of course, there is one big reason for this. After a somewhat rocky start, the COVID-19 vaccination program is progressing across the country. As I write this article, more than 50% of all Americans have now received at least one shot of a COVID-19 vaccine. This number continues to rise with every passing day. The expanding vaccination program is having a measurable, beneficial effect on transmissions and hospitalizations. Equally importantly, it is helping people feel more optimistic again about the future.

For proof, just look at the statistics, bookended by the springs of 2020 and 2021. April 2020 saw unemployment spike more than ten points, from 4.4% in March to 14.8% in April. In May of this year (the most recent figures available), unemployment was back down to 5.8%. True, this is still well above the low 3% range we had gotten used to, and that persisted until February 2020. But it sure looks and feels a lot better than the 20% to 30% unemployment that some predicted (myself included) when the pandemic first took hold.

The Dow Jones experienced a similar shock, dropping more than 10,000 points in March 2020 to a mid-March low of 19,174. But, it started climbing back up almost as quickly as it fell, and has been consistently above 30,000 since February of this year.

Annualized GDP showed the extent of the economic damage wrought by the pandemic. In the second quarter of 2020, US GDP fell at an estimated annualized rate of negative nine percent. This was the natural result of stay-at-home orders across the country and the virtual elimination of restaurant, hotel, convention and entertainment industry employment. GDP remained negative throughout 2020 but turned positive in the first quarter of 2021 with an anemic growth rate of 0.4%.

But the Fed recently issued guidance that US GDP growth for the full year could be 6.5%. Typically, 3% GDP growth is considered strong. The last time the US economy exceeded a GDP growth rate of 3% was in 2005. So 6.5%, if it actually happens, will represent a significantly higher rate of growth than we have seen in decades.

Certainly, a lot of this growth will just be clawing back some of the jobs that were lost in 2020. But it still signals that the US economy is ready to rebound, and that the worst of the pandemic is behind us, at least from an economic perspective.

Of course, the national picture is not completely in sync with what we are experiencing in Chicago and in Illinois. Recently released US Census data shows that Illinois lost population over the last decade, one of only three states to do so. We now have just under 12.6 million residents in the state – a two percent decline since 2010, and will lose a seat in the US House of Representatives. Texas will gain two. It is true that most of Illinois’ population loss was downstate. But even the Chicago area registered a slight decline over the decade – a rare occurrence among large US cities. Nationally, the US had a 2020 population of just over 331 million, a gain of 7.4% for the decade. As the Congressional gains in Texas suggests, a lot of this growth was concentrated in the South and West.

And then there’s the housing market which, is some ways, has been the biggest surprise. During the Great Recession of 2008-2009, the real estate sector suffered some of the worst declines in value since the Great Depression. When the pandemic hit, many predicted the same thing would happen again. But, outside the downtown areas of the nation’s largest and densest cities (with New York, San Francisco and Chicago being among the most notable examples), residential real estate prices have actually experienced large gains, driven by record-low interest rates and a desire for more space and privacy in a stay-at-home and work-from-home age.

But even here, Chicago is an underperformer. A Case-Shiller survey of the 20 largest US cities shows that residential real estate has uniformly increased in price, ranging from 8.6% and 17.4% for the 12-month period through February 2021. What are the best and worst performers in this group? You guessed it. At an 8.6% rate of growth, Chicago is the Caboose. It is also one of just two cities to see appreciation below 10% (the other is Las Vegas). Phoenix is on top at 17.4%.

We should feel good about the gains we have seen in the economy from a year ago to today. But that feeling is more of a mixed bag here in Chicago where we are still the weakest link among the nation’s largest metro areas.

Steve Cain is Secretary of RPBG. He writes articles and compiles content for our quarterly newsletter. The opinions expressed in this column are his own and do not necessarily reflect the views of RPBG and its Members.




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