Chicago's Job Market Thrives, but Office Occupancy Declines Persist
In the first ten months of 2023, there has been a decline in office-using jobs year over year, despite the Chicago area showing a net increase in jobs. The expansion of employment in the region was primarily seen in non-office sectors. Recent data from the U.S. Bureau of Labor Statistics reveals that total nonfarm jobs in the Chicago area grew by 0.7% year over year by the end of October.
Corresponding to the national average, the Chicago metropolitan area experienced a 10 basis points reduction in the unemployment rate, reaching a year-over-year rate of 4.4%. Key sectors driving employment growth included education and health services, leisure and hospitality, and construction, with increases of 4.8%, 4.4%, and 1.6% respectively year over year. Notably, the information, professional and business services, and manufacturing sectors faced the most significant year-over-year job losses, declining by 8.2%, 2.3%, and 0.9% respectively.
Looking at the 12-month percent changes in total compensation for private industry workers in the U.S. and Chicago, both experienced growth, rising by 4.3% and 4.2% respectively, in a non-seasonally adjusted context. Interestingly, the difference between these figures is among the lowest recorded.
Despite positive trends in non-office sectors, there is a notable disparity between office utilization and absorption in Chicago since the start of the pandemic. While the market added jobs in leisure and hospitality, education and health services, and construction, significant losses were observed in sectors associated with office space. Professional and business services, as well as the information industry, saw substantial workforce reductions.
Chicago's financial sector, its largest employment segment, added 3,600 jobs, but this was insufficient to counterbalance the job cuts in office-working sectors. Consequently, the overall vacancy rate in Chicago reached a record high of 16.2%, with more than 5 million square feet negatively absorbed in the past 12 months.
Despite challenges in office space, the growth in healthcare-related jobs is contributing to the demand for medical office space in the area. Northwestern Medicine's recent opening of a 235,000-square-foot outpatient center reflects this trend, with over 500,000 square feet of medical space absorbed by healthcare tenants and owner-occupiers in facilities exceeding 10,000 square feet over the past year.