Skepticism greets report of 'nearly destroyed' C-U economy

CHAMPAIGN — Champaign-Urbana was one of five metropolitan areas "nearly destroyed by the recession," according to a story from 24/7 Wall St., a company that produces content for the Web.

But several local officials and economists, while acknowledging recent job losses, say the writers engaged in hyperbole.

Some noted the Champaign-Urbana's December unemployment rate of 7.9 percent was lower than the Illinois rate of 9.3 percent and the national rate of 8.3 percent. Others said some statistics cited in the Web story don't match up with official employment data from the state.

The report

The story was based on employment data from 363 metro areas that came from a report commissioned by the U.S. Conference of Mayors and prepared by IHS Global Insight.

According to the story, the other four metro areas "nearly destroyed by the recession" were: Carson City, Nev.; Reno, Nev.; Santa Barbara, Calif.; and Flint, Mich.

A broader version of the story listed nine "nearly destroyed" metro areas and included Wichita Falls, Texas; Abilene, Texas; Brunswick, Ga.; and New London, Conn.

The cities were chosen because recent job growth in those areas has been slow.

Although a casual reader might assume them to be "the worst of the worst," the cities seem to have been selected to reflect certain categories — in Champaign-Urbana's case, cities with a high percentage of government jobs.

Some cities, such as Reno and Santa Barbara, were hard-hit by the housing bust, while others, like Flint, were hurt by declines in the auto industry.

The story focused on jobs the metro areas are projected to regain by the fourth quarter of this year, compared with the number of jobs lost at the depth of the recession.

According to the story, the Champaign-Urbana metro area — which takes in Champaign, Piatt and Ford counties — had 114,200 jobs at its "pre-recession peak" and only 105,100 when the recession reached its trough. That was a loss of 9,100 jobs.

By the fourth quarter of this year, the story said, the area is projected to have 105,400 jobs. That would be a gain of 300 jobs.

According to the 24/7 Wall St. narrative: "The region's employment peaked late in the third quarter of 2008, when 114,000 residents were employed.

By the second quarter of this year, IHS projects the region to lose 7.9 percent of those jobs. Through the rest of the year, the area will regain only 2.7 percent of jobs lost.

The story went on to say: "Many of the jobs lost in the area have been government jobs, especially in the education sector, which were cut due to budget constraints."

However, the opening statement of the narrative was at odds with official data. It claimed unemployment in Champaign-Urbana increased from 9.1 percent to 10 percent between June and November of 2011.

But data from the Illinois Department of Employment Security shows the rate fell from 8.6 percent in June 2011 to 7.8 percent in November 2011. The only time the Champaign-Urbana metro area's rate topped 10 percent was in January and February of 2010.

In a study issued last June, IHS Global Insight projected the Champaign-Urbana area won't return to peak employment until the first quarter of 2019 — seven years from now.

By contrast, the Bloomington-Normal and Springfield areas are projected to regain peak employment during the first quarter of this year.

Chicago is supposed to reach that point by the third quarter of 2014, and Peoria by the fourth quarter of 2014.

Some Illinois communities will have to wait even longer than Champaign-Urbana, according to the IHS report. Rockford isn't expected to get there until the second quarter of 2020, and Decatur's return appears to be "beyond 2021."

The fact the 24/7 Wall St. story was based on an IHS Global Insight report was ironic, because that same firm reported in 2009 that Champaign-Urbana was one of the first communities in the nation to emerge from recession.

A look at jobs data from the Illinois Department of Employment Security helps shed light on employment trends in the Champaign-Urbana metro area.

Each year, employment tends to peak toward the end of the fall and spring semesters at the University of Illinois — often in May and November. Employment drops off sharply in summer, as might be expected in a college community.

Often, the difference between peak employment periods and the summertime low is 6,000 to 7,000 jobs.

State data shows that 2008 was a strong year for employment in the Champaign-Urbana area, with a low of 111,441 jobs that summer and a peak of 118,274 jobs that fall.

The effects of recession were evident in 2009, with a low of 105,201 jobs that summer and peaks of just under 113,000 in the spring and fall.

In 2010, employment appeared to rebound. The low was 106,943 jobs in the summer, with peaks of 113,897 in the spring and 115,727 in the fall.

But the jobs picture in C-U took a definite tumble in mid-2011. After a spring peak of 113,213 jobs, the summer low fell to just 103,575 jobs and the fall peak reached only 110,731 jobs.

The reaction

Here's how some people reacted to the 24/7 Wall St. story:

University of Illinois economist J. Fred Giertz expressed skepticism about the story.

"It is hard to believe that Champaign-Urbana is worse off than Danville, Decatur or Rockford in Illinois or various places in Michigan," Giertz said in an email. "I doubt if Santa Barbara is nearly destroyed."

Giertz said Champaign-Urbana has a good deal of seasonal variation in employment, so the report's findings may hinge on the month in which the numbers were taken.

"Champaign-Urbana may also have experienced job losses later than other areas, which means that recovery will also be delayed," he said.

Urbana Mayor Laurel Prussing called the 24/7 Wall St. story "much ado about nothing."

She said she believes the first IHS Global Insight report — which said Champaign-Urbana was coming out of the recession faster than other communities — was correct.

"It seems like someone made a miscalculation on the second report," she said in an email.

Cameron Moore, CEO of the Champaign County Regional Planning Commission, said he "could not disagree more" with the conclusion that Champaign-Urbana has been nearly destroyed by the recession.

"From what I have seen, Champaign-Urbana came through the recession better than most places, but not as good as some when considering the national picture," he said in an email.

"It is a huge stretch to say that Champaign-Urbana was nearly destroyed by the recession," Moore said. "We certainly experienced job losses as noted in the report like virtually everywhere else in the country."

Moore said it may be valid that Champaign-Urbana will recover jobs more slowly than other communities. But the report relies on projections of future job increases.

"We will only know how valid these projections are after the conclusion of 2012," he said.

"We weathered the recession storm pretty well, and I am optimistic about the future economic strength of the community," Moore said.

Geoffrey J.D. Hewings, director of the UI's Regional Economics Applications Laboratory, called the analysis "a little overdrawn."

"'Destroyed' is an intemperate description of the job declines," he said in an email from Japan.

Citing the Illinois Jobs Index, Hewings said the Champaign-Urbana area lost a larger share of its job base than other metro areas in the state.

But it also grew more rapidly than other metro areas before the recession, he said.

"The index and employment forecasts suggest some recovery over the next 12 months, but not recovery to prior peaks," Hewings said.

But placing the Champaign-Urbana metro area "in the same league as Flint, Mich,, is not credible," Hewings said. "It is hyperbole."

The employment base in Champaign-Urbana has tended to be more stable than those of other Illinois communities over the past two decades, Hewings said.

"But there is no doubt that the downturn in the state's fortunes has affected the metro area," he said. "Almost 50 percent of jobs are in education, health and government."

Nationally, government employment has contracted for more than 20 months, Hewings said.

Government jobs account for 34.9 percent of employment in the Champaign-Urbana metro area. That's even higher than Springfield, at 26.9 percent.

Hewings said he looks for "little or no change" soon in the employment picture locally.

"The university is unlikely to add many jobs, continued state and federal cutbacks will hurt the area, and given the prospect of little or no job change, it is unlikely that there will be any boost to the housing market," he said.

Ed Scharlau, vice chairman of Busey Bank, was puzzled by some statistics cited in the 24/7 Wall St. story.

But he added, "I do think there's a message that Champaign County has really been affected by the recession. We do have fewer people working now than a year ago.

"Even though we're seeing a slight recovery nationwide and in Champaign County, a lot of people are unemployed, and the (unemployment) rate is much higher than many would say is acceptable for our county."

Scharlau said he is sometimes asked why the Champaign-Urbana area didn't weather the 2009 recession as well as it did the one in the early 1980s.

"What's the difference? One thing is Chanute," he said, referring to the Air Force base in Rantoul that closed in the early 1990s. When it closed, it took $115 million in payroll out of the county, he said.

Scharlau said many economic signals in Champaign County are pointing up. He noted a big increase in the value of the county's agricultural crop, two years of increases in retail sales across a broad array of categories and big projects, such as the Blue Waters supercomputer and the nine-story Carle hospital tower.

"If we were really depressed, property values would be going down, but last year property values in the county were $11.6 billion, up from $11.5 billion in 2010," he said.

"I can guarantee you property values in Flint, Mich., were down," he added.

"When you look on the whole, we look pretty good," Scharlau said. "I'll bet 95 percent of the people in the United States wouldn't mind living in Champaign-Urbana."

This story appeared in print on Feb. 5.

Comments

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parkmymeterelsewhere wrote on February 12, 2012 at 7:02 pm

The Goad lady does it again;  it is the utmost insult to Shakespeare when "much ado about nothing" is more appropriate for her own agenda.

ronaldo wrote on February 13, 2012 at 8:02 am

OK, I'll bite.  Who's "the Goad lady"?

 

parkmymeterelsewhere wrote on February 13, 2012 at 10:02 am

The mayor(who in a printed article about northeast Urbana condescendingly referred to the Olympian drive area Farm owner as the "Goat Lady" so in response to her rhetoric was designated the "Goad Lady".

Should we accept a Mayor who in one case denounces funding for a tourist/convention bureau because of current economical climate but then completely dismisses the Wall Street Journal report as"much ado"?

mmemartinez wrote on February 13, 2012 at 11:02 am

It's not a report from the Wall Street Journal...it is from a much less credible source. And I too have to agree that in terms of what I've read about unemployment rates in this area and seen in C-U I don't think it is possible that it is one of the hardest hit areas due to the recession, especially not when you are taking into consideration cities like Detroit, Flint, or numerous small towns in California. 

parkmymeterelsewhere wrote on February 13, 2012 at 11:02 am

The report is accurate simply from a visual tour of this area and how many empty commercial buildings are availale for sale now; the gathered stats relative to education jobs are probably accurate and the combination of these two factors equals/exceeds the unemployment rate in the article.

dw wrote on February 13, 2012 at 11:02 am

East/West-coast hyperbole meets classic MidWestern penchant for gross understatement:

"a little overdrawn" in MidWestern-ese translated into coastal language means "they've at maximum capacity of what you find in an intact male cow 24-72 hours after a meal".