It’s the Stupid Economy
The challenging times have hit local companies hard. We catalog some of the pain.
by Robert Reid
This is not an economy for wimps. The Chicago area is feeling the pain of the nationwide economic slowdown that threatens to drag on for months or even years. "This slowdown is different," says Paul Kasriel, senior vice president and director of economic research for Northern Trust Company, headquartered in the Loop. "The housing bust is affecting everything."
Tight credit and shrinking revenues have forced some companies to retrench and cut costs, which typically means lots of workers get fired. For the first four months of 2008, the Chicago-area unemployment rate hit 5.5 percent, which was higher than the national average of 5 percent, according to state unemployment data.
One reason the local unemployment rate is higher than the national average: Large Chicago-area companies are cutting more manufacturing, middle-management, and midlevel administrative positions than big employers in other regions. "There are a large number of low-paying jobs available, but we're losing the ones in the middle. It looks like an hourglass economy," says Richard C. Longworth, a senior fellow at the Chicago Council on Global Affairs and author of Caught in the Middle: America's Heartland in the Age of Globalism.
Among the larger companies lopping hundreds of staffers: Hoffman Estates-based Sears, Roebuck and Co., Downers Grove-based Sara Lee Corp., and Northbrook-based Allstate Corp. Meanwhile, investor unrest at Schaumburg-based Motorola is taking its toll. Under pressure from the dissident shareholder Carl Icahn, Motorola is splitting itself into two stand-alone companies—a move that is expected to result in hundreds of job losses.
Mergers aren't helping, either. Looking to recoup some of its costs after spending $21 billion to acquire LaSalle National Bank, the Bank of America is cutting 2,500 jobs in the next year, beginning with a loss of 200 positions by year-end. Washington Mutual, the Seattle-based retail banker and mortgage lender, is closing up to 25 outlets in the local market, resulting in the loss of a couple of hundred full- and part-time jobs.
Area manufacturing, which has been suffering for decades, is going through another tough cycle. Abbott Laboratories in North Chicago and Solo Cup in Wheeling are among the factory owners laying off hundreds of employees.
Companies that report on the economy's travails are feeling the pain, too. The media giant Tribune Company, which owns Chicago magazine, the Chicago Tribune, and WGN TV and radio stations, said it would cut hundreds of jobs at its publishing and broadcasting properties. Its crosstown rival, Sun-Times Media Group, is chopping up to $50 million from its operating budget this year, resulting so far in the dismissal of 35 newsroom workers, and the Arlington Heights-based Daily Herald is suffering layoffs and cutting employee compensation. In broadcasting, WBBM-Channel 2 shed 17 workers, including the highly paid 10 p.m. anchor Diann Burns and health-care reporter and anchor Mary Ann Childers.
With front-row seats for much of this bloodletting, Illinois consumers are pretty down on this down economy. In March, the New York-based Conference Board's consumer confidence index for the nation was at 65.9, while in the Midwest it stood at 41.8. A rating in the 40 range usually means people are expecting a recession, and 90 or above means they anticipate economic growth, says Lynn Franco, director of the consumer research center for the Conference Board, which has tracked consumer sentiment and trends since the 1960s. "Downward pressure on manufacturing jobs and housing values is taking a toll on people," Franco says.