June Market Update

Steve Cain, Director – Writer/Editor

The There’s more good news about the economy, and the fears that we were headed for another slowdown after our frigid winter recede ever further into the recesses of our memory.

Steve Cain

The latest evidence of the positive momentum of the economy is the jobs report, just out this morning.  The US economy gained another 217,000 jobs in May, slightly ahead of forecasts, and adding yet another month of positive job growth to what has become quite a long run.
 
The unemployment rate is unchanged at 6.3%; however, total job-force participation levels remain low.  Clearly, the growing job totals have not reached many of the long-term unemployed and discouraged workers who have yet to reenter the workforce in large numbers.  But continued positive job growth should eventually bring some of these folks back from the sidelines and into the job market.
 
Jobless claims are also down.  The four-week moving average jobless claims figure is just over 310,000.  This is the lowest moving average in seven years.  Assuming job growth keeps increasing and jobless claims keep decreasing, it is reasonable to project that the recovery will affect a wider cross-section of Americans and spread this growing prosperity across a broader swath of the population.
 
While the national trends are good, Illinois is still lagging and has more troublesome fundamentals.  Perhaps the biggest impediment to economic recovery in Illinois is the continued inability of state government to deal with the pension crisis and tax policy.  The best recent example is the legislature’s failure to either extend the “temporary” increase in the state income tax, or bring spending levels downward such that the “old” tax rate covers costs.
 
Given the track record of our state legislature, particularly in light of the fact that it is an election year, it is not surprising that our state officials have once again kicked the can down the road.  Unfortunately, the ratings agencies are not equally willing to wait another year.  Two of the three big ratings agencies – Fitch and Moody’s – have now lowered the state’s credit rating in the wake of the legislature’s failure to deal with the fiscal mess that has been building for decades.  Even before this most recent downgrade, Illinois has the lowest credit rating of any state in the nation.  This recent downgrade only adds to the state’s terrible reputation, and increases our cost of borrowing.
 
At some point, pressure from the ratings agencies, combined with the ever increasing cost of borrowing, seems likely to force some sort of reckoning in Springfield.  Then again, the Illinois Legislature is the undisputed gold-medal winner in procrastination and avoidance of difficult decisions.
 
Despite the state’s ongoing fiscal woes, Chicago’s Central Area is on a roll.  Cranes keep crowding the skyline, and new tech jobs are transforming former industrial areas near the Loop into trendy enclaves.  River North and the Fulton Market District today are unrecognizable from how they looked 20 years ago.  
 
While the impact of this downtown boom on Rogers Park may not be as strong as it is on some of the neighborhoods closer to the CBD, it is certainly not hurting.  By all indications, vacancies are low and rents continue to increase.  Looks like it’s going to be a good summer for the property owners of Rogers Park Builders Group!