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Industrial Lag Puts Drag on Regional Recovery

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The nation's mighty industrial engine is beginning to rev up. The problem is that much of the activity, construction included, is occurring outside the Midwest, putting a drag on regional recovery.

Photo Courtesy of Mortenson Construction
Mortenson Construction is active in the health care market. Among its projects is the Advocate Good Shepherd Hospital modernization in Barrington, Ill.
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Manufacturers that traditionally have built in the Midwest are in many cases opting for the Southeast, says Anirban Basu, chief economist with Washington, D.C.-based Associated Builders & Contractors.

"The Southeast has done a good job of marketing itself to industry, and where industry goes, its suppliers follow," Basu says. "That's not to suggest manufacturing isn't occurring in the Midwest, but the base isn't growing. The region may need to cultivate new sources of economic activity if production doesn't increase."

Meantime, the region continues to lag the South, East and West in construction backlogs and other key indicators. "When Chicago and Detroit continue to stumble, there's only so much the region can recover," says Basu. "Though it's attracting capital, Detroit has one of the highest unemployment rates in the nation. Chicago continues to be burdened by high tax rates and underfunded pensions."

The outlook isn't entirely bleak. Chicago's status as the financial capital of the Midwest is attracting hotel developers, and the affordability of housing helps grow the multifamily sector, says Jeff Reimer, executive general manager for the Great Lakes region of contractor Lend Lease, Chicago. "However, high unemployment continues to have a dampening effect on office work."

"At present, the fiscal picture for both Chicago and Illinois are grim and alarming for businesses looking to relocate or expand," says Ken Simonson, chief economist with Arlington, Va.-based Associated General Contractors of America. "On the other hand, Chicago always has been known as the city that works. Now it's the city working to reinvent itself."

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