Unemployment & Labor Market

Chicago's unemployment rate stands at 4.5%, which falls at the upper boundary of the "healthy" range. The year-over-year change in unemployment is flat, at 0.0 percentage points, indicating no improvement or deterioration in joblessness over the past year. This stability suggests that the labor market is neither tightening nor loosening, with employment levels remaining relatively unchanged.

Workforce Supply

The civilian labor force in Chicago is declining, with a year-over-year decrease of 1.72%. This negative growth trend is concerning, as it may indicate outmigration, aging demographics, or declining labor market attachment. A shrinking workforce can limit long-term economic growth and signal underlying structural challenges in attracting or retaining residents.

Wage Growth

Average hourly earnings in Chicago are increasing at a rate of 4.18% year-over-year, qualifying as strong wage growth. This pace likely exceeds inflation, enabling workers to gain real purchasing power and supporting consumer spending and living standards. Sustained wage growth above 4% is a positive sign for household financial health, despite broader economic challenges.

Labor Demand

Labor demand in Chicago is sending mixed signals, with a Labor Demand Composite score of 4.87 and nonfarm payroll employment growing at just 0.6% year-over-year, indicating slow job growth. Weekly hours worked are slightly below the 12-month trend, at -0.275%, suggesting that employers are exercising caution in labor utilization. Although the composite score is modestly above average, the weak employment growth and flat hours point to restrained demand for labor.

Cost of Living

Chicago's cost of living composite score is 2.94, which is relatively moderate compared to other major metros. This score indicates that housing and living expenses are reasonably aligned with local earnings, contributing to affordability. The moderate cost burden supports household stability and may enhance the city's competitiveness in attracting residents, despite other economic challenges.

Office Economy

The Office Worker Ratio composite score is 2.3, well below the scale's midpoint, indicating a relatively low concentration of white-collar, professional services employment. This suggests that Chicago's economy is less dominated by high-value office sectors compared to peer cities, potentially reflecting structural shifts such as remote work or a stronger reliance on industrial, logistics, or service-sector jobs.

Housing — Construction

Residential building permits in Chicago have declined sharply, falling 27.41% year-over-year, one of the steepest declines among major metros. This significant drop signals a substantial pullback in construction activity, likely due to higher interest rates, reduced builder confidence, or weak demand expectations. The contraction in new supply could constrain housing availability in the medium term, although current demand appears subdued.

Housing — Market Velocity

Homes in Chicago are selling at a median of 35.0 days, with a year-over-year change in days on market of -2.78%, indicating that homes are selling slightly faster than they were a year ago. According to the rules, a negative DOM yoy% suggests a modestly tightening market with improving buyer demand or limited supply. However, the composite score for days on market is low, at 6.72, suggesting that overall market velocity remains relatively slow compared to national trends.

Conclusion

Chicago's economy exhibits a mix of modest strengths and significant structural challenges. Robust wage growth, at 4.18%, and a relatively affordable cost of living support household purchasing power. However, the labor market is constrained by a shrinking workforce and modest job growth, while the office sector appears weak relative to other major cities. The sharp decline in housing construction is a concern, although sales velocity has improved slightly. Overall, Chicago faces headwinds from labor supply erosion and soft demand in key sectors, resulting in a below-average economic performance that limits its near-term growth outlook.