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Economic Development

News &Vıews
Published by the Federal Reserve Bank of Chicago Consumer and Community Affairs Division

New Chicago Fed Index to Help Gauge
U.S. Economic Trends
Volume 7 Number 1
Spring 2001
Inside this Issue:

Conference Helps Women
in Chicago
New Markets Tax Credit
Could Spur $15 Billion in
New Investments
Banks Increase CDC’s
Capitalization
Michigan Workers Receive $3.6
Million in Training Grants
SBA Web Site Wins Award
Indiana INTERNnet to Battle
Brain Drain
Two New MSA Profiles and
Investment Opportunities
Drive for Stamp to Honor
Mother of Franchising
Chicago Fed National
Activity Index
CDCs & Microlenders Can
Link to SBA Home Page
From Our Research Department

Measuring stick helps gauge U.S. economic trends using 85 indicators
On March 5, 2001, a new index designed to better gauge overall economic activity and inflationary
pressures, was released by the Federal Reserve Bank of Chicago.
Called the Chicago Fed National Activity Index, or CFNAI, the index provides useful information
on the current state of economic activity and inflationary pressures in the United States. Movements
in the CFNAI closely track periods of economic
expansion and contraction, as well as periods of
rising and falling inflationary pressures. The
index will be released on a monthly basis.

CFNAI
Chicago Fed National Activity Index

“Our goal in releasing this index on a monthly
basis is to provide an objective, contemporaneous measure of economic activity that will add to
the public discourse,” W. Curt Hunter, Chicago Fed Director of Research, stated.

The index is adapted from the methodology developed by James Stock of Harvard University and
Mark Watson of Princeton University which was discussed in an article titled “Forecasting Inflation,”
published in the Journal of Monetary Economics in 1999. The concept supporting Stock and Watson’s
approach is that a common factor exists in all inflation indicators, and it is this factor, or index, that is
useful for predicting inflation. Similarly, the CFNAI extracts a single, summary measure of current
economic activity from a host of common indicators.
The 85 economic indicators underlying the CFNAI are drawn from five broad categories of data:
output and income; employment, unemployment and hours; personal consumption, housing starts
and sales; manufacturing and trade sales; and inventories and orders. Each of these data series
measures some aspect of overall macroeconomic activity.
The experience with many widely used indicators of economic activity and inflation has been that, in
general, they do well in some periods and less well in others. Often a relationship that is pronounced
at one time disappears in later episodes. A key finding from Stock and Watson’s research is that across

Continued on page 2

CFNAI continued from page 1
different time periods an index like the CFNAI beats forecasts based
on other single indicators or combinations of different indicators.
Research at the Chicago Fed generally supports these findings.

The following are the official release dates for 2001:

Date of Release

Monthly Data for

March 5, 2001
April 3, 2001
May 2, 2001
May 31, 2001
July 5, 2001
August 2, 2001
September 4, 2001
October 3, 2001
November 5, 2001
December 5, 2001

January 2001
February 2001
March 2001
April 2001
May 2001
June 2001
July 2001
August 2001
September 2001
October 2001

The CFNAI will be released at 9:00 a.m. Central Time. ■
For more information about the Chicago Fed National Activity Index, please
contact James Pieper at 312/322-2387, or visit www.chicagofed.org.
See related article on page 13.

Fed Facts
The Federal Reserve Bank of Chicago is one of 12 regional Reserve
Banks that, together with the Board of Governors in Washington, D.C.,
serve as the nation’s central bank, the Federal Reserve System.
The role of the Federal Reserve System is to foster a strong
economy and a stable financial system.
The Chicago Reserve Bank:
• Participates in formulating national monetary policy,
• Supervises and regulates banks and bank holding companies, and
• Provides financial services to banks and the U.S. government.
Financial Services
Volumes (2000)
• Checks Processed
$1.7 trillion
• Automated Clearinghouse Transfers
$2.5 trillion
• Wire Transfers
$57 trillion
• Currency Received
and Counted
$51 billion
• Unfit Currency
Destroyed
$9.5 billion

Employees
2,121
Assets
$66.9 billion
(as of 12/31/2000)
Depository Institutions
in 7G District
3,324
Banks and Bank Holding
Companies Supervised
1,281

Communications
Advisor: Alicia Williams
Editor: Harry Pestine
Economic Development News & Views welcomes story ideas,
suggestions, and letters from subscribers, lenders,
community organizations, and economic development
professionals. If you wish to subscribe or to submit
comments, call 312/322-8232 or write to:
Economic Development News & Views
Federal Reserve Bank of Chicago
Consumer & Community Affairs Division
230 S. LaSalle Street
Chicago, Illinois 60604 -1413.
The material in News & Views does not necessarily
represent the official policy or views of the Board of
Governors of the Federal Reserve System or the
Federal Reserve Bank of Chicago.
Economic Development News & Views – ISSN: #1083-1657
Editor’s Note: A special thanks to Robin Newberger and
Marina Plavnik for their assistance in preparing the
MSA Profiles article.

Wealth-Building Conference Helps Women in Chicago
vened the event stated, “No topic
is more important to women
today than addressing and
attacking the issue of building
for a secure financial future.”
Karen Kane, senior vice president at the Fed, also expressed
the bank’s support and commitment for the program. “It’s our
pleasure to work with organizations like WSEP in extending our
outreach and providing support
to the great work that they do in
helping women become more
financially empowered.”
Wanda White (2nd from right), president of Women’s Self-Employment Project, welcomes
keynote speaker Dr. Julianne Malveaux (center) to the organization’s “Wealth Building
Conference for Women,” held at the Federal Reserve Bank of Chicago on March 10. Also
greeting Dr. Malveaux are Karen Kane (far left), senior vice president, and Angela
Robinson (2nd from left), vice president, Federal Reserve Bank of Chicago and Brooke
Stephens (far right), financial author and a conference speaker.

More than 100 Chicago-area
women gathered at the Federal
Reserve Bank of Chicago on Saturday, March 10 to learn how to
start and manage a wealth-building plan. The event, called
“Moneywise: The Conference for
Financial Empowerment,” was
hosted by the Chicago Fed and
the Women’s Self-Employment
Project (WSEP). The conference
addressed personal finance topics for women of all ages and at
all stages of financial planning —
whether they are just starting a
plan or enhancing existing
strategies and investments.
The keynote speaker was Dr.
Julianne Malveaux, economist,
syndicated newspaper columnist
and author of “Wall Street, Main
Street, and the Side Street: A
Mad Economist Takes a Stroll.”
Malveaux told the attendees that
culturally, women get mixed
messages about money, and

emphasized the need to teach
young people early on about the
importance of money and how to
handle their finances. “Money
will empower you to make
change,” Malveaux concluded.
Wanda White, president of
WSEP, stated that Saturday’s
attendance at the conference
indicates that women continue
to see the importance of personal financial issues. “We saw
today that women of all financial
situations want and need to
know more about budgeting,
saving, investing, and using
credit wisely. We think the conference helped take the mystery
out of building wealth, and
that’s important to women and
to WSEP,” White noted.
Angela Robinson, vice president
and director of Economic
Research Statistics at the Chicago
Fed, who, along with White, con-

Also addressing the conference
was Brooke Stephens, author of
“Wealth Happens One Day at a
Time: 365 Days to a Brighter
Financial Future” and “Talking
Dollars and Making Sense: A
Wealth-Building Guide for
African-Americans.”
Additional featured speakers discussed topics related to managing personal finances and building wealth. The topics covered
included: saving money and barriers to saving; using credit
wisely; investing; and building
wealth and creating assets. The
discussions focused on the needs
women have in these areas.
The conference was held as part
of Women’s History Month and
was co-sponsored by WSEP, the
Federal Reserve Bank of
Chicago, the American Express
Foundation, and Fannie Mae.
The Women’s Self-Employment
Project provides training for
women interested in starting a
business or expanding an existing one. The organization also
provides small-business loans,
asset-development products,
entrepreneurial training and

consulting on various aspects of
running a small business. ■
For additional information on the
various programs offered by the
Women’s Self-Employment Project,
call 312/353-0182.

www.chicagofed.org

on the web

The F
Federal
ederal Reser
Reserve
e Bank
of Chica
Chicago's
o's web
web site off
offers
ers
a wide variety of timely
timely
and unique information,
information,
including:
Research
• Economic Data and Research
• Banking Data
Resources
• Educational Resources
Publications
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ormation
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Finance

New Markets Tax Credit Could Spur $15 Billion in
New Investments in Urban and Rural Communities
The recently
enacted Community Renewal Tax
Relief Act could
spur the investment of $15 billion in new private capital into
investment vehicles that make
loans and equity investments in
New Markets businesses.
What is the New Markets
Tax Credit?
When making an equity investment in an eligible "community
development entity" (CDE),
individual and corporate
investors can receive a New
Markets Tax Credit worth more
than 30 percent of the amount
invested over the life of the
credit, in present value terms.
Eligible CDEs could include
for-profit community development financial institutions
(CDFIs), for-profit subsidiaries
of community development
corporations, SBA-licensed New
Markets Venture Capital companies, and Specialized Small Business Investment Companies.
A number of pioneering community-based institutions have
demonstrated track records in
finding viable market opportunities in areas often overlooked
by traditional investors. By
increasing their capital base,
this tax credit will enable CDEs
to lend and invest more, to
attract additional outside capital, and to bring even more private-sector support to their
market-priming activities.

Why Do Businesses in
Low-Income Urban and
Rural Areas Need Help in
Accessing Capital?
Markets in America’s inner
cities and distressed rural areas
possess enormous untapped
economic potential. However,
growing businesses in these
communities are unlikely to
attract the attention of venture
capitalists who generally work
within their existing relationships and communities. The
smaller local venture funds that
exist in some communities may
have difficulty raising capital,
developing deal flow, providing
the requisite investment and
management expertise, and
managing the risks inherent in
less diversified local economies.
Greater distances in rural areas
often mean that capital
providers may incur higher
costs for travel and information.
That is even more true of businesses in isolated rural or innercity communities that are cut
off from mainstream business
networks. In urban markets,
information barriers may prevent investors and lenders from
discovering and fully appreciating business opportunities.
Why is Equity Capital
Especially Important
to Businesses?
Equity capital can provide small
businesses with “patient” capital
— capital that can be used to
grow a business before a return
on the funds is due to the
investor. A healthy equity capital base in a business relieves

some short-term cash flow pressures, allowing the firm room to
innovate and introduce new
products, cultivate new sales
leads, and hire and train new
staff. In addition, equity capital
can increase a small business’s
creditworthiness, which can
lower its cost of financing and
better enable it to leverage
additional sources of financing.
Finally, an equity cushion helps
a firm absorb unforeseen setbacks and weather temporary
economic downturns.
How Will the New Markets
Tax Credit Work?
Eligible CDEs will apply to the
Treasury Department’s CDFI
Fund for an award of New Markets Tax Credits. The application and selection will be based
on objective criteria, including
the expertise of the management team and the experience
of the CDE in working with disadvantaged businesses and communities. Once a CDE is
awarded tax credit allocations,
the CDE is authorized to allocate its given amount of tax
credits to private equity
investors in the CDE.
When an equity investment is
made in the CDE, investors will
be able to claim a 5 percent credit
on the investment amount for
each of the first 3 years, and a 6
percent credit for each of the
next 4 years. During the life of
the investment, the tax credit will
total over 30 percent of the investment, in present-value terms.

Which Investors will be
Eligible for the New
Markets Tax Credit?
Any taxable investor — including an individual, a company,
or an investment fund — that
makes an equity investment in a
qualified CDE is eligible for the
tax credit. The kind of eligible
investors that may be interested
in New Markets Tax Credits
include banks and thrifts, insurance companies, investment
banks, venture capital and
other investment funds, finance
companies, individuals, corporations, and others.
Which Businesses will
Qualify for CDE Loans
and Investments?
The CDE, using its local knowledge and expertise, will decide
what businesses to invest in or
lend to with the funds it raises
with the New Markets Tax
Credit. Almost all businesses
located in low- or moderateincome areas could qualify for
loans or equity investments.
Based on the portfolio of existing successful business investors
in New Markets areas, typical
firms could include: small technology firms, inner-city shopping centers, manufacturers,
retail stores or microentrepreneurs. A business must meet the
following two eligibility requirements to qualify:

Continued on page 5

Tax Credit continued from page 4
First, the business must be
located in either a census tract
with a poverty rate of at least 20
percent or a census tract with a
median income that does not
exceed the greater of 80 percent of the median income for
the MSA, or 80 percent of the
statewide median income.
Second, the business must have
a substantial connection to that
location as measured by the following criteria: at least 50 percent of the business’s income
must be derived from activity in
a low-income community; a substantial proportion of the business’s property must be located
in a low-income community; the
employees of the business must
perform a substantial proportion of their work in the lowincome community; and less
than 5 percent of the business’s
assets can be held in unrelated
investments.
These requirements may be met
by the business unit receiving
the investment, such as a
branch plant or division of a
company, rather than the entire
corporate entity. This means
that a company does not need
to establish a new corporation
in the eligible census tract, as
long as the CDE’s investment
can be traced to the facility in
the low-income census tract.
What Types of Community
Development Entities will be
Eligible for the New Markets
Tax Credit?
The New Markets Tax Credit
will build upon the knowledge
and expertise of local institutions that understand the local
business terrain and have a
proven record of success in

community and economic
development. A wide range of
for-profit community development entities will qualify,
including: community development banks or venture funds;
community development corporations; small business investment companies focused on
low- and moderate-income communities; venture capital

Federal
Gov’t.

vices, including mortgage
financing for first time homebuyers, financing for community facilities, commercial
loans and investments to start
or expand small businesses,
loans to rehabilitate rental
housing, and financial services needed by low-income
households and businesses.
These institutions also pro-

Business
Tax Credit
Allocation

Tax Credit
Allocation

Community
Development
Entity

Private
Investors

companies; and other investment funds serving low- and
moderate-income communities.
Tax credits could also be
awarded for investments in
national or regional funds that
invest in local community development entities. Similarly, tax
credits could be provided for
secondary market funds that
purchase eligible loans or
investments from the originating entity. The following are
examples of some of the types
of CDEs that the New Markets
Tax Credit is designed to assist:
• Community Development
Financial Institutions (CDFIs)
CDFIs are specialized financial institutions that are
located in, and serve, lowand moderate-income areas.
CDFIs provide a wide range
of financial products and ser-

Investments
& Loans

Business
Investments
& Loans

Business

vide technical assistance to
small businesses and credit
counseling to consumers.
CDFIs include community
development banks and
thrifts, credit unions, loan
funds, venture capital funds,
and microenterprise loan
funds. The Treasury Department’s CDFI Fund certifies
and funds CDFIs nationwide.
• Community Development
Corporations (CDCs)
CDCs that establish for-profit
subsidiaries, limited liability
companies, or partnerships
may be eligible for equity
investments by NMTC
investors. Like CDFIs, CDCs
have as their primary mission
serving the economic and
social needs of their communities. CDCs have an extensive history of serving dis-

tressed areas and utilizing tax
credit tools, such as the lowincome housing tax credit, to
build affordable housing
• Small Business Investment
Companies focused on Lowand Moderate-IncomeAreas
(SBICs) SBICs are private
venture firms that are
licensed by the SBA to invest
in small growing businesses.
In order to encourage SBICs
to invest greater amounts of
capital in inner cities and in
rural areas, the SBA introduced a new investment category – “LMI Investments” –
for financings made in lowand moderate-income geographies, or for financings in
businesses that employ a significant percentage of people
from such geographies. Any
SBIC whose primary mission
is making investments in LMI
geographies will be able to
apply for the New Markets
Tax Credit. ■
Further questions? Please contact
the Consumer and Community
Affairs staff at the Federal Reserve
Bank of Chicago at 312/322-8232
or visit the United States Treasury
Department’s CDFI Fund web site
at www.treas.gov/cdfi/.

Banks Increase CDC’s Capitalization
Shareholders of the Northern
Illinois Community Development
Corporation (NICDC) recently
announced that four new bank
shareholders have become investors
in NICDC. The four new bank
investors are Associated Bank, Firstar
Capital Corporation, Blackhawk
State Bank and Stillman BancCorp.
The new investors have added
$342,000 to the development corporation’s current capital base of
$460,000. According to David
Thompson, NICDC president and
executive vice president of Alpine
Bank, the new investments will be
used to increase the pool of investment capital available for small
businesses in Winnebago and
Boone Counties.
NICDC, which was organized in
1992, is a private, for-profit, multibank community development corporation authorized by federal and
state bank regulatory agencies to
encourage banks to participate in

higher risk community investments. Organizers include the
Rockford Local Development Corporation (RLDC), area banks, the
Illinois Department of Commerce
and Community Affairs (DCCA)
and communities in Winnebago
and Boone Counties. NICDC’s
objective is to stimulate business
development in the area. Essentially, NICDC is a bi-county extension of the RLDC’s successful
Revolving Loan Fund that serves
businesses in Rockford.
NICDC offers a range of debt
and equity investments up to
$100,000 for small businesses
located anywhere in Winnebago
and Boone counties. Terms and
conditions of these investments
are flexible to accommodate the
diverse needs of the many types
of businesses and business
projects in the two-county area.
Since its inception, NICDC has
provided $1,050,000 of capital to

finance 15 small business projects
with aggregate investments totaling
$8,030,000. John Phelps, NICDC
loan portfolio manager and RLDC
Deputy Director commented, “The
new capital being provided by new
shareholders will allow the
portfolio to double in size over the
next five years.”
NICDC was initially capitalized
with $375,000 provided by its
founding banks AMCORE Bank,
Bank One, National City Bank,
Alpine Bank and Belvidere
National Bank and a grant from
DCCA. These funds were devoted
to the corporation’s small business
investment activities. Participating
governments and the Rockford
Local Development Corporation
provided start-up-operating capital.
The RLDC manages NICDC’s dayto-day operations under a contractual arrangement. A board of
directors appointed by its shareholders governs the corporation.

NICDC’s new board of directors and
officers for the year 2001 include:
Bruce Lammers, president; David
Thompson, vice president; Edward
Munguia, secretary and David
Stearns, treasurer. Bruce Lammers,
newly elected President expressed
his expectation that “NICDC will
expand its role in providing capital
for economic development in
Northern Illinois and serve as a
forum for financial institutions to
address area economic development needs in a collaborative manner.” Other directors include Chuck
Sommers, National City Bank; Jim
Metz, Belvidere National Bank; Jeff
Layng, Bank One; Bill Zibell, Associated Bank; David Norton, Firstar
Bank; Dan Loescher, Loescher &
Associates, Ltd.; Stuart Cohn, Behr
Metals and Dawn Hallsten, Mateer
& Associates. ■
For additional information contact
Sanders Howse, Jr., Rockford Local
Development Corporation,
815/987-8675.

Michigan Workers to Receive More Than $3.6 Million
in Job Training Grants
The Michigan Economic Development Corporation (MEDC) is
helping Michigan workers
improve their job skills.
During the first two months of
2001, the MEDC’s Economic
Development Job Training
program funded 44 grants of
more than $3.6 million to
upgrade the skills of more
than 6,000 Michigan workers.
“These grants, coupled with the
$60 million already in place for
the new Michigan Technical
Education Centers, will be the
cornerstones of Michigan’s
worker training program,” said

Doug Rothwell, president and
CEO of the MEDC. “Companies
come to Michigan because of
our strong workforce. The job
training program allows us to
address the individual training
needs of a company.”
The program helps Michigan
businesses create new jobs or
retain existing jobs by improving
the skills and competitiveness of
Michigan’s workforce. Under the
requirements of the job-training
program, employers must provide
a 25 percent match for training
existing workers. Employers will
provide almost $1.5 million in
matching funds for the 44 grants.

The funds are provided to local
community colleges, vocational-technical schools or
other training providers. As the
state’s 18 Michigan Technical
Education Centers (M-TECs)
open for business, more companies are expected to utilize
their training services, which
are tailored to each company’s
skill needs and time demands.
There are seven M-TECs currently open with more scheduled to open this year.
“This program seeks to ensure
that Michigan employers have
the highly trained technical
workers they need to compete

in the global economy,”
Rothwell said. “Providing skills
training helps worker career
advancement, teamwork and
productivity.”
MEDC, a partnership between
the state and local communities,
promotes smart economic
growth by developing strategies
and providing services to create
and retain good jobs and a high
quality of life. ■
For more information, contact
Kathleen McMahon, Economic
Development Corporation, at
517/335-4590.

SBA Web Site Wins Award
The SBA’s award-winning web
site garnered yet another prize,
when Home Office Computing, a
magazine aimed at the growing
work-at-home workforce, published its choice of the “100 best
home office products, services
and sites of 2000.”
The publication gave the Bronze
Award in the Info/Portal Site
category to the SBA site,
www.sba.gov. The magazine’s
announcement emphasized that
“the Small Business Administration’s site offers encyclopedic info

on government-sponsored financing, training and advocacy.”
The SBA web site offers approximately 45,000 pages of a wide
variety of information on starting, financing, developing and
managing a successful business,
and has established itself as an
invaluable resource to its users in
the small business community.
Since its inception in 1994, the
site’s online traffic has increased
steadily, to a weekly average of
more than 10 million hits.

The Silver Award in the same category went to the Service Corps
of Retired Executives (SCORE)
Web site, www.score.org. SCORE
is an SBA-sponsored organization that provides free business
training and advice.
Home Office Computing editor
in chief Eric Grevstad said: “We
are pleased to salute these products because they help homebased workers succeed… they’re
just right for today’s work-athome workforce.”

The SBA web site has won several
major awards and accolades for
excellence from the business,
publishing and online communities over the past few years.
Among them are Forbes Best of
the Web 2000, Building Caring
Communities Web Excellence
Award 2000, Starting Page Top
2000, Microsoft’s Best of Business Webs ’97 & ’98, Yahoo!’s
Best Sites of ’98 Award and the
Eagle Award for Excellence on
the Net. ■

Indiana INTERNnet to Battle Brain Drain
The Indianapolis Chamber of
Commerce has developed a
unique initiative aimed at
increasing the state’s supply of
educated workers. The Indiana
“INTERNnet” project formerly
known as Brain Gain uses intern
programs to keep central Indiana graduates in the region.
Indiana has great colleges and
universities, and thousands of
students annually take advantage
of the opportunities they offer.
Too often, however, after graduation, those students leave to go
to bigger cities or areas with
more geographic diversity. a
practice known as “brain drain.”
According to research done by
the Indiana Fiscal Policy Institute, 36 percent of residents and
89 percent of non-residents leave
the state after graduation to
begin their careers. Even more
alarming, only 4.5 percent of
high tech graduates remain in
the area. Roland Dorson, executive vice president of the Chamber, cited a low awareness of

strong career opportunities
within the state as a major cause
for the high rate of departure.
The Indianapolis Chamber has
identified higher education
internship and co-operative education programs as key factors in
determining where graduates
accept jobs. However, many of
these programs are unknown or
are under-populated, depriving
metropolitan Indianapolis of a
powerful tool for reversing the
brain drain.
Initially started in 1999, the mission of the Indiana INTERNnet
project is to identify strategies
for increasing employers and
students’ use of internship and
co-operative education programs offered by colleges and
universities in metropolitan
Indianapolis. The Chamber predicts that by raising the levels of
participation among employers
and students in metropolitan
Indianapolis, the state will
increase its stock of highly educated workers available for the

emerging knowledge-based
economy.
Recent accomplishments
include:
• The creation of a catalog, targeted toward employers, that
describes internship programs
currently available through
central Indiana colleges and
universities.
• The development of the
Indiana INTERNnet web-site.
Scheduled to be up and running in early 2001, the site will
be a matching system for students, universities, and
employers who are interested
in acquiring or setting up an
internship opportunity in Indiana. The site will also provide
tools to help users create a
high quality internship, including “how to start an internship” for employers, “how to
build a resume” for students,
and “what companies have
model internship programs”
for universities.

Funders for the Indiana
INTERNnet project include the
Lilly Endowment, the Indiana
Department of Commerce, Indiana Technology Partnership,
Central Indiana Corporate Partnership, Indianapolis Foundation, USA Group Foundation,
IUPUI, Indianapolis Chamber of
Commerce and Anthem.
John S. Myrland, president of the
Indianapolis Chamber of Commerce, stated “from all that we
know, internships really make a
difference in where graduates
decide to locate. The Chamber
wants to keep central Indiana
graduates here and improve our
community’s workforce, and we
feel the key to this is creating
and expanding high-quality
internship programs to improve
the connection between those
graduates and central Indiana
employers.” ■
For more information, contact Kelly
Parker, Communications Manager,
Indianapolis Chamber of Commerce
at 317/464-2226.

Two New MSA Profiles and Investment Opportunities Released
Robin Newberger and Marina Plavnik
are Research Analysts in the Consumer
Issues Research Section of the Consumer
& Community Affairs Division
In March 2001, the Federal
Reserve Bank of Chicago
launched the latest in its series of
MSA Profiles, covering Ann Arbor,
Michigan and Davenport-MolineRock Island, Iowa-Illinois. The
profiles provide extensive data on
demographic, socioeconomic,
housing, employment, small business and mortgage lending trends
within each MSA. In addition, the
profiles report the results from
surveys conducted in each MSA to
assess the housing, infrastructure
and credit needs of low-income
neighborhoods in these areas.
The Chicago Fed’s Consumer
and Community Affairs (CCA)
Division has been developing
profiles of the major metropolitan statistical areas (MSAs) in the
Chicago Federal Reserve district
to provide financial institutions,
nonprofit organizations, and government agencies with information on community development
opportunities. These profiles
highlight the economic and
demographic characteristics of
each MSA, and aim to identify
the investment opportunities in
the MSA to help financial institutions address the credit needs of
their communities. The ultimate
goal of this publication series,
MSA Profile and Investment
Opportunities, is to encourage
community and economic development by promoting relationships and partnerships between
financial institutions and local
community organizations.

Highlights of the Ann Arbor,
Michigan MSA Profile
(Lenawee, Livingston, and
Washtenaw Counties)
As illustrated in Figure 1, almost
one-half of the Ann Arbor population resided in middle-income
census tracts, 29 percent of the
population resided in low- and
moderate-income neighborhoods, and 22 percent in upperincome tracts. In 1999, the Ann
Arbor MSA had an estimated population of 557,349 people. From
1990 to 1999, the population was
estimated to have increased by
13.3 percent. Almost 55 percent
of the MSA’s population resided
in Washtenaw County.
The MSA’s minority population
experienced a 30 percent growth
rate between 1990 and 1999 (Figure 2). Asians were the fastest
growing racial/ethnic group and
reported a gain of 55 percent. By
comparison, Non-Hispanic Whites
reported the slowest rate of growth
during the period (11 percent).
Figure 3 depicts the racial/ethnic
composition of the MSA by
income census tract, as given by
the 1990 Census. Whites were the
largest racial/ethnic category in
all income geography categories,
with the proportion increasing
with the income of census tracts.
Blacks represented almost 19
percent of the low-income tract
population and over 9 percent of
the moderate-income population. Asians constituted about 11
percent of the low-income tract
population and nearly 2.5 percent of the moderate-income
tract population. Hispanics represented almost 3.5 of the lowincome tract population and
over 4 percent of the moderateincome population.
Continued on page 9

Figure11– -Percent
PercentofofPopulation
Populationinin
Ann
Arbor
M
Figure
Ann
Arbor
MSA
(by
Census
Tract
Income)
(by Census Tract Income)

Middle-income
49%

Upper-income
22%

Low-income
7%

Moderate-income
22%

Source: 1990 Census of Population and Housing, U.S. Bureau of the Census.

Figure22–- Change
Changein
inRace/ethnicity
Race/ethnicityofofAnn
AnnArbor
ArborMSA
M
Figure
Population:
1990-1999
Population: 1990–1999
60
50
40

Percent

by Robin Newberger and
Marina Plavnik

30
20
10
0
Asian

White Hispanic

Black

Native American

White NonHispanic

Total Minority

Source: Population Estimates Program, Population Division, U.S. Bureau of the Census.

Figure
of Ann
AnnArbor
ArborMSA
MSA
Figure33 -–Racial/ethnic
Racial/ethnic Composition
Composition of
(byCensus
CensusTract
TractIncome)
Income)
100%
80%
60%
40%
20%
0%
Low-income

Moderate-income
White

Black

Middle-income
Asian

Hispanic

Source: 1990 Census of Population and Housing, U.S. Bureau of the Census.

Upper-income

MSA Profiles continued from page 8
As illustrated in Figure 4, 65 percent of the housing units in the
Ann Arbor MSA were owneroccupied, 28 percent were rental
and 7 percent were reported as
vacant. Livingston County
reported the highest percentage
of owner-occupied housing in
the MSA (78.5 percent). Washtenaw County had the largest percentage of rental units (34.3 percent), while Lenawee County
reported the highest proportion of
vacant units (almost 10 percent).

Figure44– -Housing
HousingUnits
UnitsbybyOccupancy
Occupancyin
Figure
Ann Arbor MSA
Ann Arbor MSA

Owner-occupied
65%
Rental
28%
Vacant
7%

According to the 1990 Census,
the Ann Arbor MSA had a
median family income of
$45,123, well above the $36,652
median family income reported
for the state of Michigan as a
whole. Livingston County had
the highest median family
income of $49,910. The U.S.
Department of Housing and
Urban Development estimated a
1999 median family income of
$68,700 for the Ann Arbor MSA.

Source: 1990 Census of Population and Housing, U.S. Bureau of the Census.

Figure 5 - Change in Employment by Industry
Figure 5 – Ann
Change
in Employment
by Industry in
Arbor
MSA: 1991-1998
Ann Arbor MSA: 1991– 1998
60
50

Percent

40
Retail trade
Retail
trade

30
20

Finance,
Insurance
Finance, Insurance
and
Real Estate
Estate
and Real
Farm employment

10

Farm employment
0

Services
Services

Construction
Construction

-10

Source: Bureau of Labor Statistics.

Figure
- Change
Small
Business
Lending
in Ann
Ar
Figure
6 –6 Change
in in
Small
Business
Lending
in Ann
Arbor
MSA by Census Tract Income: 1998-1999
MSA by Census Tract Income: 1998–1999
40
Middle-income

20

Upper-income

Percent

Low-income
0
-20

Moderate-income

-40
-60
Number of loans

Loan value

Source: FFIEC, Dun & Bradstreet, and 1990 Census of Population and Housing.

According to the 1990 Census,
the MSA had a median housing
value of $87,057, which was considerably higher than the state
median housing value of
$60,062. Livingston County had
the highest median housing
value of $97,441. The value of
residential housing units
authorized by building permits
increased at an average annual
real rate of approximately 2.2
percent from 1995 to 1999.
Between 1991 and 1998, the
MSA added six new jobs for every
100 people, or a total of 34,900
jobs, with service-producing
industries accounting for over 88
percent of the gain. Between
1990 and 1998, construction was
the fastest growing industry in
the MSA in terms of employment,

reporting a 55 percent growth
rate (Figure 5). Farm employment, on the other hand, experienced a decline of over 7 percent
during the same period.
Over the eight-month period
ending in August 2000, the MSA
unemployment rate averaged 2.0
percent, which was below the 3.5
percent unemployment rate for
Michigan as a whole. Washtenaw
County had the lowest unemployment rate in the MSA of 1.6
percent, whereas Lenawee
County had the highest unemployment rate of 3.6 percent.
Our analysis of small business
lending data gathered under
the Community Reinvestment
Act (CRA) suggests that while
the number of small business
loans in the MSA increased by
11.6 percent from 1998 to 1999,
the total dollar value of loans
fell 7.9 percent during this
period. As illustrated in Figure
6, low-income tracts reported
the largest decline in the number and dollar value of loans
from 1998 to 1999. The middleincome census tract category
was the only one that reported
gains in both the number and
the dollar value of loans during
the period.
In general, our analysis of the
home mortgage lending data for
the MSA gathered under the
Home Mortgage Disclosure Act
(HMDA) shows that lending fell
between 1998 and 1999 in the
Ann Arbor MSA and its three
counties, driven primarily by a
slowdown in refinance lending.
As depicted in Figure 7, the 19981999 decline was in sharp contrast to the gains observed in all
census tract income categories
during the 1997-1998 period.
Continued on page 10

MSA Profiles continued from page 9

Highlights of the DavenportMoline-Rock Island MSA Profile
(Rock Island County (IL),
Henry County (IL),
Scott County (IA))
A growth in the minority population fueled the 2.2 percent population increase in the DavenportMoline-Rock Island MSA between
1990 and 1999. Minorities
accounted for an estimated 12.8
percent of the MSA population in
1999 -- with Blacks representing
6.1 percent of the total, White
Hispanics 5.4 percent, and Asians
1.0 percent. As seen in Figure 9,
minorities grew by about 30 percent between 1990 and 1999 as
compared to a 0.9 percent decline

for non-minorities. The White
Hispanic population grew by 55.4
percent over the period, the Asian
population by 42.2 percent, and the
Black population by 13.6 percent.

Figure
Census
Tract
Income
Figure77– -Change
ChangeininLoan
LoanOriginations
Originationsbyby
Census
Tract
Inco
in Ann
Ann Arbor
ArborMSA:
MSA:1997–1999
1997-1999
in
100
75

Nominal per capita income in the
MSA was $26,003 in 1998, and the
U.S. Department of Housing and
Urban Development estimated a
1999 median family income of
$51,800. The 12.3 percent of
households in the MSA living below
the poverty line in 1990 exceeded
the 11.9 percent rate in Iowa and
the 11.5 percent rate in Illinois.
Sixty-four percent of the units in
the MSA were owner-occupied in
1990. Thirty percent were rental
and the remainder were vacant.
The median housing value in
1990 (approximately $50,000) was
about $4,000 higher than the
median for Iowa, but over $30,000
below the median for Illinois. As
seen in Figure 10, the average dollar value of new single-family units
was about the same in 1999 in real
terms ($134,000) as it had been in
1990. Approximately 34 percent
of renters in the MSA paid more
than 30 percent of their monthly
income in housing costs, compared to 30 percent for Iowa and
37.7 percent for Illinois. The MSA
had an affordability ratio of 0.56
in 1990.1

Percent

50
25
0
-25
-50

Low- and
moderate-income

Upper-income

Middle-income
1997-1998

1998-1999

Source: FFIEC, HMDA data on CD-ROM.

Figure8 8– Community
- CommunityInvestment
Investment
Opportunity
Survey
Resu
Figure
Opportunity
Survey
Results:
CreditAvailability
AvailabilityininAnn
AnnArbor
ArborMSA
MSA
Credit
50
40
Percent

Over 25 percent of the population
residing in low- and moderateincome census tracts were minorities
in 1990. This compares to 6.7
percent within middle-income
census tracts and 4.7 percent within
upper-income census tracts.

30
20
10
0
NPOs

Individuals

Does not meet needs

Businesses

Meets needs

Exceeds needs

Source: Community Investment Opportunity Survey, Federal Reserve Bank of Chicago.

9 – 1990-1999
Population
Change
Figure 9Figure
-- 1990-1999
Population
Change
DavenportDavenport-Moline-Rock
Moline-Rock IslandIsland
MSA MSA
60
50
40
Percent

In the second section of the
Profile, Investment Opportunities:
Survey Results, we summarize the
results of our Community Investment Opportunity Survey.
Because Washtenaw County is the
only county that has low-income
tracts and contains the majority of
moderate-income census tracts,
the discussion is focused on the
survey results for Washtenaw
County. In general, survey results
indicate a need for additional
affordable housing, especially
single-family units. Survey results
also suggest a greater need for
adequate streets and sidewalks,
schools, public transportation,
and public recreational facilities.
Although availability of infrastructure is reported to be good, on
average, some responses indicate
a greater need for health care
facilities, retail trade establishments, financial counseling
services, and day care centers.
Almost one-half of the respondents
are dissatisfied with credit availability to nonprofit organizations and
about one-fifth indicate a greater
need for credit by individuals and
businesses (Figure 8).

30
20
10

Continued on page 11

0
-10
White NonHispanic

1 The affordability ratio is calculated by dividing median
household income by median housing value. Values
closer to 1.0 indicate greater affordability.

Black

Asian

White Hispanic

Source: Population Estimates Program, U.S. Bureau of the Census.

Total Minorities

MSA Profiles continued from page 10
Figure
– Average
DollarValue
Value of
of New
Figure
10 --10
Average
Dollar
NewSingleSingleFamily
Units
in MSA
(1999dollars)
dollars)
Family
Units
in MSA
(1999

133,950

133,826
131,676
128,824
127,054
125,615

122,857

120,712

120,084
115,104

90

91

92

93

94

95

96

97

98

99

Source: U.S. Bureau of the Census.

Figure
1111-- –Change
Figure
Changein
in Employment
Employment
bybySelected
SelectedIndustries
Industries in
in MSA

The MSA increased its wage and
salary jobs by 22,600 between
1990 and 1999, representing an
addition of 6 jobs per 100 people. The 13.9 percent increase in
employment compares favorably
to the 2.2 percent estimated
increase in population. Service
industries employed almost 80
percent of the MSA workforce in
1999. As seen in Figure 11,
service-industry jobs grew by
about 15 percent between 1990
and 1999, versus 8 percent
growth for goods-producing
industries. In particular, the services sector grew by about 37 percent, as compared to a 0.6 percent contraction in the
manufacturing sector.

145,100
125,600

51,500
37,200 40,300

Goods-Producing
Industries

31,100 30,900

Service-Producing
Industries
1990

Manufacture Sector

37,700

Services Sector

1999

Source: Bureau of Labor Statistics and Regional Economic Information System (REIS), Bureau of
Economic Analysis, U.S. Department of Commerce.

Figure
Percent
of Business
Businesses
Figure1212– -Percent
of Loans,Loans,
Businesses
and and
Population
by
Census
Tract
Income
Population by Census Tract Income
70

The number of new small business loans rose by 1.3 percent in
the MSA between 1998 and 1999,
while the dollar value of that
lending fell by 14.2 percent. The
average loan value was lower as a
consequence. For the upper and
middle-income census tracts, the
number of loans rose by 6.8 percent and 3 percent, respectively.
The number of loans in moderate- and low-income census tracts
fell by 4.4 percent and 9.5 percent, respectively. The value of
loans in moderate-income tracts
declined by 24.8 percent as well,
while the dollar value of loans in
low-income census tracts grew by
22.2 percent.

60

Percent

50
40
30
20
10
0
Low

Moderate
Share of loans

Share of businesses

Middle

Upper

Share of population

Source: FFIEC, Dun & Bradstreet, and 1990 Census of Population and Housing, U.S. Bureau of
the Census.

The 1999 data indicate a concentration of business lending
in the upper-income census
tracts. As Figure 12 shows,
upper-income census tracts
received 20 percent of business
loans, as compared to having
about 13 percent of the businesses and 17 percent of the
population. The largest

proportion of business loans (53
percent) were issued in
middle-income census tracts
that had 61 percent of the
businesses and 65 percent
of the population.
According to data gathered
under the Home Mortgage Disclosure Act (HMDA), the largest
share of housing loans (43 percent) was dedicated to refinancing existing mortgages, followed
by conventional mortgage loans,
home improvement, and government-insured loans. As Figure 13
shows, the number of housing
loans in the MSA declined by 21
percent in 1999 (the MSA had
experienced a 44 percent
increase during the 1997 to 1998
period). Less than 1 percent of
loans (43 out of 5,395) were
made to borrowers residing in
census tracts with a minority population of 50 percent or greater.
All 43 loans originated in minority tracts were made in low- and
moderate-income census tracts.
Survey Responses
An additional perspective on the
community-investment needs in
the MSA comes from the Consumer and Community Affairs
Division’s survey of nonprofit
organizations. Survey respondents reported least favorably
about the availability of affordable housing. Forty-six percent of
respondents reported that the
availability of one-to-four-unit
owner-occupied housing and the
availability of affordable rental
units do not meet the needs of
the community.
Infrastructure is generally viewed
as not meeting needs with regard
to schools and transportation, but
respondents give higher marks
Continued on page 12

MSA Profiles continued from page 11
Figure
13 --13Percent
Change
Figure
– Percent
ChangeHousing
HousingLoan
LoanOriginations
Originations
60
50

Percent Change

40
30
20
10
0
-10
-20
-30
-40
Low-Moderate

Middle
1997-1998

Upper

MSA Total

1998-1999

Source: FFIEC and HMDA data.

to neighborhood services such as
police/fire departments and
public recreation facilities.

The needs for banking, financial
counseling, job training and day
care services are currently being
well-met according to survey

respondents. Respondents rated
the availability of credit to
individuals and businesses
higher than the availability of
credit to nonprofit organizations. Fifty-four percent of
respondents deemed credit to
nonprofits as not meeting the
community’s needs, compared to
34 percent who agreed it does
meet their needs. With regard to
credit availability for businesses,
more than 60 percent of the
respondents agreed that shortterm loans meet or exceed
needs, about 70 percent agreed
that long-term loans meet or
exceed needs, and about 75
percent agreed that lines of
credit meet or exceed the
needs of the community. ■

In addition to the Ann Arbor and
Davenport-Moline-Rock Island Profiles, the Consumer and Community
Affairs Division has completed
profiles on the following MSAs:
Saginaw-Bay City-Midland, Flint,
and Detroit in Michigan; Milwaukee
in Wisconsin; Indianapolis in
Indiana; Des Moines in Iowa; and
Chicago in Illinois. These profiles
can be accessed via the Federal
Reserve Bank of Chicago’s public
website at www.chicagofed.org/
publications/MSA.
For copies of the profiles or further
questions, please contact the Consumer and Community Affairs
division at 312/322-8232.

Women in Business

Drive for Stamp to Honor Mother of Franchising
Congresswoman
Louise M.
Slaughter
recently introduced a resolution in the
United States
Congress to honor Martha
Matilda Harper with a
postage stamp.
Harper created modern business
franchising and, in doing so,
moved her and hundreds of
other low-income women into
economic self-sufficiency.
“While Susan B. Anthony and
other suffragists are honored
with postage stamps, women
pioneers in other fields, especially male-dominated sectors
such as business, are not as

fortunate,” said Congresswomen
Slaughter.
Harper, an indentured servant
from the age of seven, was determined to use business for social
change and to help women
achieve economic independence. She established the
Harper Method Inc., a healthconscious hair-and-skin-care
franchise system in 1888 to
change her destiny and leave
servitude behind.
Harper’s management practices
would be considered contemporary by today’s standards — the
business thrived until 1972. It
became a worldwide network of
more than 500 health-conscious

shops with two international
manufacturing centers and five
training schools. The Harper
Method Founders Shop in
Rochester, N.Y., is the oldest continually operating beauty salon
in America. Harper also invented
the reclining shampoo chair,
modern versions of which are
used almost universally.
“It is important that young people know that women in this
country achieved greatness in
many fields,” declared Slaughter,
who was recently elected vicechair of the Congressional Caucus on Women’s Issues. “They
were not recognized for it. However, Martha Matilda Harper is
not just an example of women’s

history, but of American History.
This is a woman who attained the
American dream.”
A dozen major women’s associations have endorsed the resolution
for a Harper postage stamp. They
include the National Association
of Women Business Owners, the
National Women’s Business Council, the Association of Women’s
Business Centers, the National
Association of Female Executives,
the American Business Women’s
Association, the American Association of University Women, and
Women, Inc. ■
For more information on Martha
Matilda Harper and the stamp, log
on to http://www.marthamatildaharper.com.

Chicago Fed National Activity Index Shows Economy
Improved Slightly in March
The Chicago Fed National Activity
Index (CFNAI) increased to –0.63
in March from a downward revised value of –0.91 in February.
The revision to February’s index
was relatively small, from –0.89 as
reported last month. The manufacturing sector continues to be a
primary source of weakness in
the CFNAI. In addition, negative
employment growth outside of
manufacturing adversely affected
the March reading. The overall tenor of the March manufacturing data, however, was
improved relative to February,
raising the index somewhat.
The three-month moving
average index, CFNAI-MA3,
was –0.80 in March, an
improvement over the downward revised –0.85 value in
February. March was the
ninth consecutive month that
the CFNAI-MA3 was below
zero, an indication of belowtrend growth in the national
economy and a sign of easing
pressures on future inflation.
Economic data released for
March suggest some improvement in the manufacturing sector. Industrial production growth
was positive in March. In addition, the National Association of
Purchasing Managers’ Index for
manufacturing improved,
although the PMI continued to
depict a contracting manufacturing sector. For the 20 individual
indicators that receive the largest
weights in the CFNAI, 14 are substantially related to the manufacturing sector; 13 of these 14 indicators showed improvement in
March relative to February.
Other data releases that contributed negatively to the March
CFNAI include the payroll

employment and unemployment
reports, which also displayed
weakness outside of the manufacturing sector. For example,
employment growth was either
negative or below average in the
retail and wholesale trade sector,
service-producing sector, and
transportation and utilities sector. Overall, of the 85 individual
indicators, 55 series showed
improvement relative to February,

the CFNAI is constructed (19672001), there were five economic
recessions. In each of these recessions, the CFNAI-MA3 fell below
–1.50. The March CFNAI-MA3
reading of –0.80 continues to be
above those previous recessionary levels. Historical experience
indicates an increasing probability of a recession as the CFNAIMA3 falls deeper into and below
the range of –0.70 to –1.00. The

sion for December 2000, from
–0.68 to –0.77, is almost completely due to revision in the
December Industrial Production
report. This had the effect of
lowering the CFNAI-MA3 for
December through February. ■

3
2
1
0
-1
-2
-3
-4
-5
1967

1972

1977

1982

1987

1992

1997

Chicago Fed National Activity Index, Three-Month Moving Average (CFNAI–MA3)

while 51 series displayed belowaverage growth. As of April 30,
March data for 64 of 85 indicators had been published; estimates for the remaining 21 series
were used in constructing the
March index.
The negative March reading
should be interpreted as
continuing evidence of national
economic growth below trend.
The CFNAI-MA3 has been at or
below –0.70 since December
2000. The likelihood that the
U.S. economy is currently in a
recession appears to have
decreased slightly since February.
In the sample period over which

March index levels continue to
indicate that the U.S. economy is
most likely not in recession.
Revisions to the February CFNAI
can be attributed to two main
factors: revisions to previously
published data and differences
between estimates of previously
unavailable data and subsequently published data. Today’s
revised February CFNAI is 0.02
lower than the number initially
reported. Revisions to previously
published data contributed +0.08
to February’s value, while differences between forecasted and
now published data contributed
–0.10 to this figure. A larger revi-

CDCs &
Microlenders
Can Link
To SBA
Home Page
Certified development
companies (CDCs) and
micro-lenders will soon be
able to link to the SBA
home page at www.sba.gov.
Small businesses in need
of assistance can currently
get the name and address
of various lending partners on the SBA Web site.
The new linkage will allow
the SBA customers to
more easily access information about services in
their geographic areas. ■

From Our Research Department
The Federal Reserve Bank of
Chicago serves the Seventh Federal Reserve District, which
includes the entire state of Iowa
along with large portions of Illinois, Indiana, Michigan, and Wisconsin. At the present time,
there are 43 Metropolitan Statistical Areas (MSAs) in the Seventh
District. The geographic boundaries of MSAs are defined by the
U.S. Office of Management and
Budget (OMB) as economic areas
encompassing communities that
are tightly linked by a flow of
commuters, migrants, goods and
services, and payments.
Unemployment rates are useful
indicators of the labor market
conditions in local areas. The
unemployment rate is defined as
the percentage of adults in the
work force who are not currently
employed but are actively seeking
employment. Importantly, the
work force, and hence the unemployment rate, does not include
workers who are not actively looking for work. This means that
workers who have given up looking for work are not counted as
unemployed.
Unemployment rates for Seventh
District MSAs are derived from
data provided by the United
States Department of Labor
(USDL). Using definitions and
guidelines established by the
USDL to ensure consistency across
state lines, state agencies calculate
MSA unemployment rates on the
basis of a monthly payroll survey
and unemployment insurance
records. The rates used here have
been adjusted to account for normal seasonal variations.
Through the better part of this
record economic expansion,
labor markets in the Seventh

District were tighter than the
nation as a whole. In contrast to
the 1980s, the Midwest’s unemployment rate had been running
below the national average since
1992. While good news for the
region’s workers, whose wages
and salaries grew faster than the
national average, the very low levels of unemployment made it difficult for employers to find quality
help. Broad-based labor shortages, across both industry and
occupational categories, had contributed greatly to the District’s

LABOR MARKET HIGHLIGHTS
There are signs that the generally
softer U.S. economy is having a
disproportionate effect on the
Seventh District’s labor markets.
Announced layoffs in the Midwest
were reportedly running at twice
the rate of the national average
and the unemployment rate was
also increasing faster here.
The average unemployment rate
for District states rose to 4.3 percent in the first quarter of 2001.
This is the first reading above 4.0

Change in initial unemployment claims
80

60

40
Midwest
20
US
0

-20

4/00

2/00
1/00

3/00

8/00

6/00
5/00

7/00

slowing employment growth in
the last few years. Earlier in this
expansion, a strong rebound in
our manufacturing industries, as
well as robustness in construction
and services, led to employment
growth in the region that outpaced that of the nation. As labor
markets in the region tightened
more dramatically in the mid1990s, the national rate of
employment growth caught up to,
and has since surpassed, the
region’s. With a generally slower
economy and relatively unfavorable migration patterns, the trend
toward slower job growth should
continue in the near term.

9/00

2/01
4/01
12/00
10/00
3/01
11/00
1/01

percent in over three years and is
up from an average of 3.7 percent
in both the first and fourth quarters of 2000. In addition, it is the
first time in nearly a decade that
the unemployment rate in the
Midwest has topped the national
average. The region’s labor markets have been tighter, and our
unemployment rate lower than
the national rate since May 1992,
and it wasn’t that long ago when
they were nearly a full percentage
point lower.
There is strong evidence that
higher unemployment in the District is due largely to softness in

our manufacturing sector. Two of
our mainstay industries, steel and
autos, have struggled recently. A
number of domestic steel producers filed for bankruptcy protection in 2000 and domestic auto
producers have announced a slew
of production cutbacks and
layoffs in recent months.
Initial unemployment claims
though the first two weeks of
April were running around 30
percent higher than at the same
time last year. When this data is
separated into eastern and western portions of the District, it is
readily evident that the trend
toward increasing joblessness in
the region is being driven by the
heavily industrialized eastern
states of Indiana and Michigan.
Despite the jump in unemployment insurance claims, unemployment remained relatively low
in Indiana, at 3.2 percent in
March. Iowa had the lowest rate
of District states, 2.8 percent,
while Illinois had the highest,
5.3 percent.
Of the District’s metro areas,
Madison, Wisconsin and Cedar
Rapids, Iowa had the lowest
unemployment rates, at 1.8 percent and 1.9 percent respectively.
As one might expect, the highest
unemployment rates in March
could be found in manufacturing
intensive areas. Flint, Michigan
had the highest rate, at 7.1 percent, followed by Decatur, Illinois
at 6.6 percent.
Richard E. Kaglic—Economist

Seventh
District Labor Markets
Unemployment conditions for March 2001

Green Bay
Wausau
Oshkosh
Saginaw
Sheboygan
Grand Rapids

Flint

Lansing

Madison
Milwaukee

Cedar Falls/Waterloo

Racine
Kenosha

Janesville

Dubuque

Rockford

Sioux City
Cedar Rapids

Benton Harbor

Davenport/
Moline

Chicago

Detroit
Kalamazoo
Elkhart

Iowa City
Des Moines
Kankakee

Peoria

Springfield
Decatur

March 2001
Unemployment Rates (SA)
Over 5.5%
4.5 to 5.5
3.5 to 4.5
Under 3.5

NOTE: All rates are subject to revision.

Gary

Normal/
Bloomington Lafayette

Champaign/
Urbana

South
Bend
Kokomo

Terre
Haute

Bloomington

Ann Arbor
Jackson

Fort Wayne

Muncie
Indianapolis

Consumer and Community
Affairs Division
Federal Reserve Bank
of Chicago
230 S. LaSalle Street
Chicago, IL 60604-1413

Economic Development
News &Vıews is published
three times a year by the
Federal Reserve Bank of
Chicago, Consumer and
Community Affairs Division.
Please address all
correspondence to:

Volume 7 Number 1
Spring 2001

News &Vıews

Economic Development

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