Mayor Rahm Emanuel's jobs pipeline somewhat leaky [Chicago Tribune]By Kathy Bergen, Kristen Mack and Wailin Wong, Chicago TribuneMcClatchy-Tribune Information Services
Aug. 19--The announcements have become regular occurrences for Mayor Rahm Emanuel and a prominent part of his strategy to be seen as steward of Chicago's economy: Yet another company plans to expand its presence and its payroll in the city.
United Airlines. GE Capital. Chase. And dozens more. All have paired up with the mayor at a news conference or in a statement to commit jobs to the city. But a Tribune review of the announcements indicates the jobs pipeline may not be quite as robust as the hype would indicate. And in the months and years that follow, when the news conference has been forgotten, the reality of running a business, especially in a rocky economy, can interfere with the best-laid plans.
When Google Inc.announced Monday it would slice Motorola Mobility's payroll by 20 percent, the cutback represented a reversal of fortune for Emanuel, who less than three weeks earlier trumpeted the smartphone-maker's decision to move its headquarters, with its 3,000 high-paying jobs, to Chicago.
The mayor had heralded the company's planned move from Libertyville as a "game changer" -- a crucial step toward creation of a true tech hub downtown. After the layoffs announcement, it was harder to see that a lagging enterprise that had just slashed its jobs pledge by 700 positions was just as good for the city's economic revival.
Motorola's backpedaling is the most recent and dramatic example of how Emanuel's jobs announcements -- aimed at creating buzz that he's kicking the city into high gear, pulling businesses from the suburbs and elsewhere in the country -- don't all live up to their billing.
Emanuel keeps a running tally: Eight companies committing to moving their corporate or regional headquarters to Chicago and 28 companies expanding here, adding about 20,000 jobs in a little more than a year in office. But a Tribune review found that while about 60 percent of those job pledges are for new positions, the remainder likely will be transfers -- good for the city but not providing direct opportunities for the 1 in 10 Chicagoans who are out of work and looking for jobs in a soggy economy.
Moreover, of the new jobs, more than 1,700 of the positions the mayor counts are construction jobs, which aren't permanent. Of all the announced jobs, 2,200 are with companies that failed to provide a definitive date on when they would finish the hiring, and about 3,600 are on phased timetables that could stretch beyond 2015, raising the question of how firm those pledges could be.
"No one knows the future of the economy or of a particular firm," said public finance expert J. Fred Giertz, a retired professor of economics at the University of Illinois at Urbana-Champaign. "A company can get into an activity that seems great today, and in six months, it may not seem so great, whether it's Groupon or Facebook."
But as a political career-building tool, the announcements can be quite effective, he said: "From the standpoint of Mayor Emanuel, every job created in Chicago looks good for him."
In a statement, Emanuel said: "Every business person knows confidence is one of the most important economic stimulants. Part of why we announce successful recruitments and expansions is it builds confidence in the economy and the decisions we are making. ... Other companies around the world have taken notice."
Tom Alexander, a spokesman for the mayor, said the city has worked to keep the jobs pledges on short-range but attainable timetables, taking into account the time it takes to build out office space and hire staff.
The mayor last week said he did not view Motorola Mobility's downshift in job goals as a setback or embarrassment.
"The mayor's position is that he wants to attract companies but let them operate in a manner to be successful. ... The company has a 15-year lease; they are playing the long game here," Alexander said.
Google's retreat was one example of how a company's outlook and its hiring plans can shift rapidly, throwing up a big question mark about how the mayor's jobs announcements will pan out over time.
For instance, Lawson Products' decision in November to relocate its headquarters from Des Plaines to Chicago was touted by Emanuel as "a significant commitment to the city."
The move amounted to shifting the company from one side of the Tri-State Tollway to the other, bringing the distributor of maintenance and repair supplies a bit closer toO'Hare International Airport. The new location is less than four miles from the original spot.
Lawson delivered on its promise and transferred 400 employees to the new headquarters in late spring. But by the end of June, the company announced it was laying off 100 employees, or 11 percent of its workforce, with more than half taking place at its headquarters.
For-profit education providerDeVry Inc.in July responded to falling profits by announcing plans to cut 570 jobs companywide, a month after its online services unit joined with Emanuel to announce it would bring 600 jobs to the West Loop during the next nine years. While the company says the cutbacks will not affect its downtown expansion plans, the layoffs stand as another example of the continuing fragility of the hiring climate.
In other cases, delivering on pledges is taking longer than anticipated.
Emanuel joined with ThyssenKrupp in February to announce that the Germany-based manufacturer would open a regional headquarters in Chicago this summer, with the goal of employing 100 people. Now, the company hopes to be up and running by fall, said spokesman Amgad Naguib, noting the company has selected an office space and is building it out.
"It is difficult to determine a final head count at this point, but we are looking at anywhere between 80 and a hundred employees," he said, estimating 70 to 80 percent would be new hires and the rest would be employees transferring from other locations.
Asked whether the city will be checking on how jobs pledges pan out, Alexander said: "We follow up with companies on a regular basis. What we've found is that companies are meeting their commitments."
He said he did not know if the city's follow-up on results would be shared with the public.
Interviews with the handful of companies that promised to reach goals by mid-2012 indicate some are hitting their numbers, among them Chase bank, accounting firm Ernst & Young and staffing company SeatonCorp. But at least in some cases, the mayor's role in the expansion decision appears to have been limited.
Last August, for instance, Chase said it would bring 400 jobs to the city as part of its plan to open four new branches. Chicago wasn't unique, because Chase was making those same announcements across the country. The New York-based bank opened 17 branches in the six-county area around Chicago last year and 219 throughout the country.
It made a second jobs announcement in December for an additional 400 jobs in mortgage banking.
"The jobs we announced are because the economy is slowly picking up and we need those to best serve our customers," said Chase spokeswoman Christine Holevas. The banking company worked with Emanuel in making its announcements because "it's important to show that Chicago, just like the rest of the country, is slowly ... moving in the right direction," she said.
SeatonCorp's chief executive, Patrick Beharelle, said he reached out to the mayor's camp to see if Emanuel would be willing to attend a celebration that recognized the company as a top job creator among privately held American companies.
It was only when Beharelle later shared that the company planned to hire 400 recruiters, accountants, finance and information technology staffers in Chicago that Emanuel agreed to make an appearance.
Lots of factors are taken into consideration when a company plans to expand, Beharelle said, including the availability and price of real estate and the skills of the local labor market.
"The confidence you have in the city you are deciding on and how well it's run is one of many factors," he said, adding that the mayor's appearance helped raise the company's visibility and led to a spike in applications.
The level of mayoral involvement in jobs-location decisions varies from case to case, Alexander said.
General Electric Chairman and CEO Jeffrey Immelt, for instance, has acknowledged that his personal relationship with Emanuel "tilted it a little" in Chicago's favor when GE Capital decided last year to hire 1,000 new employees here.
In the case of Motorola Mobility, Emanuel said in a recent interview that he and Google Executive Chairman Eric Schmidt "have known each other for a while, and we talk on a number of subjects."
The mayor said this gave him a chance to sell Chicago, "its cross-section of people and ideas, its quality of life and culture, its workforce, the (potential for a) minuscule commute -- how easy it is on employees."
But even in cases where the mayor simply prevails upon companies to announce existing goals, "there's a massive difference between internal strategic plans for a company and making a commitment to the city and knowing you'll be held accountable by the mayor's office," Alexander said.
The announcements can be a highly effective marketing tool for the city as long as positive announcements outnumber negative surprises, said Bobby Calder, professor of marketing at Northwestern University's Kellogg Graduate School of Management. The new-jobs drumbeat creates "an association that is pretty powerful, even if people don't give the announcements much scrutiny," he said.
Economist Giertz agrees that "it's a good idea, even though the numbers may not be fantastic."
Chicago saw its workforce grow to nearly 1.15 million in June, an increase of 2.5 percent from the year-earlier month. And its unemployment rate dropped to 10.6 percent from 12.2 percent in June 2011, according to Bureau of Labor Statistics preliminary data, using nonseasonally adjusted figures.
Still, the city's unemployment rate is painfully high, more than 2 percentage points greater than the comparable U.S. rate for June.
The Tribune review of jobs announcements indicated as many as 4 in 10 jobs could be transfers. And some of the biggest announcements, including by Commonwealth Edison and Northwestern Memorial Hospital, fold in large numbers of temporary construction jobs.
The mayor's office asserts that all three sorts of job additions will bolster the local economy by helping neighboring businesses, triggering ancillary development and making a dent in the severe unemployment rates in the building trades, which have been socked by the long-running real estate slump.
In fact, Emanuel's office made a point of noting the roster of corporate relocations and expansions doesn't fully report growth in construction jobs, including an expected 1,000 for the planned River Point tower in the West Loop.
But with many hiring target dates well into the future, or left open-ended, it will be quite a while until it can be determined if all these announcements will bear fruit.
SeatonCorp chief executive Beharelle is among those uncomfortable with long-term projections.
"For our company, it's impossible to know when a recession or a recovery or an expansion is going to happen," he said. "We would not be projecting out the number of hires we would make nine years out. I do feel comfortable one year out."
(c)2012 the Chicago Tribune
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