Chicago Business Activity Contracts Further in May, Hiring Challenges Persist

According to a survey conducted by MNI Indicators, Chicago Business Activity manufacturers continued to decline for the ninth consecutive month in May. The survey data revealed that demand is cooling down, and companies face difficulties hiring new employees.

The Chicago Business Barometer, which assesses business conditions in the region, dropped to 40.4 in May from 48.6 in April. This represents the lowest reading in six months and falls below the consensus forecast of 47.0 from economists polled by The Wall Street Journal. The index suggests that business activity contracted in May, falling below the threshold of 50, separating expansion from contraction.

The barometer considers five key components: new orders, order backlogs, production, supplier deliveries, and employment. In May, the production index declined, reversing the rebound seen in the previous month. Some firms experienced a slowdown in business activity among their customers, contributing to this decline.

The new orders index also decreased, reaching a six-month low and its second-lowest level since June 2020. This decline can be attributed, at least in part, to customers who had previously overordered from certain firms.

Furthermore, the employment index softened, indicating that businesses face hiring and retaining staff challenges.
The prices paid index decreased to its lowest since August 2020, suggesting weakened demand. The report highlights that the pass-through of lower commodity prices from suppliers remained slow and moderate.
These findings underscore the ongoing contraction in Chicago’s business activity and the difficulties in hiring new employees—the challenges manufacturers face, and the softening demand raise concerns about the region’s economic outlook.