Paprocki: Three things affecting Illinois business right now

The holiday season is a critical time for businesses, but operating a company in Illinois comes with unique challenges.

Now is a good time to examine what may be helping or in the way of companies maximizing profits.

Here are the economic factors affecting Illinois businesses' ability to grow this holiday season:

Higher unemployment

Illinois' unemployment rate ticked up for the second month in a row in October to 4.6%. This is higher than the 3.9% national average and higher than all of Illinois' neighbors. Cook County's unemployment rate sat slightly higher at 4.9% in September, the most recent data.

In October, the sectors with the largest monthly job losses included: professional and business services (-6,700), manufacturing (-5,300), financial activities (-2,900), and educational and health services (-2,900).

Illinois is unique in that our state generally relies on its small firms, more than the rest of the nation, to drive its job growth. Since the pandemic began, small businesses with fewer than 20 employees were the only ones to add jobs in Illinois. And since 2010, small businesses were responsible for 72% of all net job growth in Illinois.

We need as many people working or engaged in the job market as possible to stimulate the economy. For us, that may mean looking to help local shops and service providers first.

Inflation cools

Inflation has been a significant issue for the past year, affecting consumer spending and business costs. But recently, inflation in Chicago has cooled to 2.4%, lower than the national average.

This is a potential boon for businesses. Lower inflation can lead to increased consumer confidence and spending, and less pressure on business margins, which is exactly what businesses need during a potential holiday rush.

Property taxes on the rise

Commercial property taxes have risen 74% in Cook County during the past two decades, with the latest round of property tax bills - due Dec. 1 - up by $909 million across the county. Commercial property owners represent more than $300 million of Cook County's tax increase, a sign business rents and overhead could increase in 2024.

In general, tax hikes increase the cost of doing business, potentially discouraging new businesses from setting up shop and existing businesses from expanding. Business owners must now decide how much of these higher costs they take off their bottom lines and how much they shift to consumers.

We should also pay attention to the tax hike on the March ballot in Chicago, with voters deciding on a new proposal to increase the real estate transfer tax on properties more than $1 million. If passed, it would make buying city properties more expensive, leading to higher overall business costs. The effect: accelerate a business and job exodus, raise rents and lower values of properties.

The tax hike's passage could impact the suburbs and its commuting workforce - with businesses considering a move out of the city or out of Illinois altogether.

Overall outlook

This holiday season presents a mixed outlook for businesses. The vitality of small businesses and cooling inflation offer hope, while rising unemployment and rising costs associated with property taxes are concerning.

If the state and local government could prioritize businesses interests and focus on lowering taxes, the holidays could become a story worthy of the Hallmark Channel.

Matt Paprocki is president and CEO of the Illinois Policy Institute.