Employment Cycle Co-Movements and Economic Integration Between Milwaukee and Chicago

Chicago's expanding global role depends on the city serving as the center of a large, integrated economic region—which includes its northern neighbor of Milwaukee. This study uses monthly data to create series of employment cycles, before applying time-series tools to address comovements and economic integration. We find that the two MSAs are in the same phase of the employment cycle for about two-thirds of quarters. Cross-correlation functions show that Milwaukee and Chicago are more synchronized with each other than they are with smaller MSAs in their states, but less synchronized than New York and Philadelphia. Rolling correlations between Milwaukee and Chicago are higher during recessions and are lower during booms; perhaps the cities have different drivers of growth. Forecast Error Variance Decompositions confirm that Milwaukee has less of an impact on Chicago's economy than vice-versa, but that New York has twice the effect on Philadelphia than Chicago has on Milwaukee. We therefore conclude that Milwaukee and Chicago are fairly integrated, but that this degree is still comparatively low.