That's drought related and it's going to be fine. All my plants are doing that here and on the bottom.

Dax

Same here. I believe rust is more spotty on the needles.

Drought? I don't know where the posters Zone 5 is, but if it is in the NE then drought is unlikely. All evergreens drop interior needles, some years they drop more than others.
It looks to me like normal shedding, or just physiological, transplant shock,too much/frequent water, improper planting (check that it is not too deep), or someone added fertilizer when planting. There is a possibility that it is Fungal, there are several diseases of Spruce. One new one SNEED is not yet easily recognized.
The tree looks fine to me but its worth sending a sample to your local extension service to check, it's dirt cheap to do this.

forget about rust and spraying.. its all normal ...

i suspect recent transplant.. within 3 years.. and a large transplant at that.. they stress more in that regard... can you add any facts in that regard ...???

i suspect a weather anomaly ... adding to the stress above... i had 8 weeks near 100 with total drought.. most of my conifers look like this.. can you add any more pertinent facts ... ???

the key.. or the future of this plant is in its buds.. of which there are no pix ... but next years buds are already there ... they should be tan brown.. and hard as nails... and as long as they remain so.. this plant is ready for next year.. [dead or dying buds turn black and mushy]

go out there.. and trace back 6 to 9 inches.. and you will see where last years buds were .. and you will note no browning of this years crop of needles.. then track back to the prior set of buds.. and you will note there is no brown.. so last years growth is fine .. and then track back further.. and you will probably see some browning on the oldest needles.. this is NORMAL ...

no conifer holds its needles forever.. usually only 1 to 3 years .. all older needles are shed.. interiors of conifer are bare.. so what you are seeing is within normal limits ...

now.. look up to the leader ... this tree is getting established.. because you will note the rather normal aggressive growth now starting ... much more than the horizontal growth.. this tree is wildly happy ... but as above.. trace down.. it has needles on the trunk only from this year.. and last year.. and is shedding those needles 3 years back ... and as you trace the trunk further down.. you will note it is bare.. and starting to form mature bark ... which is needle-less ...

whoever suggested chemical intervention is wrong.. and frankly .. probably only wants to sell you something you dont need ... and since its all normal.. spraying is just pollution ...

step away from this plant.. and relax.. it is doing fine ... i would increase the mulch to another foot or two.. and start wondering what you are going to do.. when this thing is 50 to 100 feet tall .... do not start trimming the horizontal growth.. to keep it confined to what little space it has now ... this is a forest tree of great potential .... not some tree you are going to keep as a cute little xmas tree in the middle of your lawn ... there are named varieties which would be better suited for that ...

good luck

ken

Here is a link that might be useful: its native potential

Thank everyone! i agree after your inputs- this is normal considering the drought we had in chicago. i had this tree planted three years ago.it was about 6 ft. when planted.
ill try to research on sneed also.
happy gardening everyone!

If you end up with little puffs of green around a conspicuously bare interior then the browning is excessive.