A sorry state: Illinois’ economy in 2017
Since the end of the recession, only 5 out of Illinois’ 13 metro areas – Carbondale-Marion, Chicago, Kankakee, Lake County-Kenosha County and Springfield – have recovered all the private-sector jobs lost from the Great Recession.
Illinois has long lagged the rest of the U.S. economy.
According to data from the Bureau of Labor Statistics, or BLS, monthly job growth in Illinois has persistently trailed the rest of the U.S since the recession. However, since January 2017, the state began to diverge along an important dimension: labor force participation.
For most of the U.S. economy, labor force participation rebounded in 2017 and the unemployment rate decreased because of strong employment growth. The opposite is true for Illinois: the unemployment rate decreased because the state’s labor force declined.
As Illinois’ population declined due to out-migration over the past several years, the size of the state’s labor force was also shrinking. However, since January 2017, the participation rate among those who stayed also decreased.
Since the end of the recession, only 5 out of Illinois’ 13 metro areas – Carbondale-Marion, Chicago, Kankakee, Lake County-Kenosha County and Springfield – have recovered all the private-sector jobs lost from the Great Recession.
Illinois’ real economic engine – private sector investment – has stalled. Growth in the government sector financed by a crushing tax burden is a potential culprit behind Illinois’ declining labor force and a growing gap between the haves and the have-nots.
Economists agree that taxes on the returns to capital leave everyone worse off. Higher taxes have a negative effect on investment. A decline in investment lowers the marginal product of labor, reducing the value of employment prospects. In addition, higher taxes on business profits reduce job creation and increase before-tax income inequality. In addition, higher property taxes cause the out-migration of housing-rich but income-poor individuals who are liquidity constrained.
2017: U.S. economy grows, Illinois’ economy declines
In 2017, while the U.S. economy expanded and employment growth continues to exceed expectations, Illinois’ labor force shrank. From January 2017 to September 2017, the entire state of Illinois only gained 12,800 jobs on net, which is less than half the job creation during the same months in 2016. Although unemployment fell in the last 12 months, the state employment situation is not healthy by any means.
Unemployment counts the number of job seekers. A decrease in the number of unemployed would spell good news if that decrease had been caused by an increase in the number of people finding work. Instead, when total employment decreases and the number of unemployed also decreases, it is because fewer individuals are looking for jobs.
That’s the case in Illinois, where the labor force shrunk by 97,000 people from January 2017 to August 2017. The opposite is true for the nation as a whole. The U.S. added roughly 1.4 million people to the labor force over the same time, increasing the labor force participation rate to 63.1 percent from 62.9 percent.
Mounting frustration due to a lack of opportunities and a crushing tax burden can explain why Illinois’ population has been declining at a yearly rate of 0.2 percent since 2013. A long history of poor economic policy decisions at the state and local levels has begun to spur an exodus of Illinoisans, who are choosing to leave the state for greener pastures.
Why Illinois struggles: Income and property taxes
Income and property taxes take a larger chunk out of Illinoisans’ incomes than residents of all bordering states, according to data from the U.S. Census Bureau.
From March 2015 to March 2016, Illinoisans saw 31.1 percent of their income flow toward income and property taxes, compared with 28.7 percent for Wisconsinites, 25.1 percent for Michiganders, and 24.6 percent for Iowans. 23.3 percent for Indianans, 23.1 percent for Missourians and 21.1 percent for Kentuckians.
Historically, Illinoisans have paid the largest share of their income in property taxes and income taxes compared with neighbor states, even after including all tax credits. Illinois is home to the highest property taxes in the nation. This is perhaps why it’s not surprising taxes are the No. 1 reason people cite for wanting to leave the state.
Despite Illinois seeing the worst personal income growth in the nation over the recession era – and Illinoisans seeing a larger share of their incomes flow to income and property taxes than residents of any surrounding state – lawmakers were bold enough to pass a 32 percent income tax increase in July 2017.
The lack of pro-growth reforms, as well as high income and property taxes, are harming Illinois families. The state’s declining labor force and continued out-migration are part and parcel of weak employment growth. Until state and local lawmakers pass serious pro-growth economic reforms, there’s little reason to think the state’s long-term jobs prospects will look any brighter.
An in-depth look at the employment situation in Illinois metro areas
Bloomington MSA
The Bloomington area suffered a net loss of 1,700 private sector jobs during the recession. Since the end of the recession (from February 2010 to September 2017), zero new private-sector jobs on net have been created in this metro area.
Carbondale-Marion MSA
This Carbondale-Marion metro area suffered a net loss of 3,900 private sector jobs during the recession. Since the end of the recession, this area has created 5,400 new private-sector jobs on net. This metro area is one of only five metro areas to have recovered from the Great Recession.
Champaign-Urbana MSA
This Champaign-Urbana metro area suffered a net loss of 7,500 private sector jobs during the recession. Since the end of the recession, only 3,600 new private-sector jobs on net were created in this metro area.
Chicago-Naperville-Arlington Heights
The Chicago metro area suffered a net loss of 344,000 private sector jobs during the recession. Since the end of the recession, this area has created 463,800 new private-sector jobs on net. The Chicago area is one of only five metro areas in Illinois to have recovered from the Great Recession.
Danville MSA
The Danville metro area suffered a net loss of 2,800 private sector jobs during the recession. Since the end of the recession, zero new private sector jobs on net have been created in this metro area.
Davenport-Moline-Rock Island MSA
The Davenport-Moline-Rock Island metro area suffered a net loss of 16,300 private sector jobs during the recession. Since the end of the recession, only 11,200 new private-sector jobs on net have been created in this metro area.
Decatur MSA
The Decatur metro area suffered a net loss of 5,000 private sector jobs during the recession. Since the end of the recession, only 1,100 new private-sector jobs on net were created in this metro area.
Elgin Metro Division
The Elgin metro division suffered a net loss of 38,700 private sector jobs during the recession. Since the end of the recession, only 27,200 new private sector jobs on net were created in this metro area.
Kankakee MSA
The Kankakee metro area suffered a net loss of 3,600 private sector jobs during the recession. Since the end of the recession, this area has created 4,000 new private-sector jobs on net. Kankakee is one of only five metro areas to have recovered from its recession-era jobs loss.
Lake County-Kenosha County metro division
The Lake County-Kenosha County metro division suffered a net loss of 42,400 private sector jobs during the recession. Since the end of the recession, this area has created 54,100 new private-sector jobs on net. Along with this metro area, only the Chicago area, the Carbondale area, Kankakee and the Springfield area have recovered from the Great Recession.
Peoria MSA
The Peoria metro area suffered a net loss of 18,200 private sector jobs during the recession. Since the end of the recession, only 5,000 new private-sector jobs on net were created in this metro area.
Rockford MSA
The Rockford metro area suffered a net loss of 24,200 private sector jobs during the recession. Since the end of the recession, only 12,700 new private-sector jobs on net were created in this metro area.
Springfield MSA
The Springfield metro area suffered a net loss of 3,700 private sector jobs during the recession. Since the end of the recession, 8,400 new private-sector jobs on net were created in this metro area. Springfield is one of only five metro areas to have recovered from its recession-era jobs loss.