Fed: Illinois unemployment rate 2nd-highest in nation
Analysis from the Federal Reserve Bank of Philadelphia indicates Illinois lost jobs during Q2 rather than gaining, as previously reported. It may still be losing jobs. Illinois ranked No. 2 for highest unemployment in November.
Illinois’ employment gains have been overestimated, showing a gain when they should have shown a loss in the spring, according to a report Dec. 13 from the Federal Reserve Bank of Philadelphia.
Those losses may be continuing, as the state ranked No. 2 in November for highest unemployment in the U.S.
The Illinois Department of Employment Security in conjunction with the U.S. Bureau of Labor Statistics originally estimated the state added 35,800 jobs from mid-March through mid-June 2022. The Fed reported more detailed data shows that was wrong: the state lost jobs during that time.
The overestimation of job gains, which are calculated based on Current Employer Survey data, may help to explain why Illinois’ unemployment rate continues to increase despite the state reporting job growth. Illinois’ unemployment rate of 4.7% is second highest in the nation, behind only Nevada.
Because of the conflicting estimates, the Illinois Department of Employment Security continues to report the state is adding jobs, reportedly gaining 17,500 jobs in November.
Leading the month’s job growth was the leisure and hospitality sector with 10,700 jobs added; professional and business services added 5,800 jobs; education and health added 3,500 jobs; construction added 2,400 jobs for the month; and financial services and other services added 1,400 jobs and 1,000 jobs, respectively.
Despite overall job growth for November, five of the state’s 11 sectors suffered job losses for the month. Leading the losses for November was the trade, transportation and utilities sector as it shed 4,300 jobs; the government sector lost 1,700 jobs; manufacturing lost 1,000 jobs, while the information sector lost 200 jobs and mining lost 100 in November.
Despite continued estimates of jobs growth, Illinois is still missing 41,500 jobs compared to pre-pandemic levels, while the analysis from the Federal Reserve suggests this number may be even larger. There will be a clearer picture of Illinois’ labor market when the Bureau of Labor Statistics conducts benchmark revisions to their estimates in March 2023.
Regardless of what the data will ultimately show, Illinois’ labor market will have to contend with serious headwinds in the new year.
The Federal Reserve continued to pursue interest rate hikes in order combat inflation, boosting rates another 75 basis points for November. Inflation remained high at 7.1% for November. Interest rates are now the highest they have been since 2008 and the Great Recession, with the Fed continuing to signal more rate hikes are coming, although possibly at a slower pace. It raised its benchmark rate half a point Dec. 14 to a target range of 4.25 to 4.5% – the highest rate in 15 years. The Federal Reserve’s policymakers are predicting higher unemployment and slower economic growth in both 2023 and 2024, with the economy forecast to grow just 0.5% next year.
Other recession warning signs have been making news recently. Fitch Ratings is expecting a recession by the second quarter of 2023. It stated a recession is likely to be similar to the 1990-1991 recession, which lasted nine months, but is also expected to be milder than the one from 30 years ago. A recent Bloomberg Economics model projects there is now a 100% chance of a recession in the next 12 months. Morgan Stanley’s Chief U.S. Equity Strategist & Chief Investment Officer, Mike Wilson, believes earnings losses in 2023 could rival those of 2008.
The concerning jobs and unemployment figures are a bad sign for Illinois’ economy should a downturn take place. Illinoisans suffered more than most Americans during the Great Recession. Because the state still hasn’t recovered from the pandemic, it remains vulnerable to suffering more severely than other states should a recession occur.
Illinois has a tendency to struggle to recover from economic downturns compared to the rest of the nation, as it did after the Great Recession and is doing now after the pandemic. During the Great Recession from 2007 to 2009, Illinois’ economy shrank by nearly 5% compared to a 3.2% drop in the rest of the nation. Then it lagged the recovery from 2009 to 2017, growing by 10.6% while the rest of the nation grew by 17.1%.
With the passage of Amendment 1, Illinois’ $313 billion pension debt will likely continue to balloon as state and local taxes, which are already among the highest in the nation, rise in an attempt to keep up without reform to the pension system. If property taxes continue to rise at their recent rate, homeowners can expect to pay more than $2,100 during the next four years. Meanwhile, spending on vital programs will continue to be crowded out.
Illinois’ housing and labor markets are already suffering as high taxes and reduced services make finding a job and living in the state tenuous. These problems would be exacerbated should the U.S. enter a prolonged recession. Illinois needs reform that will control the state’s cost drivers and deliver vital support to taxpayers when they need it the most.