Illinois last in nation for growth in businesses that create jobs
Lots of businesses tried to get started during 2021 in Illinois, but the ones that create jobs had a tough time launching. That’s why Illinois unemployment remains high and salaries depressed during a national labor shortage.
Illinois is currently battling one of the slowest economic recoveries of any state in the nation. The state is still missing more than 250,000 jobs since the pandemic began and residents are facing some of the highest unemployment rates in the nation.
Making matters worse, Illinois’ job opening rate is fourth lowest in the nation, meaning there simply aren’t as many jobs in Illinois as in other states.
While the rest of the country is currently experiencing one of the greatest labor shortages in recorded history, and national job openings continue to hover around record highs, Illinois isn’t showing many signs of a labor shortage.
Prior to the pandemic, when the U.S. economy was considered to be at full employment, the ratio of unemployed to job openings hovered around 0.8 job seekers per job opening. As of December 2021, that number had declined to 0.6 job seekers per job opening nationally, the lowest number since the Bureau of Labor Statistics began reporting the monthly data in 2000.
But Illinois has a ratio of 0.84 unemployed workers per job opening, on par with the pre-pandemic state and U.S. economy and nowhere near the massive labor shortage seen in other states. That shouldn’t be taken as a positive sign for Illinois’ labor market. It is a bad byproduct of high levels of unemployment and low levels of job openings.
The state’s lack of job openings in comparison to other states has reduced the bargaining power of workers in Illinois, who may receive more generous pay and benefits in other states. It has also made it harder to find work in Illinois.
One big reason why employment options are limited is new business formation activity was stagnant in Illinois in 2021, according to data released Feb. 14 by the U.S. Census Bureau. Illinois experienced the smallest increase in 2021 of any state for new business applications that are most likely to create jobs.
The average state in 2021 saw a 24% increase in these job creators, known as high-propensity business applications. Illinois’ applications only rose 11%.
The stagnation of new business activity in Illinois is particularly concerning as the state’s labor market hopes to recovery from the effects of the COVID-19 pandemic and state-mandated lockdowns. However, despite slow growth in high-propensity business applications in 2021, Illinois still received more applications than any other Midwestern state. It received 5.6 applications per 1,000 residents, the 10th highest rate in the nation. While that is good news, Illinois’ ranking is likely to fall as other states see a marked rise in business applications.
Ultimately, a high level of business applications doesn’t mean much for Illinoisans unless they result in businesses that hire people. Despite being among the states with the most applications per capita, very few of these business applications result in actual business formation. In 2021, only 6.7% of business applications were expected to result in a business formation within one year of applying – one of the worst rates in the Midwest.
The inability of applications to turn into fully-fledged businesses means while Illinois has one of the highest rates of high-propensity business applications in the nation, projected four-quarter business formation falls below the national median.
The Census Bureau’s business formation statistics present a mixed bag for Illinois.
Illinois has some of the most accessible resources for entrepreneurs in terms of financing and human capital, so sees a high level of business applications even though these applications are growing at the slowest rate in the nation. They represent great potential for business formation.
But Illinois has one of the worst track records in the nation for its ability to turn applications into real businesses that offer jobs. The combination leaves many Illinoisans looking for work and finding relatively few job openings.
If Illinois hopes to recovery its pandemic-related job losses, the state will need to encourage growth in business applications and do a better job of ensuring these applications ultimately result in new employers for Illinois’ workforce. One good place to start would be to simplify Illinois’ regulatory code, which is third-most cumbersome in the nation. Lots of potential skyrockets are being lit, but Illinois needs to stop squirting the hose on them.