Illinois workers 26% less likely to find a job in May than other workers

Illinois workers 26% less likely to find a job in May than other workers

Illinois lost jobs in May as the state’s workers found themselves facing a tougher job hunt than workers in other states.

The COVID-19 pandemic cost people jobs everywhere in the U.S., and Illinois was no worse.

But now that the nation is recovering, Illinois is worse off. Illinois job seekers in May were 26% less likely to find work than their peers in other states.

Typically, when private – household and business – spending declines, government support increases to mitigate the decline in aggregate demand. Unfortunately, Illinois state and local governments entered the crisis with mounting debts and meager rainy-day funds.

The lack of funds meant large state and local government job cuts as well as no immediate support for struggling households and businesses. At the start of the pandemic, Illinois cut state government payrolls by 10,100 and 44,100 local government workers also lost their jobs. These numbers represent 6.5% of all job losses Illinoisans experienced between January and April of 2020.

Despite large money transfers from the federal government, the number of workers in the government sector has continued to fall even after the recovery began. While Illinois’ private sector recovery lags the rest of the nation, government employment is also shrinking.

More must be done on the policy front as COVID-19 fears dissipate to help cash-strapped businesses invest and create good-paying jobs. Illinois’ latest budget includes $655 million in tax hikes on employers, essentially a sign on the front door stating Illinois remains closed for business. The fact that a large share of revenues at all levels of government are spent on debt held out of state and on pension costs means Illinois’ economy will continue to lag. That means that relative to the rest of the country, Illinois could be in worse shape than it was before the pandemic.

According to data from the monthly household survey, Illinois job seekers were 6.2 percentage points less likely to find a job when compared to the rest of the country on average. Of those who were unemployed in April, 17% found a job in May, 64% remained unemployed and 19% left the labor force.

Across the country, unemployed Illinoisans were 26% less likely to find work in May when compared to job seekers across the nation.

Since the recovery began in April 2020, Illinois has added 401,800 jobs (+7.6%), one of the slowest paces in the nation. The only states adding fewer jobs were Iowa (+7.5%), Nebraska (+7.3%), Alaska (+7.1%), Louisiana (+7.0%), Oklahoma (+6.0%), New Mexico (+5.2%) and Wyoming (+3.4%).

Employment levels in Illinois remain 431,400 below their pre-pandemic peak in January 2020, meaning Illinois has regained fewer than half the jobs it lost during the pandemic. As a result, Illinois is battling the eighth-highest unemployment rate in the nation.

Unfortunately, Illinois’ latest budget signals Illinois job seekers will continue to struggle relative to residents of other states. We know this because Illinois leaders continue to make the same policy mistakes.

Exactly a decade ago, they raised taxes at the onset of the recovery from the Great Recession. Tax hikes coupled with declining government services resulted in lower investment and sluggish productivity and employment growth, contributing to the state’s lackluster recovery relative to its peers.

This time around, Illinois imposed four taxes on businesses totaling $655 million. Adding insult to that injury, Illinois lawmakers couldn't balance the state budget for the 21st year in a row despite the tax increases.

By raising the cost of doing business in Illinois, the changes will be a drag on wages, and will lower investment and opportunity for the state's idled workers.

The tax hikes will not result in higher levels of public investment, which raise employment and the supply of government services. Nor will they provide help to needy Illinoisans because more than 25% of Illinois’ budget is dedicated to rising public employee retirement costs. That number is expected to continue to increase.

The estimated total cost of pensions had soared to nearly $28 billion on average each year in forgone income and direct payments to the pension systems by 2017. Tax hikes without any improvements in the quantity and quality of public services harm the state’s economic prospects and lower Illinoisans’ incomes.

Turning things around means a constitutional amendment that allows for a reduction in future pension liabilities and thus pension costs.

Instead, Illinois leaders put a constitutional amendment on the 2022 ballot to give public sector unions even greater power at the expense of everyone else. This amendment, Senate Joint Resolution Constitutional Amendment 11,  would permanently raise the unit cost of government services. Higher cost per government worker could also lead to lower growth in government employment.

If SJRCA 11 becomes permanently enshrined in the Illinois Constitution, the state’s labor market performance will continue to lag.

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