Illinois unemployment rate is third-highest in the nation, highest in Midwest

Illinois unemployment rate is third-highest in the nation, highest in Midwest

Illinois stands as one of the states with the most to gain – and lose – as the national economy continues to surpass job growth expectations.

The national economy added 528,000 jobs from mid-June to mid-July, far more than the 258,000 experts were anticipating.

The good news is that the nation’s continued overperformance has, for now, translated into a continued labor market recovery for Illinois. The bad news is strong job growth raises inflation expectations, making steeper Federal Reserve rate hikes more likely and lowering the odds the U.S. can tamp down inflation without inducing a recession.

Total nonfarm payrolls in the United States have now surpassed their February 2020 levels, marking the completion of a 27-month-long employment recovery, according to data released Aug. 5 by the U.S. Bureau of Labor Statistics. Not all states have experienced the same recovery: Illinois payrolls are still down more than 1.4% compared to their pre-pandemic peak in January 2020.

Strong jobs growth at the national level is good for Illinois, because its labor market remains one of the least recovered in the nation. As of July, the state was still missing nearly 89,000 jobs compared to early 2020 levels. Illinois’ unemployment rate of 4.4% is also third highest in the nation.

While the national economy continuing to surpass employment expectations is a good thing for Illinois’ employment recovery, a great deal of economic uncertainty remains. The Federal Reserve has raised interest rates four times already this year, with more rate hikes anticipated in the coming months. Despite rising interest rates, inflation remains at the highest levels seen in the past 40 years – up 8.5% from a year ago, the bureau reported on Aug. 10. As payroll growth accelerates, inflation expectations also remain high and increase the likelihood of steeper, more frequent rate hikes by the Federal Reserve. Larger rate hikes reduce the chances inflation can be brought down without the economy slipping into a recession.

Illinois’ economy still hasn’t fully recovered from the economic downturn of 2020. The state is still missing nearly 89,000 jobs and the unemployment rate is the highest in the Midwest. Making matters worse, Illinoisans suffered more during the Great Recession than most other Americans and are poised to be particularly vulnerable in the event of an economic downturn today.

On top of recent policies that have exacerbated the threat of recession, Illinois governments have less flexibility in their budgets and spending on vital services, which will be especially needed during a recession, has largely been crowded out by pension obligations. The state is also facing a $1.8 billion unemployment trust fund deficit that raises questions about how much assistance could be provided to Illinoisans who lose their jobs and about whether it will result in higher taxes for businesses.

The results could be catastrophic for Illinois, whose businesses and residents are already fleeing. Three major corporations – BoeingCaterpillar and Citadel – in the past few months all announced they would be relocating company headquarters out of Illinois. A record exodus driving population decline threatens to prevent the state’s economy from ever returning to pre-pandemic employment levels.

The first step to ensure Illinoisans don’t endure a particularly painful future economic downturn will be for voters to take a hard look at Amendment 1 on the Nov. 8 ballot. Amendment 1 would change the Illinois Constitution to grant unions in Illinois more extreme powers than they have in any other state, including the ability to bargain over virtually limitless subjects, the ability to override state law through their contracts and guarantees taxpayers and lawmakers would have an extremely difficult time reversing course.

Should Amendment 1 pass, Illinois’ $313 billion pension debt would continue to balloon as state and local taxes, which are already among the highest in the nation, rise in an attempt to keep up. An Illinois Policy Institute analysis found property taxes would rise $2,149 or more during the next four years should Amendment 1 pass, as taxpayers are forced to fund greater government union demands. Spending on vital programs would continue to fall. 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. Amendment 1 ensures those challenges worsen during periods of economic duress.

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