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 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.
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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 – Boeing, Caterpillar 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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