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 Despite sustained job growth recently, the
unemployment rate in Illinois is now the worst in the nation.
Illinois’ unemployment rate remains 4.5%, now the highest in the nation and a
full percentage point higher than the national rate of 3.5%
The state’s sluggish recovery from the pandemic is putting the state in a
precarious position as economic uncertainty and recession fears continue to
increase. 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%.
The state’s pandemic recovery has been hindered by Gov. J.B. Pritzker’s COVID-19
policies, which were more severe than other states and disproportionately hurt
workers in the leisure and hospitality sector. Pritzker has continued to extend
emergency powers throughout the pandemic, recently issuing his 35th COVID-19
disaster proclamation.
Illinois’ restrictive pandemic policies and use of federal enhanced unemployment
benefits likely resulted in a sluggish recovery of pandemic job losses. During
the pandemic, the federal government provided funding to states to increase the
amount of unemployment benefits paid out by $300 per week for each recipient.
The fastest-recovering states all ended these increased benefits months before
the official expiration date in September 2021. In all, 25 states did so.
Illinois, like the slowest-recovering states, did not terminate the benefits
before they expired by federal law.
At the time, industry groups in Illinois raised concerns increased unemployment
benefits would delay some workers’ returns to the labor force by reducing their
financial incentive to look for work. The extra benefits did not include any job
search requirements. Those concerns appear to have been justified given the
state’s slow recovery from the pandemic and its highest in the nation
unemployment rate today.
The Federal Reserve continues to take measures to fight inflation, recently
raising interest rates by 75 basis points while pledging more hikes are on the
way. It is expected to raise rates by another 75 basis points again in November.
Despite months of rate hikes, inflation has remained stubbornly high at 8.2%,
fueling further uncertainty about the future of the economy.
Warning signs of an impending recession continue to mount. 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.
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Illinois added 14,900 jobs in September, continuing its job growth for the 16th
consecutive month. September growth came in stronger than August, when the state
added just 4,100 jobs for the month, revised up to 4,500 with the latest
release, signaling a sharp slowdown in growth.
While the state added jobs as a whole, some sectors fared better than others.
The education and health sector led the way by adding 6,300 jobs; trade,
transportation and utilities as well as professional and business services each
added 2,200 jobs; government added 1,500 jobs; financial services and other
services each added 1,400 jobs, while construction added another 500.
Several sectors shed jobs. The leisure and hospitality sector lost 1,500 jobs
for the month; the information sector dropped 600 jobs; and manufacturing lost
100 jobs.
Mining payrolls remained unchanged for the sixth consecutive month.
Given its struggle to recover jobs lost during the pandemic, Illinois is in a
difficult position heading into what may now be an inevitable economic downturn.
Illinois governments already 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 $1.3
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 would result in higher taxes for businesses.
The results could be catastrophic for Illinois, whose businesses and residents
are already fleeing the state. Tyson foods became the sixth company to announce
its departure from the state, joining Boeing, Caterpillar, Citadel, FTX, and
Highland Ventures in relocating employees and operations out of Illinois. A
record exodus driving a 114,000-person 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
government 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. The property tax hike alone is
conservatively estimated at more than $2,100 over four years if the amendment
passes. 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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