January jobs growth weak, Illinois labor force in 10-year decline

Newly released Illinois jobs report points to anemic jobs growth and a contracting labor force.

Illinois’ January jobs data showed continued weakness in jobs growth, coupled with a significant one-month increase in the labor force size. However, new multi-year revised data show that Illinois’ job creation has been weak for years, and its labor force size is in a long-term decline.

New January 2017 jobs data

Illinois’ January 2017 jobs data from the Illinois Department of Employment Security shows weak overall job creation with significant losses in manufacturing (-2,600); professional & business services (-3,100); leisure & hospitality (-3,500) and government (-4,000).

Illinois’ unemployment rate remained at 5.7 percent in January. However, there was a significant month-over-month increase in the labor force and the number of employed.

Revised data for 2016

Revisions to Illinois’ historical data resulted in an increase in the number of payroll jobs but a decrease in both the size of the labor force and the number of people working. These large revisions occur every year. The Bureau of Labor Statistics revises nearly two years’ worth of payroll jobs data and four years’ worth of household unemployment data each February. The revisions to the payroll jobs data are done to “true-up” the monthly jobs estimates to a more complete jobs data set called the Quarterly Census of Employment and Wages,.

The revised data resulted in Illinois having a better year in 2015 than originally projected, but a worse year in 2016. Illinois’ 2015 jobs count was revised up from a net gain of 51,400 to a gain of 81,600. However, Illinois’ 2016 jobs count was revised down from a net gain of 28,400 to a gain of 18,900. On the whole, the revisions resulted in Illinois having about 20,000 more jobs on net in December 2016 than originally estimated.

The revisions also affected Illinois’ manufacturing sector. Illinois was originally estimated to have lost 11,000 manufacturing jobs on net from December 2015 to December 2016, but that estimate was revised down to a loss of 7,700 manufacturing jobs on net. However, Illinois’ downward trend continued with an additional 2,600 manufacturing jobs lost on net in January 2017.

The annual revisions resulted in Illinois’ workforce being 60,000 people smaller than originally estimated, with the change coming from nearly 60,000 fewer people working in Illinois. This is undoubtedly bad news for Illinois, as out-migration trends have pointed to the fact that working-age adults are leaving Illinois fastest.

Illinois labor force’s 10-year decline

Illinois’ labor force contracted by 52,000 people in 2016. The Land of Lincoln has been in a downward trend for labor force participation since the onset of the Great Recession. Compared to the state’s pre-recession peak, Illinois’ labor force shrank by 210,000 people on net as of December 2016 (and 190,000 people on net as of January 2017).

By comparison, Indiana’s labor force has made a robust recovery since the Great Recession. The Hoosier State’s labor force held steady in 2016, expanding by just less than 2,000 people on net. However, Indiana has seen significant growth since the recession bottom and has surpassed its pre-recession peak by 70,000 people.

Iowa, Wisconsin and Missouri all have larger labor forces compared to their pre-recession peaks, while Kentucky’s labor force is 30,000 smaller than pre-recession levels.

How migration affects the labor force

One of the big differences between the labor forces in Indiana and Illinois is that Indiana has a small net in-migration of prime working-age adults while Illinois has significant out-migration of working-age adults. Illinois’ out-migration of working-age adults is a major cause of a smaller working-age population and thus a smaller workforce.

A Paul Simon Institute poll points to the fact that taxes are the No. 1 reason people leave Illinois. Another big reason Illinoisans depart is for jobs. And the two factors are related – higher taxes leads to fewer jobs.

Illinois needs a growing workforce and a strong economy to make the state more attractive for families and sustainable for government finances. Lawmakers should focus on crafting a balanced budget without raising taxes and creating a regulatory environment that will make Illinois a better place to invest and create jobs.