Illinois loses 1,100 jobs in October, unemployment rate falls largely from workers giving up

Jobs data is giving the illusion of economic recovery in Illinois. The reality is 107,530 workers gave up their job searches, and new COVID-19 lockdowns can only hurt more workers.

While the nation as a whole accelerated its recovery from the COVID-19-related downturn, adding jobs and reducing unemployment rates, Illinois’ recovery has hit a snag.

New data released Nov. 20 by the U.S. Bureau of Labor Statistics shows Illinois lost 1,100 jobs in October, the second consecutive month of job losses despite the continued national jobs recovery. Meanwhile, other data shows while the state’s unemployment rate appears to have cratered in October at 6.8% – on par with the national average – this drop was largely because of the 107,530 Illinoisans who gave up their job search altogether.

Had those who exited the labor force from mid-September to mid-October been counted, the state’s unemployment rate would have been 8.4% rather than the 6.8% reported. While this is a massive difference, the true state of Illinois’ employment picture is likely much worse.

That’s because while the business survey used by the BLS and Illinois Department of Employment Security to estimate total jobs in the state economy shows Illinois lost more than 1,000 jobs last month, the individual survey that is used to estimate components of the unemployment rate estimate that employment in Illinois rose by more than 127,000 in October. The widely conflicting estimates of employment combined with large estimates of labor force dropout suggest the survey estimates used to calculate the drop in the unemployment rate are likely to undergo revisions by next month, as they frequently do, and will ultimately show Illinois’ economy is still struggling far more than the rest of the nation.

Even the current data does not match the positive tone the Pritzker administration has greeted it with in the IDES press release. Leaders claim to “see positive signs that employment is picking back up,” however jobs have declined in Illinois for the past two months, even as the rest of the nation continues to add jobs. Perhaps even more concerning is Illinoisans now appear to be dropping out of the labor force en masse. That is one of the main reasons why the state’s unemployment rate is creating the illusion of recovery.

Although the state economy in general is struggling mightily, some industries have been harder hit than others. The largest losses remain in the leisure and hospitality sector, which is still down 131,600 jobs, or 21% compared to February.

Meanwhile, the educational and health sector remains 63,900 positions (7%) below February levels, the professional and business services payrolls remain 57,000 (6%) below pre-pandemic levels, and trade, transportation, and utilities are still missing 41,000 (3%) jobs.

Many of the industries that remain the most affected are industries that will be most tightly restricted under new Tier 3 mitigation measures that began statewide Nov. 20. New mitigation efforts include restrictions on bars and restaurants, health and fitness centers, hotels, recreational services, and manufacturing businesses. Rising cases of COVID-19 and increased restrictions on economic activity will likely result in further job losses and business closures, as was the case under similar circumstances in the spring.

Making matters worse for already-struggling businesses, Gov. J.B. Pritzker is continuing to pursue new forms of revenue, even after voters soundly rejected his progressive income tax hike Nov. 3. The governor has suggested he may now be in favor of raising the state’s flat income tax or closing “loopholes” to raise more revenue, though exactly which loopholes he is referring to remains unknown. As the state’s economy continues to struggle with the COVID-19 downturn – and to a much greater extent than the rest of the nation – it is imperative lawmakers work to avoid further harm to businesses and jobs.

Fortunately, Illinois voters already did their part and rejected the $3 billion progressive income tax hike on Nov. 3, which would have raised taxes on more than 100,000 of the state’s largest job creators – small businesses. Economists argue against raising taxes during a recession, so lawmakers now must reject Pritzker’s call for a 20% income tax hike on everyone.

Instead, Illinois can improve its fiscal situation and continue to provide core services mainly by implementing constitutional pension reform. There is also the additional possibility of the state receiving federal aid by reforming state finances, if congress adopts the Taxpayer Protection Act.

Rather than just throwing more money into a black hole of pension debt and deficits, constitutional pension reform and the Taxpayer Protection Act would offer overburdened Illinois taxpayers a path to declining debt, lower taxes, more effective state government and a more sustainable recovery.