Illinois unemployment rate is worst in U.S.

Illinois added 14,900 jobs in September, but its unemployment rate was the highest in the nation. Inflation and growing recession fears could hit the state harder than most.

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.

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.