Monthly jobs report fails to show depth of Illinois job losses

IDES estimated unemployment rate remains artificially low because it fails to count nearly 238,000 Illinoisans who have given up trying to find a job.

Illinois added 93,200 jobs from mid-June to mid-July, continuing participation in the national jobs rebound from the COVID-19 downturn. The additional jobs now bring the state’s unemployment rate to 11.3%. A much-welcomed improvement, but still well above the national unemployment rate of 10.2%.

While growing payrolls mark signs of a continued recovery for the state amid the sharpest downturn in recorded history, roughly 237,869 Illinoisans remain missing from the state’s labor force due to COVID-19 and associated state-mandated lockdowns (see appendix). Those 237,869 have given up looking for work entirely. Had these Illinoisans been counted in the labor force, Illinois’ unemployment rate would have been 15.1%, 34% higher than the state’s official estimate.

Prime working-age Illinoisans, particularly women, are those who have dropped out of the labor force the most. Ensuring these Illinoisans return to the labor force and find jobs will be essential for the state to have a full economic recovery.

Yet, during an unprecedented downturn that has left record numbers of Illinoisans out of work, state leaders are trying to persuade voters to pass a $3.7 billion tax hike that will especially hit the small businesses that create most Illinois jobs. The July numbers are another step in the right direction, but Illinois is still facing a long road to recovery and must focus on policies that will encourage would-be workers to return to the labor market.

Already, having the nation’s highest state and local tax burden remains a drag on the Illinois economy, so what would happen to the COVID-19 recovery if Illinoisans face another tax increase?

Illinois voters on Nov. 3 have a rare opportunity to decide whether giving lawmakers more power to raise state income taxes will help or hurt the COVID-19 recovery. Economists argue against increasing taxes during a recession, but Gov. J.B. Pritzker so far has put $56.5 million of his own money into a campaign to convince voters his $3.7 billion income tax hike is truly a “fair tax.”

Pritzker’s “fair tax” would increase taxes up to 47% on more than 100,000 small businesses just as they are trying to recover from the COVID-19 economic damage. Lawmakers already set rates for the initial tax hike that would be up to five times greater on small businesses than on large ones, if voters approve. Those small businesses are responsible for the vast majority of new jobs in Illinois.

The COVID-19 shutdowns disproportionately hurt women workers and worsened racial gaps in the Illinois economy. By hurting Illinois’ small business job creators, Pritzker’s progressive income tax will further damage the jobs market and make the recovery increasingly harder.