Union power vote, population loss threaten Illinois’ labor market recovery

Key indicators show Illinois’ labor market could begin adding jobs faster than the national economy if population decline and Amendment 1 don’t derail the state’s trajectory.

Illinois may be ready to finally recover the jobs lost during the COVID-19 pandemic, but two threats loom: population loss and a vote to enshrine the nation’s most extreme labor union powers in the Illinois Constitution.

Since the onset of the economic recovery from the COVID-19 pandemic, Illinois’ labor market has lagged the national average. Although the national economy suffered a slightly worse decline in employment in early 2020, the rest of the nation has been able to make a much quicker employment recovery than Illinois. For example, national payrolls shrank by 14.4% from their 2020 peak to their trough in April 2020. Illinois payrolls fared marginally better, losing only 13.5% of the jobs from January-April 2020.

Since the recovery began in April 2020, the national economy has added jobs 23% faster than Illinois. The substantially quicker U.S. recovery means Illinois is still missing more than three times as many jobs as the national average, with payrolls down 2.5% in Illinois and only 0.8% for the nation.

The laggard recovery has left Illinois battling the sixth-highest unemployment rate of any state. Yet key indicators are now signaling Illinois’ labor market may be primed to make up some ground on the national recovery.

Illinois’ job opening rate has risen from one of the lowest in the nation to now match the national average, while hiring and separation rates in Illinois have remained on par with the rest of the nation for the better part of a year, according to new Job Opening and Labor Turnover Survey data from the U.S. Bureau of Labor Statistics.

Job creation in Illinois has exceeded the rest of the nation during the past six months. Much of that can be attributed to Illinois’ strong October jobs report, but Illinois’ pace of job creation has matched or exceeded the national average in three of the past six months.

With the surge in Illinois’ job opening rate during the past several months coupled with hiring and separations rates that remain on par with the rest of the nation, Illinois’ labor market should be expected to continue to make progress towards a full employment recovery. It should enjoy stronger job creation than the rest of the nation, especially because the state is missing significantly more jobs.

But several factors could jeopardize the recent progress.

First, the rest of the nation’s labor force has essentially made a full recovery but Illinois doesn’t have enough bodies.

Illinois is still missing more than 94,000 labor market participants. Many of those missing are likely to remain out of the labor force indefinitely, or have moved from Illinois to other states. Illinois lost over 120,000 residents to other states from mid-2020 to mid-2021, a record for the state. Many of those are believed to be Illinoisans of prime working age. With many potential labor market participants choosing to remain on the sidelines or leaving the state altogether, Illinois could struggle to find qualified employees to continue to fill vacancies.

While demand for employees and a large pool of still-unemployed workers will likely be enough to continue driving Illinois’ current labor market recovery, population decline – particularly among those of prime working-age – threatens the long-term stability of the state’s labor market.

Second, Illinois politicians and public employee union bosses are pushing Amendment 1, which is on the Nov. 8 ballot. The proposed change would enshrine union powers in the Illinois Constitution – a move no other state as been willing to grant a special interest group. It would cause permanent damage to job creation in Illinois. Even just the uncertainty over the status of the amendment and whether voters will approve it could affect job creation, as policy-related uncertainty is associated with lower economic growth.

Amendment 1 would grant unions the ability to bargain over virtually limitless subjects, including the ability to override state law through their contracts. It would guarantee taxpayers and lawmakers would have an extremely difficult time reversing course.

Should Amendment 1 pass, Illinois’ $317 billion pension debt will continue to balloon as state and local taxes, which are already among the highest in the nation, rise in an attempt to keep up. Spending on vital public services will 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.

Illinois needs reform that will control the state’s cost drivers and deliver the services taxpayers expect for their dollars. Amendment 1 ensures those challenges will increase.