Like a patient with a bad fever that brings a rosy-looking glow to the cheeks, Illinois reported a decline of its unemployment rate in July. But don’t pop any champagne corks because this is a terrible sign. The Illinois Policy Institutereports:
Another month of workforce dropout shows Illinois needs a friendlier environment for entrepreneurs and businesses. Illinois’ workforce shrank for the third consecutive month in July, contracting by 33,600 people. This comes in the wake of 35,000 Illinoisans dropping out of the labor force in June, and 8,500 leaving the workforce in May. A shrinking workforce during summer months in Illinois is not surprising, given that summer is prime moving season and previous Bureau of Labor Statistics, or BLS, data show working-age adults driving Illinois’ out-migration. Sustained workforce dropout is the entire reason Illinois’ unemployment rate has fallen to 5.8 percent from the nation’s highest at 6.6 percent in April.
Let this sink in: people are fleeing from Illinois while they can, in the summer moving season, and that is why unemployment is “shrinking.” This graph shows the relationship.
IPI sums up the underlying dynamic:
The unfortunate cycle in Illinois starts with an unfriendly business climate, which breeds joblessness, which in turn drives up the unemployment rate, especially in manufacturing communities. Out-migration and workforce dropout among discouraged workers then drive down the unemployment rate, as those who can’t find good jobs in the Land of Lincoln either quit looking for work or leave for other states with better opportunities. Both of these effects are apparent in Illinois’ workforce dropout and massive out-migration.
But I also think the looming pension crisis in Illinois tells businesses and income-earners that their taxes will continue going up and up, as long as they stay. With outmigration signaling forthcoming weakness in real estate prices, the incentive is to sell now.
This is a tragedy. Illinois ought to what it once was: a leading driver of the Midwestern and American economies. It still owns an unsurpassed crossroads location, its status as the metropolis of the Midwest, and strong positions in many industries.
But the blue model of political economy is killing it. And the decline in unemployment is a bad sign.