State Policy Network
SPN State Job Report: States lagging in total job recovery led in February

February job growth continued across most states, with an interesting flip between the usual set of leaders and laggers. Job growth is occurring across sectors, and even the much-beleaguered leisure and hospitality sector is showing strong gains in recent months.

The February Bureau of Labor Statistics report showed a new set of state job growth leaders for the month, though the relative positioning of states in the total recovery has remained roughly the same. Idaho and Utah remain the only states that have recovered all jobs they lost during the pandemic recession. More states can join them by accelerating reopening policies, enacting pro-growth laws, and wisely leveraging federal funds for long-term growth.

February flip: Struggling states lead in job gains this month

States that have lagged in the total jobs recovery led in February, with California (+141,000), Michigan (+63,500), Washington (+28,700), and Illinois (+21,100) showing the largest jobs gains. Nonetheless, California, Michigan, and Illinois remain in the bottom quarter for job recovery during the entire pandemic. On the other hand, Texas (-27,500) posted the largest job loss on the month, driven by payroll losses in business and professional services and leisure and hospitality. The Lone Star State remains well above average on the broader recovery, however, and has even led the states in job growth over multiple months. On a percentage basis, Michigan had the largest jobs gain on the month (+1.6%) while Oklahoma had the largest loss (-0.7%).

Divergence in state jobs recovery

Idaho (+1.1%) and Utah (+0.5%) are the only two states that have recovered all the jobs they lost during the pandemic recession, with Montana (-2.3%), South Dakota (-2.4%), and Arkansas (-2.9%) closing in. The states that are closer to a full jobs recovery are those that had less economic exposure to the coronavirus and enacted fewer economic restrictions. For example, the economies of Hawaii, Nevada, and Florida are the most heavily dependent on leisure and hospitality as a portion of total payroll jobs. A dramatic reduction in interstate and international tourism caused an outsized loss of total jobs in these states compared to others. However, the worst loss of leisure and hospitality jobs occurred in Hawaii (-40.4%), New York (-34.9%), and California (-33.8%), with New York and California’s losses more likely attributable to harsh state and local policy decisions.

The states furthest from a total jobs recovery are generally those that enacted the most strict economic restrictions and had the greatest loss of leisure and hospitality jobs. Hawaii (-17.8%), New York (-10.8%), Nevada (-10.5%), and California (-9.2%) remain furthest from a full jobs recovery.

States should leverage economic reforms, federal funds, and reopening policies to drive recovery

State and local officials now have plenty of policy levers to pull to drive local recovery. While states await Treasury Department guidance on valid uses of federal funds from the American Rescue Plan Act, they can move forward on safely reopening their local economies, thus helping them recover the staggering job losses in leisure and hospitality and other affected sectors.

Funds from the American Rescue Plan Act will swamp state and local budgets with excess funds for near-term spending. States should leverage these funds towards long-term, pro-growth reforms where possible, accompanied with pro-growth economic and regulatory policies. State policymakers should also focus on an agenda for reforming torts, tax, and cutting red tape to make their recoveries durable. They can create lawsuit protection for small businesses, enact commonsense tax relief to catalyze growth, and make job creation more rapid by cutting through the tangle of red tape that can tie up entrepreneurs and workers.

Categories: News
Policy Issues: Economy
Organization: State Policy Network