Monday, December 06, 2021

America’s Two-Track Jobs Recovery

By Editorial Board | The Wall Street Journal

Now Hiring' signs are seen in Bloomsburg, Pa., Nov. 7. - PHOTO: PAUL WEAVER/ZUMA PRESS

Lockdowns and other harsh government measures don’t stop Covid, so why is the White House still trying to defend them? “Stronger COVID measures produce STRONGER ECONOMIC outcomes,” White House chief of staff Ron Klain tweeted Wednesday. “That’s why jobs, growth and economic activity are UP this year, significantly over last year.”

Egad. Jobs and economic growth have rebounded as vaccines became widely available and Democratic-led states finally lifted their destructive lockdowns. But lockdown states continue to suffer high unemployment while Republican-led states that maintained many fewer restrictions have almost fully recovered.

It’s clear from the numbers, if you’ll bear with us. The Labor Department recently reported that the unemployment rate in October hit the lowest on record since 1976 in West Virginia (4.3%), Georgia (3.1%), Oklahoma (2.7%), Utah (2.2%) and Nebraska (1.9%). Vermont (2.8%), Idaho (2.8%), South Dakota (2.8%), New Hampshire (2.9%), Alabama (3.1%), Montana (3.1%), Wisconsin (3.2%) and Indiana (3.3%) are close to their pre-pandemic rates.

In some of these states, many unemployed have dropped out of the labor force, which has reduced their unemployment rates. But the labor force has grown in Idaho, Oklahoma, South Dakota, Utah and Wisconsin as well as some others. All these states have GOP governors and legislatures, with the exception of Wisconsin (Democratic Governor) and Vermont (Democratic legislature).

Nine states, on the other hand, have unemployment rates above 6%—California (7.3%), Nevada (7.3%), New Jersey (7%), New York (6.9%), New Mexico (6.5%), Connecticut (6.4%), Hawaii (6.3%), Michigan (6.1%) and Alaska (6.1%). All have Democratic government trifectas save Michigan (GOP legislature) and Alaska (GOP Governor and legislature).

While payroll jobs nationwide are 2.7% below their pre-pandemic peak, Utah and Idaho have exceeded theirs by 3.5% and 1.6%, respectively. Arizona (-0.2%), Texas (-0.5%), South Dakota (-0.7%), Nebraska (-0.8%), Alabama (-1.2%), Arkansas (-1.2%), Montana (-1.2%), Georgia (-1.3%), Tennessee (-1.7%), South Carolina (-1.8%) and Florida (-1.9%) will do so soon.

By contrast, New York (-8.2%), Pennsylvania (-5.4%), Michigan (-5.1%), Massachusetts (-5.1%), California (-5%), New Jersey (-4.8%), Connecticut (-4.7%) and Illinois (-4.7%) will take much longer to recover the jobs they lost, if they ever do. The New York City (-10.1%), San Francisco/East Bay (-7.4%) and Los Angeles (-6.6%) regions have even further to go.

There are about four million “missing” jobs since February 2020 in the 23 states with Democratic governors versus 1.3 million in the 27 with GOP governors even though they have only 15% more population. (State and national data don’t always align.) Incredibly, the missing jobs in California, Illinois and New Jersey exceed all those in the 27 GOP-led states combined.

What explains this startling dichotomy? One obvious culprit is the extent of lockdowns. Democratic governors tended to favor extensive lockdowns that were especially hard on small businesses. Population migration has also reduced the demand for services. Many offices in New York and San Francisco haven’t fully reopened, so hospitality jobs that depend on them haven’t returned.

Yet there are also many more missing workers in leading lockdown states. Florida’s labor force has expanded 1.2% during the pandemic while California’s has shrunk 2.1%. There are 950,000 fewer employed workers in California than before the pandemic versus 12,000 fewer in Florida. Put another way, California is missing 40 times more workers than Florida, adjusting for population. This is one reason ships are backed up in Los Angeles, where the unemployment rate is still 9.4%, though the labor force has shrunk by 120,000.

Government payments also reduced the incentive to work. Most Republican-led states withdrew expanded pandemic unemployment benefits by early July but they didn't lapse in Democratic states until Labor Day. California’s eviction moratorium didn’t expire until October, and Democrats have offered to pay 100% of the back rent for tenants dating to April 2020. The Golden State this summer also sent $1,100 checks to lower-income families.

We wish this partisan distinction didn’t exist, but the pandemic heightened the economic policy differences between the two political parties. The states have provided a market test, and GOP policies won. Mr. Klain is taking credit for the pandemic policy results in Florida and Georgia, not in New York or California.