• December 10, 2023

An Illustration of Two Economic Recoveries

Allysia Finley and Esther Plecy

May 25, 2021, 9:23 a.m. ET

The nationwide unemployment rate was 6.1% in April, but this masks the huge differences across states. With a few exceptions, those led by Democrats like California (8.3%) and New York (8.2%) continued to experience significantly higher unemployment than those led by Republicans like South Dakota (2.8%) and Montana (3.7%) were listed.

It is seldom that differences due to party control in states are so great. However, current party-political differences reflect different policy choices regarding the duration and severity of pandemic lockdowns and now government benefits such as unemployment insurance.

Nine of the ten states with the lowest unemployment rates are headed by Republicans. The exception is Wisconsin, whose Supreme Court last May invalidated the lockdown of Democratic Governor Tony Evers. The unemployment rate in Wisconsin is 3.9% – just like in Indiana – compared to 7.1% in Illinois, whose Governor JB Pritzker has been slow to reopen.

Jobs are slow to recover from severe lockdowns when companies are permanently closed. There may also be a delayed wave of small business closings once owners have used up Paycheck Protection Program loans. While Congress made the loans forgivable, companies that didn’t spend 60% of the proceeds on payroll will have to pay them back.

This includes many restaurants and personal care services forced to close their doors and lay off workers during the lockdown but still have to pay rent and other overheads. In short, labor market recovery in many states may be slower than it should be.

The restaurant bookings website OpenTable shows that May reservations in Florida were about 20% higher than on the same dates in 2019, but New York was still down 40% to 60%. Miami restaurants have reported booming business, while those in New York City have lost many of their upper-crust customers.

Idaho and Utah have seen recent increases in migrants from other states, according to census data, and have created jobs since January 2020. Most of the states in the Midwest, South, and Mountain West are not far from their suburbs. One obstacle to a faster recovery could be the $ 300 unemployment bonus, which many GOP governors are rejecting.

In the meantime, states with democratic governments continue to reward workers for sitting on the couch. The longer workers remain unemployed, the more difficult it becomes to get them back to work. Don’t be surprised if the geographic breakdown of the economic recovery increases in the coming months.

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