July Monthly Briefing
ILLINOIS UNEMPLOYMENT AND WAGE UPDATE
Eric Noggle, Senior Revenue Analyst
For most of FY 2020, jobs in the State of Illinois were at decade high levels. In fact, according to the Bureau of Labor Statistics, Illinois reached a historically low unemployment rate in February 2020 with a seasonally adjusted rate of 3.4%. But things abruptly changed with the onset of the COVID-19 virus. Within two months, Illinois went from a historical low unemployment rate of 3.4% to a historical high rate of 17.2% in April 2020. As shown in the table on the next page, this abrupt contrast between extremes was seen in states all over the country. All but three states reached record high unemployment rate levels in the Spring of 2020.
While unemployment levels have improved somewhat over the last couple of months, the rates remain at historical high levels. The latest figures (June 2020, seasonally adjusted) show Illinois with an unemployment rate of 14.6%. Although Illinois is far from alone in this dramatic change in unemployment, the State’s June 2020 rate is notably higher than the U.S. average of 11.1%. Illinois’ rate of 14.6%, ranks as the 45th highest rate in the country.
ECONOMY: NO INTEREST HIKES FOR A WHILE
Julie Bae, Pension Analyst/Economic Specialist
In response to the crisis, the Fed cut its target interest rate, the Federal Funds rate, twice in March to near zero to support the economy. Prior to the Pandemic when the economy was in the longest expansion in U.S. history, the Fed’s benchmark interest rate had gradually increased to a range of 2.25% and 2.50%. After the two rate cuts in March, the Fed decided to continue to maintain the rate to a range of 0.00% and 0.25% in July, as widely expected. This is a typical example of how the Fed achieves their goals to promote a strong U.S. economy, which are “maximum sustainable employment, stable prices, and moderate long-term interest rates.”
REVENUE: DELAYED TAX DAY DEADLINE BOOSTS JULY INCOME TAX RECEIPTS-GAINS PARTIALLY OFFSET BY WEAKER TRANSFERS AND FEDERAL SOURCES
Jim Muschinske, Revenue Manager
Base July general funds revenues grew $752 million overall. An expected gain of $1.255 billion from income tax related to the delayed July 15th filing deadline was the primary driver of the surge. Comparatively lower transfers into the general funds, along with a falloff in federal sources, served to offset much of the income tax increase. July had the same number of receipting days as the prior year.
As a consequence of policy decisions related to COVID-19, the usual April 15th income tax filing deadline was moved back to July 15th, both at the Federal as well as State level. As discussed in the Commission’s May 2020 revenue estimate update, it was estimated that as a timing consequence of that filing date change, approximately $1.3 billion of FY 2020 income tax receipts would instead fall into the first month of FY 2021. While a component breakdown is not yet available, it appears that value estimation has been confirmed as net income tax receipts grew $1.255 billion in July.