As We Head Into 2022, Employment In These States Has Recovered

Almost two years later, Covid-19 continues to disrupt our lives. Since the pandemic started, states have implemented different policies in response to Covid-19. Mask mandates, bans on large events, school closures, and vaccine requirements have all varied across states. Yet despite the disruptive effects of the virus and state policies aimed at reducing its spread, employment data just released by the Bureau of Labor Statistics (BLS) shows that some state labor markets have already recovered as we head into 2022.

The latest variant, omicron, appears to be more transmissible than earlier variants but also less dangerous. This has not stopped some countries and U.S. states from imposing new restrictions on their residents: Norway banned alcohol sales in bars and restaurants to discourage people from going out, while California reinstituted its indoor mask requirement. New rules and restrictions from other state and local governments are sure to follow.

Recent research finds that government actions meant to reduce the spread of Covid-19 also reduced economic activity. Erik Randolph of the Georgia Center for Opportunity used a Covid-19 response tracker maintained by Oxford University that tracks the actions state governments took to slow the spread of Covid-19 to estimate the impact such actions had on state employment. He finds that states with more severe government restrictions had 0.5% to 1.3% less employment in the spring and early summer of 2021 than states with less severe restrictions. For context, in March 2021, a 1.3% drop in national employment would have meant just over 2 million fewer jobs.

Despite the disruptions caused by the virus and governments’ responses to it, several states have returned to or exceeded their pre-pandemic levels of employment. The figure below shows the difference in non-farm employment in each state from February 2020 to November 2021 using new data on state employment from the BLS.

As shown in the figure, Arizona (+10,200), Arkansas (+2,200), Idaho (+16,000), and Utah (+44,100) had more employment in November 2021 than in February 2020 before the pandemic started.

Meanwhile, California and New York had over 750,000 fewer jobs than before the pandemic. California and New York have also implemented some of the harshest Covid-19 restrictions. Pennsylvania and Illinois had over 250,000 fewer jobs, and several other states remain at least 100,000 jobs short.

State and local officials have some tough decisions to make over the coming months as the omicron variant spreads. Many state labor markets are still in bad shape, and a new round of restrictions, mandates, and shutdowns will cause further damage to people’s livelihoods. It is understandable that public officials want to slow the spread of Covid-19, but decisions to shut down restaurants and bars or to require people to be vaccinated before entering businesses have economic costs that must be considered as well.

In addition to rethinking Covid restrictions, there are more fundamental reforms states should implement to improve their labor markets. Reducing red tape and reforming occupational licensing rules make it easier for businesses to expand and hire more people. Idaho eliminated or simplified 75% of its regulations and now has one of the country’s strongest labor markets.

Arizona has been a leader in occupational licensing reform. The state recognizes all out-of-state occupational and professional licenses, meaning new residents do not need to go through the hassle and cost of obtaining a new license. There is more Arizona can do, such as reduce requirements or eliminate licenses for jobs that do not pose safety concerns, but like Idaho its labor market is thriving.

Whatever officials across the country decide to do regarding Covid-19, they should be clear about the endgame. Eradicating Covid-19 is unlikely at this point, even though some countries, such as China, still claim “zero Covid” as a goal. It is more likely that Covid-19 will be endemic, like the common cold and flu, meaning we will have to learn to deal with it going forward.

Current vaccines work against omicron, especially third doses or boosters, and several therapeutics have been approved to treat Covid-19 with others on the way. Our health care system has adapted, and doctors and nurses better understand how to treat Covid patients.

Given the availability of vaccines, new therapeutics, the cost of government restrictions, and the inevitability of Covid existing for the foreseeable future, state and local officials should think twice about imposing new restrictions on their economies.

*An earlier version of this article listed Vance Ginn, Elena Pesavento, and Dean Stansel as the authors of the GCO study. They were advisors, not authors. The article has been updated.