Urban Wire The Pandemic Is Worsening. Understanding Why It’s Hitting Some States Harder Than Others Will Be Key for Recovery.
Richard C. Auxier
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Coronavirus cases in the United States are at an all-time high. The unemployment rate is decreasing, but the country has only recovered half of the 22 million jobs it’s lost since March. And both the spread of the coronavirus and economic pain could worsen during winter months.

But these headline-grabbing national stories can obstruct one of the most important aspects of this crisis: the severity of the pandemic and associated economic downturn varies significantly across states.

To better understand how each state is dealing with the pandemic, we created a new tool that collects health, economic, and fiscal data for all 50 states and the District of Columbia, showing how each state’s budget and economic conditions are changing during this crisis—and what might be needed for recovery.

States with fewer COVID-19 cases can still have big economic problems

As of November 16, 2020, Vermont had reported 2,843 total COVID-19 cases to the Centers for Disease Control and Prevention. That’s 454 cases per 100,000 people, the lowest rate of any state in the nation.

But Vermont’s private employment is down 10.9 percent since January, the third-highest percentage of private job losses in the country. The leisure and hospitality sector experienced the greatest percentage decline in employment across the state, reporting 35.1 percent fewer jobs over the period.

Vermont's percentage change in private employment from January through September 2020

Alaska, (31st in cases), Hawaii (48th), and Michigan (35th) also have relatively few COVID-19 cases but a high percentage of private job losses (more than 10 percent in each state). The leisure and hospitality sector is the main driver of private job losses in these three states and in most states, regardless of their COVID-19 counts.

Michigan unemployment rate from January through September 2020

Every state has lost private sector jobs this year, but losses are relatively few in states with a low reliance on the leisure and hospitality sector. For example, Idaho has only lost about 1 percent of its private sector jobs since January.

COVID-19-related economic issues can cross borders and exacerbate previous problems

Before the pandemic, states that rely heavily on energy sectors and severance taxes were in trouble because of declining energy consumption (PDF). COVID-19 has supercharged this problem, despite variances in how such states are handling the public health crisis.

COVID-19 case counts range widely between Louisiana (13th highest), New Mexico (30th), North Dakota (highest of any state), and Oklahoma (17th), but each state experienced its greatest percentage of job losses in the mining and logging sector, which includes oil and gas.

This is not the direct result of government restrictions in these states. In fact, North Dakota governor Doug Burgum is one of seven governors who never issued a stay-at-home order to contain the pandemic. But with far fewer people flying on airplanes and many people driving considerably less without work commutes, the oil industry has struggled and laid off a significant number of workers.

States are bracing for tough budget choices ahead

Though the economic news is mostly bad at this stage, a state’s tax revenue might be up, down, or steady since March because revenue changes depend on the coronavirus’s prevalence in a state, a state’s major economic sectors, and its revenue system. Since March, revenue changes range from a 31.0 percent decrease in Alaska to a 10.2 percent increase in Idaho.

More troubling is that most states are projecting revenue losses going forward, with some states estimating losses as high as 10–20 percent in the next fiscal year. And because state and local governments must balance their budgets, revenue drops often turn into budget cuts, and for these governments, budget cuts typically mean job losses.

This is already happening, with all 50 states cutting state and local government jobs since January, with the largest percentage of state and local government job losses in Colorado, Kentucky, Maine, and Nevada (greater than 8 percent in each state). None of these states have relatively high COVID-19 case counts.

Colorado's percentage change in state and local public employtment

States need tailored solutions and targeted federal relief

State policymakers often want to know what has worked in other places, as neighboring states can be both innovators and competitors. However, though other states might provide novel ideas worth emulating, focusing sharply on what makes their state unique—and possibly vulnerable—during this crisis will be most important to developing targeted solutions.

States also need additional federal relief to prevent even more state and local government job losses and economic hardship. But to be most effective, that aid should be formula driven and based on each state’s specific needs.

The coronavirus pandemic is getting worse, and the public health and economic ramifications are being felt across the country. But the severity of that pain is not evenly distributed. The policy response must match that reality.

Safia Sayed and Livia Mucciolo contributed to this blog post.

Research Areas Taxes and budgets State and local finance
Tags COVID-19
Policy Centers Urban-Brookings Tax Policy Center