Cannabis jobs across the U.S. are in decline, but New Mexico and other states with new adult-use markets seem to be doing fine.
A new report from leading cannabis industry job platform Vangst found that there was a two percent drop in cannabis industry employment in 2022. It was the first dip in cannabis jobs since 2012, the first year of legal cannabis in the U.S.
During the same time, however, the industry as a whole saw sales increase by $850 million—totaling $26.1 billion, a three percent increase over the year before—and experts say the relationship between these figures represents a consolidation phase for the industry.
What Is a Cannabis Job?
The legal cannabis industry, combining both adult-use and medical, reportedly supports 417,493 jobs, paying workers more than $26.1 billion annually. The greatest number of workers (31 percent) operate in the cultivation sector, followed by retail workers (23 percent). The third largest sector includes jobs involving legal counsel, marketing, human resources and other ancillary jobs. Processing and manufacturing jobs including extraction technicians, edible makers and packagers made up 17 percent of the workforce. The smallest cannabis sectors include wholesale, distribution and product testing.
Cannabis Jobs Decrease
Sales for cannabis increased across the country as more people gained access to the drug, but pandemic-level demand disappeared overnight. Cannabis business oversaturation from pandemic-related industry optimism led to overproduction and depressed wholesale prices. Retailers must still pay steep taxes despite the loss of value in their products, and many underperforming operators are forced to merge with larger companies or shutter their businesses altogether. Many major companies including Curaleaf Holdings and Trulieve Cannabis laid off workers in 2022.
According to the report, the global investment environment has much to do with the cannabis job dip as well. “A confluence of factors—global inflation, rising interest rates, cooling investor enthusiasm, depressed wholesale cannabis prices, and a shift in post-pandemic consumer demand—challenged the legal industry’s unrelenting growth,” the report states.
The number of jobs in the industry isn’t reliant on sales figures alone. Investment capital is also very important to cannabis companies, and that money just isn’t there when industry pessimism is high. Vangst reports that the prime lending rate was 3.25 percent at the beginning of 2022 and it more than doubled by the end of the year—finishing at 7.5 percent. Investors in private companies reportedly scaled spending back by 50 percent in the second half the year.
The biggest cannabis job losses in 2022 were experienced in the most mature markets. California lost the most jobs—12,600, a 13 percent decrease. The report found that this job slump doesn’t reflect the actual demand for cannabis in the state. “Five years after the first legal adult-use stores opened, the non-regulated market still meets more than half of California’s total cannabis demand. That’s due to a number of factors including high taxes, regulatory costs, and the safe harbor legacy sellers find in opt-out towns and counties across the state,” wrote the report’s authors.
The report criticizes the state for failing to keep up with modern cannabis law reform efforts and allowing municipalities to opt out of cannabis sales.
Marijuana hub Oregon lost 21 percent of its cannabis workforce while Colorado—one of the first states to legalize adult-use cannabis—lost 28 percent of its pot workforce.
Colorado also saw state cannabis sales drop in 2022 as neighboring states, including New Mexico, started their own sales. Residents of these states no longer needed to travel there to buy legal cannabis.
“Colorado’s lost customers didn’t necessarily stop buying legal cannabis. They just stopped buying it in Colorado,” according to the report.
New Mexico Cannabis Jobs Increase
But there is a bright side to this. Newer markets like New Mexico and New Jersey have seen cannabis jobs increase in 2022. New Mexico saw a 63 percent increase in the cannabis job sector—gaining 2,532 new jobs. According to Vangst, New Mexico saw the fifth highest gains in cannabis jobs in the nation.
Topping the list was Missouri with 6,958 new jobs—a 350 percent gain. Missouri began adult-use cannabis sales earlier this year.
These job losses across the cannabis industry are painful, to be sure, but they are actually signs that it is maturing into a more rooted entity in the national landscape. As wholesale prices and product demand level out in states with the oldest markets, the surviving companies and conglomerates will start growing their workforce once again, but at a more natural rate. Those mature markets enjoyed a decade of extra profits based on the novelty of legal cannabis. Their losses were assured when other markets opened.
These losses also mark the end of a novel event: The COVID-19 pandemic. Those gains were highly irregular and can’t be taken to reflect the natural course of the industry. When sales level out again, investors will return and jobs will increase.
Cannabis jobs in New Mexico and other new markets will eventually level out, but they shouldn’t experience the same level of loss that the mature markets endured over the last two years as long as there aren’t any more pandemic-level societal disruptions.
The report’s authors say the industry as a whole will become better at doing more with less in the coming year. “As the softening of demand persists in 2023, look for cannabis companies and investors to be more tactical in their approach to operations. This shift in investment and operator behavior will remain in place for the foreseeable future. Tactical decisions on opening new stores, labor utilization, and investments will persist as the broader economic slowdown continues to affect the cannabis industry,” they wrote.
H/T: abq.news
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