After the boom and bust brought on by the COVID-19 pandemic during 2020-2021, the cannabis industry saw the first-ever recorded decline in full-time cannabis jobs, according to a new report from the cannabis staffing company Vangst.
Published earlier this month, the report, titled “Economic Headwinds Produce an Industry Wide Reset”, details how the cannabis industry is in a state of flux where instead of “go-go investment in business expansion,” there is a major focus in the industry “on bottom-line sustainability - and bringing payroll costs in line with actual revenue.”
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“Call it the great cannabis reset,” Vangst stated.
The report was compiled by Vangst in collaboration with Whitney Economics, and it presents a state-by-state tally of jobs supported by legal marijuana.
According to Vangst, the data “offers a glimpse into the relative health of each state’s cannabis industry, and the importance of legal cannabis - America’s sixth most valuable cash crop - to the national economy.”
The report found that by early 2023, legal cannabis supported 417,493 full-time equivalent jobs in the United States - a drop of 2% from one year earlier. The jobs include 321,361 full-time equivalent jobs in fully legal states and 96,132 jobs in medical cannabis-only states.
The decline in jobs came even though according to the report’s figures, nationwide cannabis sales increased to $26.1 billion in 2022, a 3% rise over the $25.25 billion in 2021. The figures do not include hemp, delta-8, CBD, or unregulated sales.
“An Industry-Wide Reset”
Why the decline? “Over the past year, America’s regulated cannabis industry faced economic headwinds that tested the resilience of every company in the cannabis space. 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. In the past six months, staff reductions have hit nearly every major brand in cannabis.”
The report mentioned the boom that cannabis experienced during the early days of the COVID-19 pandemic in 2020-2021, when “nationwide sales saw a 20% bounce over what might be considered “natural” growth.”
“When the pandemic began to recede in 2022, cannabis demand returned to pre-pandemic levels. That left many companies with staffing levels incompatible with the new return-to-normalcy environment.”
But then if cannabis sales increased by 3% over the past year, why would that result in an employment decline?
The role of Inflation and the global investment climate
The report states that while revenue “is the major factor in any company’s headcount” jobs in the cannabis industry “have historically been sustained by a combination of hard revenue (sales) and investment capital.”
According to the report, the global investment climate played a major role. While the prime lending rate started 2022 at 3.25% it ended at near 7.25%. There was also the end of the “SPAC frenzy of 2021” and the fact that optimism about banking reform, federal legalization, and a booming national market, along with the election of President Joe Biden and a Democrat-controlled congress, all ended in disappointment.
The report states that the result was “an industry-wide reset” with companies that had once hired to expand and grab market share in 2022 “slimmed headcount to bring payroll within the bounds of current and projected revenues.”
What jobs are there in cannabis?
Of the 417,493 jobs, 23% are in retail, 31% are in cultivation, 17% in processing and manufacturing, and 20% are ancillary jobs. Wholesale cannabis workers made up 7%, distribution accounted for 2%, and testing lab workers made up less than 1 percent, or around 2,500 people nationwide.
The three states that saw the largest increase in jobs were Missouri at 350% growth, New Jersey at 133%, and Montana at 67%.
Meanwhile, the states that suffered the biggest job losses were Oklahoma at 37%, Colorado at 28%, and Oregon and Nevada at 21%. In California alone, the number of lost cannabis jobs was 12,600, according to the report.
The report argues that the job gains that were seen in emerging and newly legal cannabis states like New Jersey and Missouri were offset by losses in mature markets like Colorado, Oregon, and California.
The report links this decline at least in part to the opening of newly-legal states where customers can purchase marijuana legally.
"Consumers in nearby states — New Mexico, Arizona, Nevada, Oklahoma, and Montana — no longer need to travel to experience the thrill of purchasing regulated cannabis. Colorado’s lost customers didn’t necessarily stop buying legal cannabis. They just stopped buying it in Colorado.”
Where will there be cannabis job growth?
The report does end on an optimistic note. It states that after the “reset of 2022”, hiring should open up in the second quarter of 2023, as wholesale prices in mature markets find a more solid footing and established companies experience steady, single-digit growth.
The report also expects hiring to rise dramatically in new and emerging markets over the course of 2023.
Missouri, where adult-use cannabis stores opened in February 2023 “may be the hottest cannabis job market in the country right now,” according to the report.
The report also describes “consumer equilibrium” in the nation’s most mature markets - California, Colorado, and Washington. According to Vangst, as companies migrated to the legal market over the nine years, legal sales have steadily risen in those states, only to see its first-ever decline in annual sales in 2022.
Vangst states that those declines aren’t expected to occur in 2023, and that job growth in those states should reach a steady pace in the single digits.
The report states that California is the nation's biggest market and cannabis employer, but the legal market only answers half of the consumer demand in the state. If the legal market can attain 90% of cannabis demand, it would grow the state’s industry to $9 billion to $11 billion resulting in more than 130,000 jobs, instead of the state’s 83,593 full-time jobs in February 2023. Such a market share for legal cannabis in New York would mean a market worth $4 to $5 billion, and 65,000 full-time jobs, according to the report.
Other states cited as having major job growth potential if legal cannabis attains a 90% market share include New Jersey, Virginia, Maryland, Missouri, Rhode Island, and Connecticut.
Major Growth Expected in 2024
Arguably the rosiest prediction in the report is saved for the end.
The report states that Whitney Economic predicts 11.8% growth in cannabis sales in 2023, followed by 20% growth nationwide in 2024 to $35.1 billion. The report also predicts that by 2030, legal cannabis sales in the U.S. will reach $79.5 billion annually.
In the meantime, throughout 2023, the Vangst report predicts that cannabis companies will continue to look for efficiencies. There will be a major emphasis on “tactical decisions” when it comes to opening new stores, labor utilization, and investments, according to the report.
And as is often the case in tough times, cannabis companies - like companies in other industries - will look for ways to “do more with less.”
