Every time new numbers come out about the growth of the cannabis industry, the context has to be: just imagine what these numbers would look like if weed were actually legal at the federal level.
Leafly last week released its annual jobs report, which shows that even with the Covid-19 pandemic and resulting economic slowdown, the numbers are even more eye-popping than in other years. At the end of 2020, 321,000 cannabis workers were employed in the United States, up from 243,700 in 2019. That means jobs in the legal cannabis sector jumped by 32 percent, which, as Leafly noted, is “an astonishing figure in the worst year for US economic growth since World War II.”
The sector grew by 41 percent in 2018, but this year’s growth can be interpreted as more impressive, given the challenges the industry faced. The next year, 2019, saw growth of “only” 15 percent. That growth came during a year when many observers were wondering if the industry might actually start to shrink.
As we see now, the problems of 2019, were not structural, but mostly due to poor business decisions, overinvestment and bad or misguided public policy. Demand for weed climbed, even as companies like MedMen and Tilray saw their stocks nosediving. Many smaller outfits, particularly in California, dealt with overregulation and high taxes in an industry where profit margins are already slim.
This past year can be viewed as a retrenchment. Companies across the sector redirected resources toward dealing with the pandemic, a lot of the profligate spending stopped and expansions were put on hold. In fact, much of the job growth is attributable to states legalizing weed for either recreational or medical use in recent years.
Legal cannabis workers in the United States today outnumber electrical engineers, EMTs and paramedics, or dentists, Leafly notes. That’s an interesting factoid, though not precisely comparable, since the report counted all cannabis workers, including ancillary ones like accountants and publicists.
Even so, the growth is real. Leafly’s data shows the industry, after growing by 71 percent through 2020, took in $18.3 billion in revenue.
That approaches the size of the recorded-music business, which booked about $20 billion in 2019, according to the Recording Industry of America. It’s also nearly as much as the U.S. coal industry reported in 2020, according to Statista. The shrinking coal business employs only about 42,000 people now—just 13 percent of the cannabis industry’s workforce, according to the Bureau of Labor Statistics.
After just a few years, the legal-weed business—despite enormous crimps on growth—is already nearly one-sixth the size of the craft-beer industry, which last year took in about $118 billion. That stands as proof that the industry has the potential to become a major economic player in the years ahead.
Given the huge growth in revenues, the jobs numbers might comparably seem a bit anemic, but Leafly traces the problem in part to the woes of 2019. “Investors were frightened off by less-than-spectacular returns on Canadian investments at the one-year anniversary of federal legalization up north,” the report says, referring to Canada.
“Canadian investments” include many publicly traded companies that are in reality based in the U.S. Those companies list their stock in Canada because weed is federally illegal there, and it’s nearly impossible for a cannabis company to get listed on an American exchange.
New investment had essentially vaporized by last March, when the pandemic hit hard. In some cases, the report noted, companies wanted to hire new people, but Covid-19 restrictions made that impossible. That may indicate pent-up demand for workers, which will be satisfied once we get through the pandemic.
The growth in cannabis will likely continue for years as more states choose legalization, but the real spike in growth will happen only after the federal government decides to legalize weed.
That change would allow companies to trade across state lines, to list on American stock exchanges and, perhaps most importantly, to obtain banking services. For now all of that remains a challenge at best for most weed companies.