Friday, January 25, 2008

Michigan’s One-State Recession: Jobs

Originally published at

Stories about the weakening U.S. economy filled the news this week. International stock markets are riding a rollercoaster of fear over America’s slide toward recession.

In Michigan, however, we’ve been suffering what has been called a “one-state recession” for quite a while now. The problems here were an early indicator of things to come for the rest of the nation.

There was a time when an 18 year-old could graduate from a Michigan high school, get a job in an automotive plant, and after a few years, make a six-figure salary with overtime. Those days are gone now.

It isn’t much easier for college graduates either. Sam Harper, chairman of the College Democrats at the University of Michigan in Ann Arbor, will graduate with a degree in political science this May. When asked what issues were most important to young people in Michigan, his answer was matter of fact.

“As a graduating senior”, Sam said flatly, “I’d like to be able to find a job once I get out of school.”

Michigan has lost 400,000 jobs since 2000 giving us the highest unemployment rate in the country. As those jobs leave the state, residents follow. We’re one of two states (along with Rhode Island) that lost population between July 2006 and July 2007.

The exodus of jobs and people means the state has lost needed tax revenue. The result was a $175 billion budget deficit in 2007. Because the state constitution prohibits government spending unless a balanced budget is in place by October 1, Michigan was shut down for four hours at the end of September. The legislature avoided an even more embarrassing situation when lawmakers signed a budget package that kept public services running.

70% of those lost jobs are in the manufacturing sector. Pharmaceutical companies, appliance manufacturers, and yes, automotive companies are among the firms that have instituted massive layoffs.

The North American International Auto Show was in Detroit this week. It’s the automotive industry’s biggest party, where all of the manufacturers show off their new models. Though industry execs were treated to shows by artists like Mary J. Blige and Kid Rock, the smiles were short lived.

General Motors, once the symbol of Detroit’s economic dominance, has led the world in automobile sales since 1931. 2007 year-end figures find the company in a virtual dead heat with Japanese powerhouse Toyota. GM reported global sales of 9,369,524 units, while Toyota sold 9.366 million vehicles (they won’t release more precise numbers).

In 2003 Toyota overtook Michigan’s Ford Motor Company to become the world’s second largest car company. Today, January 24, 2008, Ford offered yet another salary buyout to all of its hourly employees. The corporation is struggling to become profitable again, and one way to do it is to ask employees to leave voluntarily. The question remains, where will those workers go if they choose to leave?

The United States has long been the engine of the global economy, as a manufacturing giant, and as the world’s most ravenous consumer of products and services. Nowadays we’re not building nearly as many products, and the good paying jobs that help support our buying habits are disappearing. This creates a grim outlook for those Americans who are about to enter the workforce after graduating from high school and college in the next four years.

The current international economic crisis isn’t a new phenomenon. If Michigan is any indicator – and history says that it is – the problems could get worse before they get better.


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