250,000 Michigan jobs may be gone forever, despite economic rebound

Judging by the past few years, Michigan’s economy has come roaring back from the Great Recession. Unemployment has dropped dramatically, the state has added roughly a half-million jobs since 2011 and auto companies have posted record or near-record sales for several years in a row.

But that upbeat narrative masks the deep trough that Michigan fell into during its lost decade of the early 2000s. It is yet to fully climb out — and may never.

Donald Grimes, an economist with the University of Michigan, said something vanished forever when the domestic auto industry imploded and Michigan shed jobs for 10 years in a row.

“That was a permanent adjustment of the auto industry to the loss of its monopoly power,” Grimes said of 2001-10. “We’ll never get back to where we were in the year 2000.”

Statistics bear that out. Michigan hit peak employment in 2000 and today, despite recent growth, remains about 250,000 jobs below that mark.

The decline mirrors a slide in Michigan’s labor force participation rate, the percentage of adults either working or looking for a job. That rate dropped from 68.7% in 2000 to 61.4% in 2017, a decline more severe than the national average.

Too young to retire, unable to work

One way to focus on Michigan’s long-term challenges is to zero in on that “missing” 250,000 or so jobs that existed in 2000.

Of those quarter-million Michiganders no longer working or looking for work, many were baby boomers who have aged into their retirement years. Some others went back to school or became stay-at-home caregivers.

But many others, at least 60,000 or so in recent years, found themselves too young to retire but no longer able to work because of injuries on the job or other health concerns and now live on Social Security disability payments.

Those who suffered injuries may be a bigger cohort than many believe. The number of Michiganders receiving Social Security disability payments in the state shot up from 209,539 in the year 2000 to 273,999 in 2016, the most recent year data is available. The biggest increase came during and immediately after the Great Recession.

These disabilities often fall on the working class of Michigan — men and women for whom lifting and carrying heavy loads or working in hazardous conditions remains an unavoidable part of daily life.

Among them:

Theresa Peete of Detroit served as a custodial worker for Detroit Public Schools for 27 years. She cleaned classrooms and moved furniture and other equipment. When DPS outsourced its custodial staffers, she lost union protection. When she got injured on the job, the cumulation of years of handling heavy loads without proper equipment, she eventually had to go on Social Security disability.

“I had surgery on my arm and surgery on my knee, and they’re after me to have hip surgery,” Peete said. At age 56, she lives with her daughter and collects $1,300 a month from Social Security disability.

Thom Kolar, 58, of Hartland in Livingston County used to work as a crew chief on the midnight shift at a local Meijer. Years of repetitive lifting damaged his dominant right arm. After two surgeries and years of failed attempts to regain full use of the arm, Kolar now collects disability payments.

“I have an 11-inch scar from the base of my thumb halfway up my arm,” he said. “I can pick up a gallon of milk but I can’t pour it. I look like a 2-year-old. ... I was in my early 50s when all this was happened. There isn’t anybody who’s hiring anyone to make any kind of money without being able to lift 40 or 50 pounds, and I can’t do that even on a part-time basis.”

Billy Phillips was 50 and working as a machinist in an auto body styling shop when he broke his left arm in an industrial accident. The break was so severe that surgeons had to screw and bolt the arm back together.

Today, Phillips, 62, of Taylor still has limited range of motion with the arm and numbness in his hand from nerve damage whenever he tries to use it. He lives on Social Security disability and a small pension and his wife works.

"After I got hurt, I went down and signed up for unemployment and I tried to get a job," he said. "Everybody I talked to wouldn’t accept me because of my disability. Nobody wanted to be responsible for me working in their environment. Nobody’s very accommodating. Makes it hard," he said.

Johnny Beavers worked 22 years for the Budd Co., the former auto supplier that used to operate near Mack and Conner on Detroit’s east side. He rose from the production line to a group leader, overseeing the creation of door panels and other parts for the likes of Ford and other automakers.

Budd filed for bankruptcy in 2014 and the Mack Avenue operation closed.

“That snatched my livelihood out from under my feet,” Beavers said. “I was 22 years into a 30-and-out contract and not able to find another job that’s comparable.”

Going to work at much lower pay for a highway towing company, Beavers suffered a broken back in a traffic accident on the job. At 54, he collects about $2,000 per month from Social Security disability and sees no prospect of going back to work.

“My tailbone is out of place and it’s never going to be too good,” he said. “Weather like this, it only makes it worse. I work with a therapist, do what I’m supposed to do, eat what I’m supposed to eat. It’s good days and bad days.”

Perhaps because of Michigan’s heavy reliance on the manufacturing sector, the population on Social Security disability rose faster here — 20% since the start of the Great Recession — compared with 12% for the nation at large.

And, of course, much of the burden of economic hardship falls on those who have the fewest skills. In the U.S. in 2016, those with a bachelor’s degree or higher saw an unemployment rate of 2.7%; for those with less than a high school diploma, the rate was 7.4%.

But there are many reasons why Michiganders are not working, including taking buyouts in their 50s and stretching their pensions, or mid-career people going back to school, becoming stay-at-home caregivers or having sufficient assets to devote themselves to something besides a job.

Liz Smith Yeats, 54, of Troy spent the first decade of her career in commercial banking with the old NBD bank and working as a financial consultant. But since her early 30s, she has spent the bulk of her time volunteering with Rotary, the international service organization.

She recently served as Rotary's district governor in Detroit and this year will produce two major conferences, one in Chicago and one in Toronto. She's able to devote her time to volunteerism since her husband's career as an engineer with General Dynamics supported the household.

"The whole doing stuff not for money makes me more generous, I think," she said. "If you and I agree I'm going to do a job for you and it’s $100, when I feel like I’ve done $100 worth, I’m over it, don’t want to do any more, that’s all there is. If it’s my gift to you, I will work till the very end to make it as perfect as possible."

Michigan rank is slipping

A smaller workforce is only one marker of Michigan’s economic identity today. Ranked by total economic output, Michigan’s economy has slid from ninth place among the 50 states in 2005 to 12th place today. Georgia, Massachusetts and North Carolina all blew past Michigan in a faster growth lane over those years.

Two more states — Virginia and Washington — are poised to pass Michigan and drop the state to 14th place for the size of the state economy.

The crucial question facing Michigan now: Which vantage point — the recent boom or the longer-term slippage — better predicts the future?

Many economists take the glass-half-full perspective. The state’s unemployment dropped from more than 14% during the Great Recession to a low of 3.7% last July and 4.7% in December. Auto companies are selling huge numbers of trucks and SUVs.

“Michigan has recovered to its sweet spots pretty well,” said Jim Robey, director of regional economic planning services for the Upjohn Institute for Employment Research in Kalamazoo.

But U-M's Grimes said that without boosting talent or the appeal of cities or other areas that need improvement, Michigan will have to accept its status as a less powerful economic player than in past years while other states move past it.

“You’re talking about a state that’s going to do a little better or worse than the national average,” he said. “Right now, we’re doing a bit better, and that’s a credit to some of the changes that have been made in the state. But I don’t think there’s any way we can ever get back to 2000.”

Michigan's decades-long economic challenge remains: Diversifying its economy to position the state for faster growth.

“We’re way too auto- and auto food chain-dependent,” said John Austin, director of the Michigan Economic Center, a think tank affiliated with the nonprofit Prima Civitas Foundation.

“Even with innovation assets in the array of fast-growing, emerging sectors, we have not leveraged them or seen as much growth as we should or could. We can be a leader in all these fast-growing areas and we need to push that along. Other places are fueling it even more aggressively that we are.”

Where the jobs went

Of the “missing” 250,000 jobs that no longer exist, many disappeared from the muscle side of Michigan’s workforce — manufacturing and construction.

Michigan’s factories employed nearly 900,000 workers in 2000. That total collapsed during the Great Recession when Michigan lost almost half its manufacturing jobs, down to 454,900 at the depth of the recession. Manufacturing jobs rebounded to 607,000 by the end of 2017, but that remains far below its peak level.

Construction jobs also took a huge hit during the recessionary years and have yet to fully recover. Back in the early 2000s, contractors were building upward of 15,000 new single-family houses each year on the suburban fringes of metro Detroit. The state’s construction industry employed a little more than 200,000 workers at that time.

Then the national real estate crash curtailed that suburban sprawl. Today, fewer than 6,000 new single-family houses are built each year in metro Detroit, and the industry employed 165,000 at the end of 2017. That was an improvement from the depths of the recession, but still far below its peak years.

Some industries have fared better than others in Michigan. The big winners have been the education and health care sector, which added jobs even during the Great Recession. As of the end of 2017, that sector accounted for 675,000 Michigan jobs, fully a third more than the 502,100 workers in that sector back in 2000.

Professional and business services, such as architects, auditors and engineers, often called the knowledge jobs of the future, also showed an increase. They rose to 677,000 jobs at the end of 2017 compared with 651,100 back in 2000 as Michigan slowly shifted toward a more service-oriented economy.

The path forward

While Michigan’s economy is growing nicely now, faster than the nation as a whole these past few years, with unemployment down and production levels rising, another setback remains a danger.

If President Donald Trump carries out his threat to cancel the U.S. participation in the North American Free Trade Agreement in a “hard” exit,” UM economists predict the loss of several thousand more jobs in the state.

And if Michigan loses the race to produce autonomous vehicles — if either tech companies in California or foreign automakers capture the lead — that, too, could further erode Michigan’s economic competitiveness.

So what should Michigan do?

Diversification of the economy — something Michigan has worked on for decades — needs to continue and accelerate.

And Michigan must continue to enhance the attractiveness of its cities, given how important “walkable urbanism” is to attracting tech-savvy workers today who want to live in exciting cities. That could mean investing more in public transportation or increasing the amount of state revenue sharing sent to cities.

Mostly, though, a range of leaders and economists talk about talent. Michigan’s lagging position in the race for talent was made brutally clear in January when Amazon cited talent as the key reason it left Detroit off its list of 20 finalist urban areas for its second headquarters.

As the Free Press has reported earlier, of Amazon’s 20 finalist cities, only Miami boasts a lower percentage than metro Detroit of young people with bachelor's degrees or higher. (Data for Toronto, the only non-U.S. city on Amazon’s list, was not available).

Gov. Rick Snyder cited Amazon’s decision in his recent State of the State address and said he plans to unveil a “Marshall Plan for Talent” soon to boost skill levels in Michigan.

“This is going to lay the groundwork for a new way of producing talent in Michigan,” Snyder said. “It will lead the world in this thought process. It’s going to prepare Michigan students to invent the future and prepare for what comes next.”

Talent, attractive cities, public transit, better schools — Michigan needs to taken an "all-of-the-above" approach to economic reform. How well it does that will determine whether the state ever gets back all its lost jobs.

Contact John Gallagher: 313-222-5173 or gallagher@freepress.com. Follow him on Twitter @jgallagherfreep.