Economic Development

GRBJ 30th Year: There is no quick recovery from recessions anymore

Even so, per capita income here is way up compared to 30 years ago.

September 13, 2013
| By Pete Daly |
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As awful as the recent Great Recession was, West Michigan doesn’t look too shabby when comparing the per capita income of now to 30 years ago.

At that time, according to Gregg Dimkoff of Grand Valley State University’s Seidman College of Business, per capita income was $11,700 for the Grand Rapids/Wyoming MSA.

“Today, it’s about $38,000,” said Dimkoff, adding that even when factoring in the inflation rate, it still is a doubling of income — and one may assume that means the standard of living is much higher now.

Dimkoff, a finance prof who has been closely watching West Michigan business for almost 40 years, said that, 30 years ago, “people called us the Furniture City.” The nickname arose after the Civil War when the area grew to be the center of U.S. furniture manufacturing. Although residential furniture production began to relocate to North Carolina by World War II, office furniture after the war took its place, notably with “the Big Three”: Steelcase, Herman Miller and Haworth. However, area office furniture manufacturing also began to shrink at least two decades ago and “has been slowly going away,” said Dimkoff.

GRBJ 30th Year

For years, Steelcase was the largest employer in the region, tied closely with General Motors. Dimkoff believes Steelcase once employed an estimated 10,000 here, but today, according to The Right Place, Steelcase has 3,227 employees and ranks 15th. Its numerous plants on Eastern Avenue between 36th Street and 44th are no more, and Herman Miller now is ranked higher at 14th with 3,300 employees.

The largest employer in the region now is Spectrum Health with 19,100 employees, and No. 2, according to The Right Place, is Axios Inc., with 8,000. It is an employment placement business, mainly providing temps. In third place is Meijer Inc. with 7, 725 employees.

General Motors closed most of its West Michigan facilities, some prior to and some during the worst of the recession, and now has just 550 employees in the Burlingame Avenue plant in Wyoming. The end of production in May 2009 at the iconic GM Stamping Plant in Wyoming in the wake of GM’s bankruptcy was a huge shock to the community. More than 1,500 people were working at the plant, which opened in 1936 and was the largest property taxpayer in the city of Wyoming, contributing more than $1 million a year to the city treasury. Today, the 2-million-square-foot plant is gone and the cleared site is under new ownership. The city is desperate to find “advanced manufacturing” companies to locate there.

The Kalamazoo region has had a long history of manufacturing, ranging from paper mills to metal manufacturing to pharmaceuticals. Led by Upjohn, pharmaceuticals were a key source of highly paid employment for the thousands involved in drug research and development.

The seeds of change were planted in 1995 when Upjohn merged with Pharmacia, a Swedish company, becoming Upjohn & Pharmacia. According to Dimkoff, Upjohn had been experiencing a downturn caused by a few blockbuster drugs coming off patent protection and a lack of new drugs in its pipeline. At the time, it was the biggest employer in the Kalamazoo area with more than 7,000 employees — “more than 20 percent of total employment in the Kalamazoo area,” he said.

“Things turned bad in 2003,” said Dimkoff, when Pfizer, a New York-based pharmaceutical giant, acquired Pharmacia. Pharmacia employment in southwest Michigan was about 6,000 at the time, but Pfizer immediately bought out 1,200 workers and followed that with more buyouts in 2005. By 2010, Pfizer employed 2,800 in Kalamazoo; that number is up to about 3,000 now, said Dimkoff.

“I’m not sure about the reasons for the drop in employment, but suspect it’s partly due to shuttering of products that are at the ends of their profitable lives, partly the closing of products that don’t fit Pfizer’s market strengths, and partly the consolidation of non-production-related functions to the home office instead of maintaining duplicates at both places,” said Dimkoff.

According to the W.E. Upjohn Institute for Employment Research in Kalamazoo, not all local pharmaceutical jobs were eliminated. Pfizer’s largest production facility is the one in Portage, and in 2012, Pfizer spun off its animal sciences division as an independent company called Zoetis, which has employees in downtown Kalamazoo and in Richland Township.

George Erickcek, senior regional analyst at the Upjohn Institute, is a veteran observer of the West Michigan economy and its relationship to employment. He said the recession of 1981 was the last of what he calls “a V recession,” in which there is a rapid plunge in the economy and then a rapid bounce up again. Now, he said, recessions are more like an L: The economy drops and then finally levels off and slowly plods along before starting back up again. But recovery is a long time coming, as has been demonstrated by the recent Great Recession. Most business people agree the economy is improving but are virtually unanimous in adding “not fast enough.”

Erickcek said the recession of 1991 was dubbed “the jobless recovery,” and that description holds for all of them, he said, since the 1980s. The highest employment Michigan ever had, he said, was June 2000, when there were 4,745,000 workers on the job. “We’ve never reached that again,” he added, and right now the state is about 673,000 jobs lower.

“Will the state ever get back to June of 2000? I think the answer is no,” he said.

In early 1990, about 27 percent of people employed in West Michigan were in manufacturing, with about 11 percent in health care and private education. Most of that number is health care, to which the federal government adds employees in private education, mainly at private colleges. Today, about 19 percent of the West Michigan work force is in manufacturing and 16 percent in health care/private education.

That 19 percent in manufacturing “is still much higher than the nation as a whole,” Erickcek said. Nationally, it is about 12 percent.

He said “West Michigan” for these purposes includes the MSAs for Grand Rapids, Muskegon, Holland, Kalamazoo, Battle Creek and Benton Harbor. In that region, from 1990 to 2013, the total number of jobs increased by 162,000; there was a loss of 23,000 manufacturing jobs and an increase of 60,000 jobs in health care/private education.

In West Michigan, the highest employment in manufacturing was December 1999, and the highest employment in health care/private education was March of this year.

While many believe the service sector, which includes health care, will take the lead over manufacturing, Erickcek says the Michigan economy “is still extremely dependent on manufacturing” because the goods produced are sold outside the state, bringing new money in. “If we lost the manufacturing sector, we would lose a driving force in our economy,” he said.

Health care employment is growing across the U.S. because the aging baby boomers have made the market huge, but health care consumers are inside the country — not like the consumers of manufactured goods, many of whom live in other countries. While West Michigan is making a name for itself in health care, Erickcek believes health care has “very small potential of bringing new money into the area.”

According to Dimkoff, the 1970s were horrible years for business and the economy, but “things that happened in the 1980s set us up for some good years.” People who remember what downtown Grand Rapids was like in the 1970s can testify to the changes for the better.

One was the growth of Amway Corp. and its acquisition of the aging Pantlind Hotel — today, the Amway Grand Plaza. Dimkoff said he believes $60 million was pumped into renovating the old hotel because Amway needed a venue for its increasingly large, annual, Amway product distributors meetings, which brought people from around the world.

“It still wasn’t big enough,” he said, so there followed more Amway investment in downtown hotel rooms: the Courtyard by Marriott and, most recently, the JW Marriott.

Over the same period, the Amway founders donated millions to improve downtown; hence, the Van Andel Arena, Van Andel Museum Center, DeVos Place, DeVos Performance Hall and Van Andel Institute.

The “biggest thing,” over the years, in Dimkoff’s opinion, is “the explosion in growth” in the city. Because it just happened, the recession “is in everyone’s mind, but for those people who’ve been around (Grand Rapids) for 30 years, it’s unbelievable: new roads, new malls, huge businesses, condos — just the economic vitality.”

The Grand Rapids/Wyoming MSA was the fifth fastest-growing metropolitan statistical area in the U.S. in 2011, according to Dimkoff, with a 5.4 percent increase in income in one year. And 2012 was high, too, he added.

“Some would argue we are just recovering from the tremendous dip” from 2007-2009, “but still, over 30 years, the growth has been good. I’d rather be here than any other place in Michigan — and a lot of other places in the U.S.,” said Dimkoff.

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