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Michigan: a laggard, not a leader
Listening to the press, elected officials in Lansing and Michigan business leaders, one gets the sense that Michigan has one of — if not the — best state economies.
Yes, Michigan’s economy is better than it was in the depth of the Great Recession in 2009. And since 2009, on most economic metrics, we have grown faster than the country.
That is good news. But it doesn’t mean that Michigan is now — or is on track to be in the future — a national economic leader. The Detroit Lions have improved their win total more than just about anyone, since they were 0-16, but that doesn’t make them either now, or likely to be in the future, one of the NFL’s best teams.
Let’s look at Michigan at the end of 2013. Employment data are now available from the Bureau of Labor Statistics for the full year for all states and the nation. Michigan’s annual average unemployment rate for 2013 was 8.8 percent. That’s the fifth worst in the country. On the best measure of employment — the population-to-employment ratio for those 16 and older — Michigan does a little better, ranking 43rd.
It’s almost certain that for most Michiganders, who want plentiful jobs, being 43rd makes the state a national laggard, not a leader.
Fifty-five percent of Michiganders 16 or older worked in 2013. That is better than the cyclical low of 53.6 percent in 2010. But it’s quite a bit lower than in 2007, the year before the Great Recession, when Michigan’s employment-to-population ratio was 59.9 percent.
In 2013, Michigan was significantly below the national average of 58.6 percent and far behind Minnesota — the Great Lakes leader — at 66.8 percent.
Let’s translate all these statistics into jobs:
- If the same proportion of Michiganders 16 and older worked in 2013 as in 2007, 382,000 more Michiganders would have worked in 2013.
- If Michigan were at the 2013 national average, 281,000 more Michiganders would have worked in 2013.
- If Michigan’s 2013 employment-to-population ratio was the same as Minnesota’s, 924,000 more Michiganders would have worked in 2013. (Yes, you read that right: The gap between Michigan and the Great Lakes’ best economy is nearly a million jobs!)
When it comes to employment, Michigan’s travails are structural. Michigan has been declining in both absolute terms and compared to the nation since at least the turn of the century. The pattern looks the same as it does for per-capita income. Michigan in 2000 was still a top tier state, ranking 18th in per capita income and 23rd in the proportion of those 16 and older with a job.
Unlike per capita income, however, in 2000, Michigan was above the national average in employment-to-population ratio: 66.5 percent compared to 64.5 percent. If the same proportion of Michiganders were working today as in 2000, there would be 897,000 more Michiganders working today.
The unemployment rate tells the same story. In 2000, Michigan had an unemployment rate of 3.6 percent compared to 4.0 percent for the U.S. and 3.3 percent for Minnesota. Once again, you read that right. Michigan at the turn of the century had an unemployment rate below the national average and almost as good as Minnesota.
In 2013, the story is quite different. Michigan’s 8.8 percent unemployment rate is substantially higher than the U.S. at 7.4 percent and way higher than Minnesota at 5.4 percent.
The new millennium, as we have documented in our research reports, in many ways was the end of a 100-year run Michigan had as one of the best economies in the country. American’s 20th century mass middle class was in many ways invented in Michigan. It was based on highly paid, lower education attainment jobs — mainly in factories. That economy is over. It’s not coming back.
The new path to state economic success is anchored in the knowledge-based sectors of the economy. That is where the 21st century mass middle class will be centered. Michigan continued in 2013 to be over-concentrated in the sectors of the economy that led to 20th century success, rather than those that will lead to 21st century success.
Until that changes — no matter how strong the cyclical bounce from an expanding auto industry — Michigan is almost certainly going to continue on a long-term path as a national laggard in employment.
Lou Glazer is president of Michigan Future Inc.