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Michigan’s job gap of 384,000 does not bode well for future
This year, of course, is an election year. We will be inundated from both sides on how well the Michigan economy has performed since the last election.
But if you care about whether Michiganders have a job that enables them to pay the bills and save for their retirement and their kids’ college costs, the best way to measure economic progress is over an entire economic cycle. Normally it’s measured from peak to peak, or the best year in the previous expansion to the best year in the current expansion.
The peak of the last cycle was 2007, not 2010 (the last election for governor). Peak-to-peak comparisons allow you to focus on structural — rather than cyclical — trends. It tells you how well positioned a state (or any geography) is to compete economically over the long term.
How has Michigan done since 2007? Not well at all. The Michigan unemployment rate in November 2007 — the month before the start of the Great Recession — was 7.1 percent, compared to 8.8 percent in November 2013. The poverty rate was up from 14 percent to 17 percent. And both per capita income and college attainment were stuck in the mid-30s.
The Hamilton Project of the Brookings Institution does a monthly calculation of the job gap by state from the inception of the Great Recession until today. It measures the number of jobs each state needs to create to get back to the same share of the adult population that was working in November 2007. It’s one of the best — if not the best — measures of how well Michigan has performed from 2007-2013.
Michigan's job gap in October 2013 was 384,000. That is the number of jobs Michigan would need to add just to have the same proportion of adults working today as in November 2007. The employment-to-population ratio in Michigan has declined from 59.8 percent to 54.9 percent.
Michigan ranks 43rd in the proportion of adults employed. The only states worse are Alabama, Arizona, Arkansas, Mississippi, New Mexico, South Carolina and West Virginia. If your goal is a prosperous economy, this is not a list of states you want to be close to.
By contrast, Minnesota, the Great Lakes state with the best economy, has seen its employment-to-population ratio decline from 68.7 percent to 66.7 percent and has a job gap of 85,000.
That is the kind of economy you want: a place with a high proportion of adults working in both good times and bad. For Michigan to have the same proportion of adults working as Minnesota, 925,000 more Michiganders would need to be working today. You read that right: To be competitive with the best Great Lakes state, Michigan needs to have nearly 1 million more jobs.
And if current trends are not reversed, it’s almost certain that gap will grow. Using 2013-2023 job projections from the U. S. Department of Labor, Economic Modeling Specialists Inc. found for Bridge Magazine that Michigan is projected to have the second-slowest job growth rate in the country for the coming decade. Michigan’s projected job growth — 5.8 percent — is about half of the nation’s projected 11.4 percent. And to make matter worse, a preponderance of the Michigan job growth is projected to be in low-wage occupations.
If we are to close the gap of nearly 1 million jobs between us and a leading-edge state like Minnesota, we cannot afford to believe that the cyclical bounce — due largely to the auto industry restart — we are enjoying since the end of the Great Recession has made Michigan a national economic leader. The reality is the structural challenges Michigan faced in 2007 largely remain in place today.
Lou Glazer is president of Michigan Future Inc.