LANSING — If you want to see economic stress, come to Michigan.
Foreclosures remain stubbornly high, budget shortfalls are forcing state workers to take unpaid days off and thousands of workers tied to the domestic automakers are anxious about how they’ll fare with the refashioned Chrysler LLC and General Motors Corp. out of bankruptcy.
The bleak truth, as President Barack Obama noted during a visit to Michigan this month, is that many of the hundreds of thousands of auto jobs lost over the past nine years simply “won’t be coming back.”
Michigan was second only to California in May according to The Associated Press Economic Stress Index, which combines three indicators — unemployment, foreclosures and bankruptcies — to gauge how the recession is affecting more than 3,000 counties in the United States. The higher the index’s number, the worse the impact.
A county is considered stressed when its score tops 11. Nationwide, 36 percent of counties were at that level or higher. In Michigan, just three of its 83 counties were below that limit. Many — including Wayne County, home to Detroit, and Genesee County, which includes Flint — had scores over 20.
With 740,000 people in Michigan out of work, more people are losing their homes each month and there’s little demand from buyers. The state has the nation’s seventh-highest foreclosure rate, with more than 13,600 filings in June, according to RealtyTrac Inc. Housing prices in the Detroit area have fallen 24 percent in the past year, under the S&P/Case-Shiller Home Price Index, and have dropped 56 percent since late 2005.
“No other state has lost as many jobs, and lost them so quickly and apparently so permanently,” says East Lansing economist Patrick Anderson, who doesn’t see Michigan’s economy turning around until employment begins to rise — something that might not happen until late next year.
“People need to have jobs and good prospects of employment before they can borrow money, before they can start businesses and before they can pay their bills,” he said.
Michigan has had the nation’s highest annual unemployment rate since 2006, and forecasters say June’s 15.2 percent will climb further before it turns around. The state never regained its momentum after the 2001 recession, and the bankruptcies this summer of GM and Chrysler hastened the steady stream of plant closings and layoffs.
The cascade affects even professions not tied directly to the auto industry. Lansing resident Michael Van Fossen, who once earned $50,000 a year plus benefits as a land surveyor, is now browsing Craigslist every day for jobs in other industries and going to school half-time to finish his bachelor’s in business administration.
“When everybody was building subdivisions, surveyors had more work than they could handle,” said Van Fossen, 36, who lost two surveying jobs in just over a year — the first time while his wife, Alyssa, was pregnant with their now 8-month-old son.
His wife has a small pet-grooming business, but in the tight economy, people aren’t spending money getting their pets spruced up. Neither of them has health insurance, though their two children are covered by Medicaid. His unemployment checks run out in late November.
To combat the widespread job losses, Michigan officials have eagerly pursued the “green” technology industry, touting the state’s highly skilled work force and offering multimillion-dollar tax breaks and incentives.
They’ve had some success, with Johnson Controls-Saft Advanced Power Solutions planning to open a battery assembly plant in western Michigan and General Electric Co. agreeing to invest $100 million to develop computer software and manufacturing technologies for renewable energy, gas turbine and other products at a facility near Detroit.
Michigan also is trying to diversify its economy away from manufacturing, promoting tourism, its array of agricultural products and medical, printing and pharmaceutical innovations.
But any climb back to prosperity will take time.
Michigan has lost half its manufacturing jobs — more than 450,000 — since mid-2000, and the hit to the automotive sector has been especially hard. With GM set to close five Michigan plants by the end of next year and many auto suppliers facing financial problems of their own, auto-related jobs are certain to drop below 100,000 next year, even though Michigan recently won the right to produce a new GM subcompact car.
The 740,000 unemployed Michigan workers in June was the highest monthly total since the state’s current official data began in 1976. That’s pushing up bankruptcy filings, which rose 30 percent in the first quarter of 2009 compared to a year earlier. The vast majority are personal bankruptcies.
The recession has undermined state and local tax revenues, forcing Michigan to lay off 100 state troopers and put state workers on six unpaid days off this summer. Local governments are laying off law enforcement officers and cutting back on services, schools are handing out pink slips and the state can’t keep up with repairs on crumbling roads and bridges.
Van Fossen expects more surveyors to land in the unemployment line if Michigan’s government can’t come up with the matching funds it needs to get all of its federal highway dollars next year. That could shelve 100 road projects.
Gov. Jennifer Granholm and state lawmakers are looking at a shortfall of more than $2.7 billion in the budget year that starts Oct. 1. While they hope to fill in some of the hole with federal stimulus money, they need other solutions to make up the deficit.
“The light at the end of Michigan’s long economic tunnel, which residents have been yearning to see, eludes us still,” says George Fulton, director of the University of Michigan’s Research Seminar in Quantitative Economics. “We do see some improvement, but it will continue to be slow and difficult.”
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