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November 21, 2009
By the time Michigan begins to pull out of this economic downturn, the state will have lost nearly 1 million jobs.
That's the grim assessment in an annual forecast from the University of Michigan's Research Seminar in Quantitative Economics. According to the economists behind the study, the state hit rock bottom with a thud this year, will stay there for most of 2010 and will still be losing jobs in 2011 when Michigan begins to pull out of more than a decade of decline.
"The job decline that started in mid-2000 would bottom out in the summer quarter of 2011, with an aggregate job loss of 937,000 over that 11-year period, or about one in every five jobs that existed at the beginning of the period," George Fulton, director of the seminar, wrote in the study.
Fulton and his colleagues forecast that Michigan will have lost 283,000 jobs by the new year -- the largest single year of job loss in at least 70 years, as long as records have been kept. Job losses will shrink to 85,000 in 2010 and 36,000 in 2011.
The study reflects what many analysts and economists have been saying for much of the year: Michigan was in trouble before the recession, was hit harder during the recession, and will take longer than any other state in the union to put its economy on stable -- but far reduced -- footing.
"I have to say that despite the outlook being pretty dire, it seems to be right on with what we're seeing in the economy," said Scott Watkins, a senior consultant with Anderson Economic Group of East Lansing, which was not involved in producing the U-M forecasts.
"Michigan really never got out of the national recession that occurred just after Sept. 11, 2001," Watkins said. "There is some hope that we're at the bottom, but there aren't too many signs pointing toward a sudden improvement in the Michigan economy."
The continued weakness in employment means more trouble for state services and schools, the report notes. General fund income for the state will drop almost 20 percent this year and is expected to fall another 12 percent next year. The report cites changes in the state business tax structure, earned-income tax credits for the poor and the overall decline in stocks that remain below 2007 levels despite recent gains for the declines.
Overall, the report forecasts a combined drop of 48 percent in state income between 2008 and the end of this year, and an additional 5.3 percent decline in 2010.
Money for schools will take smaller hits, but fall again next year, with a 2.3 percent drop.
The state will remain dependent on the auto industry, but with the fundamental restructuring that has taken place, especially after the bankruptcies of Chrysler LLC and General Motors Corp. this year, the industry will be far from what it once was. "By the end of 2011, auto manufacturing in Michigan is forecast to employ just over a quarter of the workers it had on its rolls in mid-2000," Fulton wrote.
By the time it's all over, Michigan will have recorded 11 straight years of job losses after averaging 58,000 new jobs annually in the preceding 30 years. But the U-M economists say the end of the worst may be near.
"Next year will be a better year than 2009 because '09 was so bad," Fulton said. "It was one of the worst years in modern history, and it could have been the worst in terms of the number of jobs."
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