Michigan’s unemployment rate in January is the lowest it has been in fifteen years. But the state ranked 40th in 2015 in the proportion of adults who worked. How can that be? An unemployment rate at the national average while at the same time having a smaller proportion of those 16 and older working than all but ten states.
The answer is that the unemployment rate has both a numerator (those working) and a denominator (those looking for work). The unemployment rate is a product of both. And in Michigan’s case the good news is the state is making progress on the number working but not so much on those looking for work.
The best way to see how this plays out is to go back fifteen years and look at the employment to population ratio in 2000 compared to 2015. Both years were big years for the Detroit Three––then and now the primary engine of the Michigan economy. In 2000 66.5% of Michiganders 16 and older worked. Two percentage points above the national average. Ranking 23rd. In 2015 57.1 percent of Michiganders 16 and older worked. Two percentage points below the national average. Ranking 40th.
Michigan, with a booming domestic auto industry, ranks last of the six Great Lakes states. Minnesota, by contrast, is the best in the Great Lakes with 67.6 percent of those sixteen and older working. Eight percentage points above the national average. In 2000 they were also eight percentage points above the national average. The gap between Michigan and Minnesota over those fifteen years has grown from six percentage points to more than ten percentage points.
To us the employment to population ratio (also called the employment rate) is the best measure of state employment. It takes out of the calculation distinguishing why people are not working. And measures what matters most: the proportion of those of working age who have a job.
Lets look at the consequences of Michigan having such a low employment rate. In 2015 4.493 million Michiganders worked.
- If Michigan’s employment rate in 2015 was the same as in 2000 743,000 more Michiganders would be working today
- If Michigan’s employment rate were still two percentage points above the national average as it was in 2000 334,000 more Michiganders would be working today
- If Michigan’s employment rate were at the national average 176,000 more Michiganders would be working today
- If Michigan’s employment rate were the same as Minnesota’s 830,000 more Michiganders would be working today
More evidence of why this is not a time for celebration!