Not time for a celebration

In an editorial entitled Snyder must sell how a 2nd term would overcome shortcomings of his 1st, Stephen Henderson, Detroit Free Press Editorial Page Editor, wrote: “I think he’s (Governor Snyder) premature in taking victory laps, especially with the unemployment rate creeping back up.”

Rick Haglund in a MLive column entitled Michigan’s economy is running rough and the ‘check engine’ light is flashing details the current reality of  the Michigan economy when he writes: “A monthly state labor market study based on October jobs numbers shows that Michigan ranks in the bottom tier of states in important areas such as employment, the labor force participation rate, per capita income and economic output per capita. Forget about Michigan’s unemployment rate, which at 9 percent in October was the third-highest state jobless rate in the country. The real jobless figure in the third quarter of this year ending Sept. 30 was 15.8 percent, according to the state’s Bureau of Labor Market Information and Strategic Initiatives. … But the most worrisome concern is for those who will eventually become the heart of Michigan’s work force—its children. Nearly 560,000 Michigan children—about one in four—were living in poverty in 2011, according to the annual Kids Count report from the Michigan League for Public Policy.” (Emphasis added.)

2014, 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, the best way to measure economic progress is over an entire economic cycle. Normally from peak to peak. 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 allows you to focus on structural, rather than cyclical, trends. How well positioned is a state (or any geography) to compete economically over the long term.

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 working as in November 2007, the month before the onset of the Great Recession. Its one of––if not the best––measure of how well Michigan has performed from 2007-2013.

The answer: not well at all. Michigan’s job gap in October 2013 is 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. We rank 43rd in the proportion of adults employed. The only states worse than us: Alabama, Arizona, Arkansas, Mississippi, New Mexico, South Carolina and West Virginia. If your goal is a prosperous economy this is not a list states you want to be grouped with.

By contrast, Minnesota, the Great Lakes states 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 working today. You read that right: to be competitive with the best Great Lakes state Michigan needs to have nearly a million more jobs.

Add to that current economic reality the job growth projections for the next decade we explored in our last post––Michigan projected to be 49th in job growth for another decade––its clearly not time for either victory laps or a celebration.

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