Wednesday, June 25, 2008

I Have Michigan Economic Bias

For those readers who have been following the blog a while, you probably see a quite negative economic view on things. While I do think government reports systematically paint a rosy view, I do unfortunately also have local bias, Michigan bias. You cannot help but be clouded by what you see on a daily basis, month after month, for years. I assume its akin to what North Carolina went through when the textile mills left in the 80s (they've since rebounded smartly) or Pittsburgh went through when the steel mills shut down in the 70s (they've sort of muddled around in a shrunken state since). Even in Michigan, we've had tough times in the past, especially late 70s, early 80s but that was cyclical - this change is structural. Many jobs will never come back, just like they did not in NC or PA - so we've been in a slow motion train wreck for over 5 years now. The simple answer is "move" but are those equivalent jobs really available anywhere else? In an economy moving to 'service' and away from 'making things'?

Now to be fair, our leadership is just about as bad if not worse as that at the national level, so aside from the global forces hitting the state - the total inability for any real leadership is hurting. But what I openly wonder as we "streamline" production and move to a service economy (like most of the rest of you) is are we a canary in the coal mine? Or a total outlier? Probably somewhere in the middle. But when I think of a "service economy" like Las Vegas with its booming job picture - I know 80-90% of those jobs wouldn't pay 2/3rd of what a typical job being destructed here is. So is that really a great long term outlook?

Here is a story of what is happening here, and why my views are most likely very certainly clouded. I do realize 90% of the states are not even within spitting distance of such calamity. And as I type each post I do try to think of the agriculture sector, the oil sector, some parts of technology, etc - that are booming from the structural trends emerging, and how those states that focus on those areas must be living in a different world. But that still leaves about 30-35 other states somewhere in the middle. Much like Peter Schiff I simply wonder how a service economy which is 70-80% based on people within the United States trading services with each other (you do my nails, I'll do your taxes, and she'll sell you stuff at Walmart) really will do over the long run? When I see people with Master's degrees desperate for a midnight shift at a grocery store it really makes me wonder. We've seen how when we take away the major drivers of our economy the past decade (building homes, and financing all forms of credit) - how quickly the worm can turn. So we're left with a huge share of healthcare jobs and government jobs - both taxing the national budget and it's people's budgets. Those appears to be "our economic drivers". So what will this economy, outside of natural resources, dominate in - in the next 50 years? A good question.
  • Michigan, once the center of America's industrial heartland, now holds a more dubious distinction: It leads the U.S. in joblessness. The state's unemployment rate hit 8.5% in May. That's up 2 percentage points from April, and compares with a figure of 5.5% for the whole U.S. in May.
  • But bad as those unemployment figures look, the reality is actually worse. The official number is arrived at by surveying households and learning how many family members are unemployed but seeking work. So it does not reflect those who have given up finding a job, or those who are not yet looking but soon will be.
  • Go to a job fair in Michigan and you'll find you are surrounded by people who fit all categories of joblessness, official and otherwise.
  • Gregory Boyd, 50, a computer programmer and IT specialist, saw his job at Ford outsourced to India three years ago. Then, he caught a break with a job at DTE Energy, Michigan's biggest electric and gas utility. But that was eliminated last fall. He has been limping along with some freelance projects since then, but needs something permanent.
  • The job picture, says DCC's Perry, is worse this time around than in 1980, the last time unemployment was so high. "Then, workers were being laid off, but these jobs are being eliminated," Perry points out. "And they are going at a much faster rate than we can replace them."
  • May's numbers alone show a loss of 50,000 jobs.
  • Hernandez says the job picture is as bleak as she has ever seen it. "We have had people with PhDs and engineering degrees applying for clerical jobs," she says.
  • Senior management openings for which she would normally see just three or four qualified applicants are drawing more than 50 qualified candidates.
  • One hope of Michigan officials is that they can turn the villain of expensive gas into a virtue, by creating a hub for "green technology" jobs. But those jobs are slow to develop, and could take a decade to materialize. A startup company developing new battery technology might employ a couple dozen workers, at best. Meanwhile, a shuttered auto plant can put more than 2,000 workers on the street, plus thousands more from supplier plants and local businesses that catered to workers.
  • Another job fair was held recently at Ford Field, the domed stadium that is home to the Detroit Lions National Football League team. The stadium is looking for workers to cook and sell the $6 hot dogs and $10 (16-ounce) beers at Lions games this fall, as well as warehouse workers, cashiers, and vendors.... Jerry has a college degree in English, which he has not put on his resume for fear of being tagged as overqualified for a job that might pay $12 an hour. Last October, the job he had supervising a customer-service group for a local bank was eliminated. "I'd move away, but this is my home and my parents are elderly and need looking after."
  • A short distance away, Reginald Johnson, 24, is neatly dressed and wearing a backpack. He is pursuing an associate's degree in electronics at nearby Wayne State Community College. Polite, articulate, and eager to work, he hopes to land a job in the stadium kitchen, cooking hot dogs and sausages, or maybe the steaks and chops served in the luxury suites. But Johnson has a problem providing more than an e-mail address on his application, and he worries it will keep him unemployed.
  • "I don't have a place right now. Last night I stayed at the Greyhound bus station," he says. Though representative of the hardship found in Michigan these days, Johnson is also emblematic of the pluck and lack of resentment often found among those trying to beat the odds and find a job.
So a lot of my "predictions" on the consumer nationwide, that have been coming true one after the other, are not in fact any brilliant analysis by said writer. I've already seen them happening here for many years - I just predicted the rest of the nation would start seeing some of the same issues. And that's the startling thing as we see the same things leak out to many (not most) other states, despite the so called strength in the national numbers.

[August 2007 Thoughts/Roadmap] & [Reviewing August 2007's Thoughts/Roadmap]
[December 2007 Thoughts/Roadmap]

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