Detroit’s pain will get worse before getting better

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March 30, 2007

SEMCOG economic outlook

Michigan’s pain far from over

Mike Wilkinson / The Detroit News

Dramatic losses in the domestic auto industry will keep Metro Detroit mired in an economic crisis, fueling continued population declines and harsh changes in the job market for at least a decade, according to a bleak forecast released Thursday.

The report, issued by the Southeast Michigan Council of Governments, predicts that, for the first time ever, the Big Three’s U.S. market share will fall below 50 percent next year and that an auto-borne regional recovery is unlikely.

Unlike the recoveries in the 1970s, ’80s and ’90s, the days of waiting for the Big Three to pull the region out of recessions are over, as car prices have remained stagnant, costs have gone up and the domestic automakers have continued to lose market share.

The current economic problems, labeled the “worst in our lifetime,” are “clearly structural and not cyclical,” the report says.

Only the rise of a more educated, skilled work force can alter the dour prediction, according to the report from SEMCOG, a regional planning organization that serves Wayne, Oakland, Macomb, Livingston, Washtenaw, Monroe and St. Clair counties.

“What it takes is a new Michigan,” said Don Grimes, an author of the study and a research specialist at the University of Michigan’s Institute of Labor and Industrial Relations.

Pulling out of the downward spiral will be difficult as fewer jobs and people will likely mean lower tax revenues, making change difficult, officials say. “The state has lost revenue. How do you reinvent yourself without any new revenue?” asked Phil Cavanagh, a Wayne County commissioner.

If the forecast is accurate — and other demographers agree with its near-term assessments — the effects on Metro Detroit will have profound implications for health care, housing, education and government.

Fewer people could keep the housing market stagnant, fewer students will force more school districts to restructure and governments banking on growth will have to do more with less.

Previous report was upbeat

The report, titled “A Region in Turbulence and Transition,” is a radical departure from SEMCOG’s last 30-year forecast in 2001. That one called for continued growth in jobs and people. It did not foresee gasoline at $3 a gallon and a five-year war in Iraq.

Among the conclusions:

  • Auto manufacturing, which has already trimmed more than 55,000 workers in the past five years, will drop another 27,000 jobs over the next five, mirroring a plunge in the overall number of manufacturing jobs.
  • The region’s population will drift downward for another nine years as an estimated 25,000 people move out each year. Lower birth rates will contribute to the decline.
  • Opportunities in health care will soar as an aging population demands medical services. The sector will add more than 100,000 jobs over the next decade, dwarfing the number of manufacturing jobs in 2017. In 2001, there were 100,000 more manufacturing jobs than health care jobs in the region.
  • It could be more than a decade before the region recovers from its job and population losses.For those on the front line of the job market, SEMCOG’s forecast underscores reality.”People in general don’t understand how dramatically the job picture is changing,” said Mary McDougall, president of Operation ABLE, a nonprofit that held a job fair in Southfield this week for people over 40 who are looking to change careers. With more than 2,500 job seekers, it was the organization’s largest job fair in two decades.

    Job market is shifting

    Finding a solution will be difficult in a region that has relied on the auto industry for its wealth and growth. But Grimes and others say that reliance must be broken because people are not buying Big Three vehicles as often as they did.

    In 1995, nearly three-quarters of all vehicles bought in the United States were built by the Big Three. Just 13 years later, SEMCOG predicts that market share will fall below 50 percent.

    “There is no bounce-back potential,” Grimes said.

    Among the proposed solutions: Regional economic development organizations are pushing to use the area’s engineering-rich job market as a launch pad. The governor has touted efforts to get more kids into college — and lure adults back into the classroom.

    “We’re preparing every student to continue their education after high school,” said Liz Boyd, spokeswoman for Gov. Jennifer Granholm. “Education is the key to the new economy.”

    If there is a silver lining, it’s in per capita incomes. SEMCOG predicts they will rise over the next five years as increased productivity– fewer workers doing more work — will lead to greater profits. Employers are expected to share those gains with employees. And those who already hold college degrees will be less likely to feel the impact of the continued decline.

    “Communities with a lot of college degrees are going to ride this upset in the auto industry and do well,” Grimes said.

    As regional leaders digest the report, SEMCOG officials hope it will do more than depress people. They want it to act as a catalyst.

    “We hope to be part of changing the understanding of what needs to happen,” said Jim Rogers, manager of SEMCOG’s data center.

    Indeed, numerous efforts are under way to get community, political and corporate leaders together behind a comprehensive vision. Detroit Renaissance expects to report on its recovery proposal in May.

    “If we do nothing, those are the numbers that are likely to happen,” said Doug Rothwell, president of the organization and an ex-GM executive. “We have an opportunity to impact these conclusions.”

    You can reach Mike Wilkinson at (313) 222-2563 or mwilkinson@detnews.com.

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    ~ by Keith A. Owens on March 30, 2007.

    2 Responses to “Detroit’s pain will get worse before getting better”

    1. […] to a recently released report authored by SEMCOG (The Southeast Michigan Council of Governments), it could take as long as a decade before Michigan is able to extricate itself from the economic muck….  That’s 10 damned years, folks.  So are we really supposed to just sit around here for […]

    2. […] to a recently released report authored by SEMCOG (The Southeast Michigan Council of Governments), it could take as long as a decade before Michigan is able to extricate itself from the economic muck….  That’s 10 damned years, folks.  So are we really supposed to just sit around here for that […]

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