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Detroit area economy: Still dismal, but the worst is behind us

ANN ARBOR, Mich.—As bad as it's been for the Detroit area economy the past several years, 2009 will end up as the worst year ever for job losses, say University of Michigan economists.

But the tide will begin to turn a year from now, albeit slowly.

In their Economic Outlook for the Wayne-Oakland-Macomb Region, George Fulton and Donald Grimes of the U-M Institute for Research on Labor, Employment, and the Economy say the Detroit metro area will lose nearly 132,000 jobs this year, more than twice as many as last year. Next year will be better, although the region will still lose another 43,000 jobs.

By fall 2010, the area will show signs of moderate job growth and will add a little more than 600 jobs for 2011.

"While that doesn't sound like much improvement, it's a far cry from the average annual loss of 45,000 jobs from 2000 to 2010, 23 percent of its total work force," Fulton said. "Job growth during 2011 is very modest until the fall quarter, but it's a welcome change from the continued job shrinkage up until then."

Fulton and Grimes predict job growth at an annual rate of 2.5 percent by the fourth quarter of 2011. In the first quarter of 2009, the area lost jobs at a "brutal" annual rate of 13.3 percent.

While they say price inflation will remain low through 2011 (even posting an annual deflationary rate this year for the first time in 60 years) unemployment will remain high.

In 2008, the unemployment rate in Wayne, Oakland and Macomb counties combined was 8.7 percent. The U-M economists predict a rate of about 16 percent for 2009 and rates above 17 percent for both 2010 and 2011.

They say the area will lose 33,000 automotive manufacturing jobs this year, 7,500 in 2010 and 1,400 in 2011. Jobs in professional and business services, including white-collar automotive workers, will also be down 33,000 this year and more than 10,000 next year, before rebounding with 2,700 job gains in 2011.

Leading the way in job creation in the Detroit area is health care. It will add 2,100 jobs this year, 3,300 next year and 3,800 the year after, the only major industry with positive job growth in 2009 and 2010 and the largest gains in 2011.

Fulton and Grimes say that as the region's population grows older (nearly one in four residents will be at least 65 by 2035) the health care sector will become an even more important industry in the area, providing both services and jobs.

Whether it's health care employment or professional and business services jobs or information technology jobs, the economists say that the Detroit area must do a better job of attracting high-education industries and workers.

Detroit lags behind such cities as Minneapolis, Chicago, Pittsburgh, Milwaukee, Atlanta and Charlotte in the educational attainment and income of its residents.

"The knowledge-based economy and the educated workers who fuel it are the fulcrum of future prosperity," Grimes said. "Detroit-area communities need to invest in programs to provide the education and training essential for the economy of the future."

Overall, the Detroit area's recent employment declines have been tied, of course, to the national recession, Fulton and Grimes say. Another factor, however, is the geographic concentration of an auto industry in structural decline.

"We have to realize that even with the restructuring of the Detroit three automakers, the U.S. auto industry will never be like it was before," Grimes said. "Those jobs are gone forever and vehicle sales will remain at lower levels for some time."

Even still, a better-functioning auto industry, coupled with a slowly strengthening national economy, signal better days ahead for the Detroit area.

"We have put the worst behind us," Fulton said. "And the next decade starts out a little better than what we witnessed throughout the current decade."

The Economic Outlook for the Wayne-Oakland-Macomb Region was presented at the 2009 Tri-County Summit, hosted by the Wayne County Commission.