After outpacing the national average through 2010 and 2011, payroll job growth in the Detroit metro area has slipped into reverse. Since hitting a post-recession peak of 1,811,700 jobs in August 2012, about 15,000 jobs have been lost on net to reach 1,796,300 in December. The City of Detroit’s ongoing financial problems are only partially to blame. Total government employment for the metro area eased by just over 2,000 jobs over that four month period. Losses are spread across private non-manufacturing industries at a time when those industries are firming up in most other metropolitan areas across the U.S. The area’s unemployment rate, which was high but declining faster than the U.S. average through 2010 and 2011, increased through most of 2012 to 10.8 percent in December. The gap between the Detroit rate and the U.S. rate has widened since early 2012.
The Michigan State Treasurer’s review of the City of Detroit’s finances resulted in the finding in December that a “serious financial problem” exists for the city. The State of Michigan has appointed a financial review team that is conducting a deeper dive into Detroit’s finances. The next step in a possible state takeover of Detroit’s finances is the expected appointment by Governor Snyder of an emergency manager for the city. The city is projected to have a $90 million cash shortfall by June unless additional budget cuts are made.
Area housing markets continue to firm up, providing a positive counterforce to the city’s financial woes. The Case-Shiller aggregate house price index for Detroit was up 11.9 percent in November from 12 months earlier. The Detroit area has suffered with some of the highest foreclosure rates in the country since 2007. This had a very depressive effect on house prices. Now, as the percentage of distressed properties in the mix of home sales declines, area house price indexes will continue to show strong gains. Construction of new homes is also increasing in the metro area. This will help to stabilize labor markets as housing-related employment increases.
Click here for the complete Detroit MSA Regional Economic Update: Detroit 2013Q1.