The Detroit Metro Area Is Losing Jobs

The official count of payroll jobs in the Detroit MSA has not only stalled, it has trended down over the last 10 months. Detroit MSA payroll employment hit a local peak of 1,867,100 in June 2013. By this April almost 10,000 jobs had been lost. The area’s unemployment rate continues to trend down, hitting 8.1 percent in April, still well above the U.S. average of 6.3 percent for that month. The unemployment rate fell, despite net job losses, due to a decline in Detroit’s labor force, and that is not good news. We expect payroll employment in the Detroit MSA to stabilize this year and next. At best, the near-term economic outlook for the Detroit area is hardly stellar. At worst we could see a continuation of the long slide in employment that was visible by early 2001. Despite the positive news of young entrepreneurs and high-tech workers heading to downtown Detroit, the broader metro area is still shedding jobs. New Jersey-based Caraco Pharmaceutical is closing its Detroit operation and will lay off 178 workers this summer. However, running counter to the official BLS employment numbers is the Southeast Michigan Purchasing Managers Index which shows improving manufacturing conditions in March and April. The SE Michigan PMI’s employment sub-index remains above 50, indicating expanding manufacturing payrolls.

The City of Detroit’s financial crisis and bankruptcy continue to dominate headlines. Emergency Manager Kevyn Orr has submitted a financial plan for the resolution of Detroit’s $18 billion bankruptcy. Approximately 110,000 creditors to the city, including some 30,000 pensioners, will vote on Orr’s plan by July 11. The vote is becoming highly politicized. In May, the Michigan House of Representatives voted to provide a $195 million bailout to the City of Detroit. The state bailout plan is currently in discussion at the state Senate.

Auto sales bounced back in March to a 16.4 million unit rate after a winter lull. April auto sales settled to a 16.0 million unit rate. We expect moderate job and income growth, combined with improving consumer confidence and the positive wealth effect from improving house prices to support national auto sales through the remainder of this year. That said, we are getting closer to an expected high plateau of auto sales of around 17 million units, so there is limited upside potential for new auto sector jobs.

Detroit 2014Q1

Click here for the complete Detroit MSA Regional Economic Update: Detroit 2014Q1.

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