DETROIT — Judging by the past few years, Michigan’s economy has come roaring back from the Great Recession. Unemployment has dropped dramatically, the state has added roughly a half-million jobs since 2011 and auto companies have posted record or near-record sales for several years in a row.
But that upbeat narrative masks the deep trough that Michigan fell into during its lost decade of the early 2000s. It is yet to fully climb out — and may never.
Donald Grimes, an economist with the University of Michigan, said something vanished forever when the domestic auto industry imploded and Michigan shed jobs for 10 years in a row.
“That was a permanent adjustment of the auto industry to the loss of its monopoly power,” Grimes said. “We’ll never get back to where we were in the year 2000.”
Michigan hit peak employment in 2000 and today, despite recent growth, remains about 250,000 jobs below that mark.
The decline mirrors a slide in Michigan’s labor force participation rate, the percentage of adults either working or looking for a job. That rate dropped from 68.7 percent in 2000 to 61.4 percent in 2017, a decline more severe than the national average.
One way to focus on Michigan’s long-term challenges is to zero in on that “missing” 250,000 or jobs that existed in 2000.
Of those quarter-million Michiganders no longer worker or looking for work, many were boomers who have aged into their retirement years. Some others went back to school or became stay-at-home caregivers.
But many others, at least 60,000 or so in recent years, found themselves too young to retire but no longer able to work due to injuries on the job or other health concerns and now live on Social Security disability payments.
Those who suffered injuries may be a bigger cohort than many believe. The number of Michiganders receiving Social Security disability payments in the state shot up from 209,539 in the year 2000 to 273,999 in 2016, the most recent year data is available. The biggest increase came during and immediately after the Great Recession.
These disabilities often fall on the working class of Michigan — men and women for whom lifting and carrying heavy loads or working in hazardous conditions remains an unavoidable part of daily life.
Perhaps because of Michigan’s heavy reliance on the manufacturing sector, the population on Social Security disability rose faster here — 20 percent since the start of the Great Recession — compared with 12 percent for the nation at large.
And, of course, much of the burden of economic hardship falls on those who have the fewest skills.
In the U.S. in 2016, those with a bachelor’s degree or higher saw an unemployment rate of 2.7 percent; for those with less than a high school diploma, the rate was 7.4 percent.
But there are many reasons why Michiganders are not working, including taking buyouts in their 50s and stretching their pensions, or mid-career people going back to school, becoming stay-at-home caregivers or having sufficient assets to devote themselves to something besides a job.
A smaller workforce is only one marker of Michigan’s economic identity today. Ranked by total economic output, Michigan’s economy has slid from ninth place among the 50 states in 2005 to 12th place today. Georgia, Massachusetts and North Carolina all blew past Michigan in a faster growth lane over those years.
Two more states — Virginia and Washington — are poised to pass Michigan and drop the state to 14th place for the size of the state economy.
The crucial question facing Michigan now: Which vantage point — the recent boom or the longer-term slippage — better predicts the future?
Many economists take the glass-half-full perspective. The state’s unemployment dropped from more than 14 percent during the Great Recession to a low of 3.7 percent last July and 4.7 percent in December. Auto companies are selling huge numbers of trucks and SUVs.
“Michigan has recovered to its sweet spots pretty well,” said Jim Robey, director of regional economic planning services for the Upjohn Institute for Employment Research in Kalamazoo.
But U-M’s Grimes said that without boosting talent or the appeal of cities or other areas that need improvement, Michigan will have to accept its status as a less powerful economic player than in past years while other states power past it.
“You’re talking about a state that’s going to do a little better or worse than the national average,” he said. “Right now, we’re doing a bit better, and that’s a credit to some of the changes that have been made in the state. But I don’t think there’s any way we can ever get back to 2000.”