Michigan: Epicenter of Unemployment

The state with the nation's highest unemployment rate dreams of diversifying as automaking jobs vanish

The line forming at the former high school in Southgate, Mich., on a recent Thursday morning stretches some 150 feet outside the front door. The parking lot had filled up early, and now people are cantering up Northline Road from parking spaces they scrounged on side streets and the Sam's Club up the street. With the rush and anticipation of the crowd, you might think that tickets to a Bruce Springsteen concert are going on sale. But this is serious business. Another job fair has come to the beleaguered suburbs of Detroit.

Michigan, once the center of America's industrial heartland, now holds a more dubious distinction: It leads the U.S. in joblessness. The state's unemployment rate hit 8.5% in May. That's up 2 percentage points from April, and compares with a figure of 5.5% for the whole U.S. in May.

There's little mystery as to the cause. Detroit's bet on big trucks and sport-utility vehicles has turned snake-eyes. With each tick of the gas price above $4 comes another announcement that General Motors (GM), Ford Motor (F), or Chrysler are cutting back production (BusinessWeek.com, 6/3/08) of big pickup trucks and SUVs, or closing a factory. Overall U.S. vehicle sales are expected to drop below 15 million this year. Three years ago, the industry sold 17 million cars and trucks.

Numbers Don't Tell the Whole Story

But bad as those unemployment figures look, the reality is actually worse. The official number is arrived at by surveying households and learning how many family members are unemployed but seeking work. So it does not reflect those who have given up finding a job, or those who are not yet looking but soon will be. That second category covers thousands of auto workers who are accepting buyout checks to drop off the payrolls of the companies that make autos or auto parts.

Some are starting their own businesses or retiring; many, though, will be looking for work again in coming months. "It is worse than the numbers tell," says Jim Perry, executive director of Downriver Community Conference, which put on the job fair in Southgate.

Go to a job fair in Michigan and you'll find you are surrounded by people who fit all categories of joblessness, official and otherwise. At this one, more than 1,000 people fill lines that snake through tables hosted by more than 50 employers, ranging from Arby's to the FBI. What the job seekers have in common is they're all looking for a crack in what otherwise looks like a solid concrete wall.

Gregory Boyd, 50, a computer programmer and IT specialist, saw his job at Ford outsourced to India three years ago. Then, he caught a break with a job at DTE Energy, Michigan's biggest electric and gas utility. But that was eliminated last fall. He has been limping along with some freelance projects since then, but needs something permanent.

"I've been close a few times, but the competition is fierce," says the former marine and veteran of Desert Storm. Boyd is single and could leave Michigan if it gets bad enough. But he wants to stay. He was born in Saginaw and now lives in the town of Trenton, 22 miles south of Detroit, and his extended family is in Michigan. "It would seem like giving up to leave," he says.

A Starring Role in the Election

Michigan's agony will be front and center in the runup to this fall's Presidential election. It figures to be a more fiercely contested battleground for Barack Obama and John McCain than even Ohio or Florida. The job picture, says DCC's Perry, is worse this time around than in 1980, the last time unemployment was so high. "Then, workers were being laid off, but these jobs are being eliminated," Perry points out. "And they are going at a much faster rate than we can replace them." According to Michigan Governor Jennifer Granholm, the state has lost more than 400,000 jobs in the past seven years. May's numbers alone show a loss of 50,000 jobs.

With little sense that the Big Three automakers are going to return to their dominance of the past, Governor Granholm and other Michigan leaders are focusing on how to move the state's job base beyond the manufacturing of vehicles. One of the bright spots, if you can call it that, for Michigan is the health-care industry. With baby boomers aging and their parents living longer, hospitals, nursing homes, clinics, and medical laboratories have the most jobs to offer in Michigan today. But the cruel irony is that there is a shortage of trained professionals. So Canadian nurses, for example, have to be imported from the other side of the Detroit River.

That explains why the Henry Ford Health Systems, which operates hospitals and clinics in southeast Michigan, probably has the most positions to offer at DCC's job fair, some 1,300 jobs. Registered nurses and lab technicians are in big demand, with not enough applicants. Recruiting specialist Ivonne Hernandez says the need for trained help is so great that Henry Ford lends employees money for necessary training. The loans are forgiven in exchange for just a one-year employment commitment.

Hernandez says the job picture is as bleak as she has ever seen it. "We have had people with PhDs and engineering degrees applying for clerical jobs," she says. Senior management openings for which she would normally see just three or four qualified applicants are drawing more than 50 qualified candidates.

Job Recruiters Are Popular People

One candidate hoping for a nurse's assistant job who cued up at Hernandez's table is Dea Johnson, 26, a certified nursing assistant from Wayne, Mich. She has been looking for work since March. That's partly because her certification in North Carolina isn't valid in Michigan, so she has to go back to school. A single mother of two, with daughters ages 8 and 2, Johnson is hopeful, if a bit stretched. She hasn't yet begun collecting unemployment benefits, which take two to three months to process in Michigan. With an extended family of some 20 around Detroit, she has no intention of moving away. "I intend to conquer here," Johnson says defiantly.

Being a job recruiter in Michigan tends to make one popular. "A neighbor of mine says she has been told her job at Ford is going to be eliminated in August, and she says she wants to talk to me about a job," says Hernandez.

But sorting through the thousands of applicants can be grinding, as well. Sandra Hines is a recruiter for the FBI. She turns up at many job fairs in southeast Michigan because the region is home to the biggest Arab population in the U.S., and the agency has placed a premium on Arabic-speaking recruits. It tested 125 last year for jobs as agents and analysts. The hard part, Hines says, is dealing with the number of applicants who approach her for jobs but who don't have enough education. Many are laid-off factory workers. "I have to say no to an awful lot of people, and you see a lot of dejection in a lot of faces."

One hope of Michigan officials is that they can turn the villain of expensive gas into a virtue, by creating a hub for "green technology" jobs. But those jobs are slow to develop, and could take a decade to materialize. A startup company developing new battery technology might employ a couple dozen workers, at best. Meanwhile, a shuttered auto plant can put more than 2,000 workers on the street, plus thousands more from supplier plants and local businesses that catered to workers.

Former Auto Workers Launch Businesses

The auto-company buyout checks may create a mini-boom in new small businesses. Tens of thousands of auto workers have accepted $100,000 or more to retire early. After years on an assembly line and punching a clock, some aren't waiting to see if the car industry bounces back. Instead, they have gone into business for themselves.

Bill Mitchell last year took a six-figure buyout from Ford, and used the money (around $65,000 after taxes) to open what he figures is a recession-proof business: a dollar store. He has two now, which he manages with his father-in-law. And though he makes about $300 a week less than when he was hanging doors on Ford Focus cars 8 to 12 hours a day, he is much happier. "I have a life now with my family, and a lot more energy," says Mitchell. But even a dollar store has to respond to economic forces: "I have had to increase the price of a bunch of items to sell for over a dollar."

Mitchell and other former auto workers also are using their buyout cash to take advantage of a byproduct of Michigan's recession—foreclosed homes. Mitchell has bought three houses for $35,000 to $66,000, which he rents while waiting to give them to his three children. He has already turned over a property to one of his daughters. Other workers who have taken early retirement have scooped up foreclosed homes for as little as $5,000 a house, banking that property values will rebound in the next decade and make the investment pay off. The result is that home sales in Detroit are spiking by double digits.

For others, there is no buyout, just a scramble to get back on their feet. Another job fair was held recently at Ford Field, the domed stadium that is home to the Detroit Lions National Football League team. The stadium is looking for workers to cook and sell the $6 hot dogs and $10 (16-ounce) beers at Lions games this fall, as well as warehouse workers, cashiers, and vendors. All told, about 400 jobs needed filling, or about a third of the 1,200 people who staff every home game or concert.

Many of those in the line are dressed casually, as if headed to a ball game, with hip-hugging pants, a T-shirt, maybe a baseball cap. But standing among them is a man in his late 40s who wears a neat but not expensive blue suit. He has ironed his own shirt this morning, and brought a sack lunch. "I realized a long time ago that sometimes a little thing like wearing the right clothes can make the right impression," says the man, who asks to be identified only as "Jerry."

Perseverance in Hard Times

Jerry has a college degree in English, which he has not put on his résumé for fear of being tagged as overqualified for a job that might pay $12 an hour. Last October, the job he had supervising a customer-service group for a local bank was eliminated. "I'd move away, but this is my home and my parents are elderly and need looking after," Jerry says. He works at a coffee shop during the week and for a landscaper on weekends, mowing lawns and spreading weed killer. If he lands the stadium job, Jerry will gladly quit the lawn job at the end of August.

A short distance away, Reginald Johnson, 24, is neatly dressed and wearing a backpack. He is pursuing an associate's degree in electronics at nearby Wayne State Community College. Polite, articulate, and eager to work, he hopes to land a job in the stadium kitchen, cooking hot dogs and sausages, or maybe the steaks and chops served in the luxury suites. But Johnson has a problem providing more than an e-mail address on his application, and he worries it will keep him unemployed.

"I don't have a place right now. …Last night I stayed at the Greyhound bus station," he says. Though representative of the hardship found in Michigan these days, Johnson is also emblematic of the pluck and lack of resentment often found among those trying to beat the odds and find a job. "They are pretty good about letting you just sit there if you don't make any trouble," he said of the bus station. "But I won't be there long, I think."

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