Rick Haglund: Restoring Michigan’s economy will require more federal COVID-19 relief

November 27, 2020 1:34 pm

Centers for Disease Control and Prevention (CDC) activated its Emergency Operations Center (EOC) to assist public health partners in responding to the coronavirus disease 2019 (COVID-19) outbreak first identified in Wuhan, China. | James Gathany/CDC Public Health Image Library

President Donald Trump whined during an Oct. 27 campaign rally in Lansing that there was too much television news coverage of the COVID-19 pandemic that has killed more than 260,000 Americans—more than double the population of Michigan’s capital city.

“It’s COVID, COVID, COVID. You can’t watch anything else,” Trump said. “On Nov. 4, you won’t be hearing so much about it.”

Wrong, as usual. Coronavirus cases have since exploded as the president has largely ignored the pandemic while being almost totally focused on pressing bogus claims of widespread fraud in the Nov. 3 election he lost to Democrat Joe Biden.

In the meantime, the coronavirus is upending the economic lives of millions of Michigan residents, particularly low-wage workers. The damage could last for years.

“There’s no other way to say it than the news is pretty alarming in Michigan,” said University of Michigan economist Gabriel Ehrlich at the university’s annual economic outlook conference this month.

While jobs bounced back quicker over the summer than Ehrlich and other economists had thought, employment growth is slowing as a second coronavirus wave is leapfrogging across the country.

Ehrlich and his forecasting team predict that while growth will continue over the next two years, Michigan will likely have 152,000 fewer jobs at the end of 2022 than it did just before the pandemic gripped the state in March.

That’s a grim statistic, especially considering that Michigan had more than 200,000 fewer payroll jobs in February than it did 20 years ago as Detroit’s automakers went into a decade-long swoon.

COVID “is really in the driver’s seat for the economy right now,” Ehrlich said.

If there’s been one economic bright spot in Michigan, it’s that our manufacturing-based economy has buoyed the state during the pandemic-induced recession. The construction industry also has held up relatively well because of new-home building, and remodeling projects undertaken by home-bound consumers.

Usually, recessions hit manufacturing states like Michigan the hardest as cash-strapped consumers halt purchases of cars, major appliances and other big-ticket items.

But this time, services have suffered the most. States whose economies are largely dependent on entertainment, travel and other services have seen the biggest sustained job losses because of lockdowns and the reluctance of millions of people to shop, eat out or take trips.

Increasingly, the auto industry is catering to upper-income buyers who have been the least affected by the pandemic and are in a spending mood.

The average new vehicle buyer is over 50 years old and earns between $75,000 and $100,000 a year, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor. The average vehicle transaction price is more than $38,000.

And that vehicle is most likely a pricy truck. Pickup trucks and sport-utility vehicles make up more than 75% of the U.S. vehicle market.

Truck sales have almost fully recovered from last spring when auto plants were shut down because of the virus, Ehrlich said.

But low-wage workers in restaurants, retail stores and other service businesses are being left behind in the recovery.

Many saw their incomes soar in the spring and summer because of the federal $2 trillion CARES Act, which provided stimulus and enhanced unemployment benefits to workers, and forgivable loans to small businesses.

Those benefits are running out, though, and will likely lead to more job cuts in low-wage service industries over the next two years.

Higher-wage jobs will slightly exceed pre-pandemic levels by the end of 2022. But middle-wage jobs will be down 2.2% and low-wage jobs will be off by 8.3%.

Low-wage, low-educational attainment workers are facing “long-term job loss,” the U of M forecast said. And the “unbalanced job recovery is likely to greatly exacerbate income inequality in Michigan” and the rest of the country.

The speed of the state’s overall recovery will depend on a safe, effective coronavirus vaccine. But experts say the vaccine might not be widely available until around the middle of next year.

In the meantime, workers, businesses and governments will be in critical need of a second round of federal relief funding.

“Without more aid from the federal government, we’re going to be in serious trouble here in Michigan,” Ehrlich said. “I just want to be really concrete. That means our teachers, police officers, firefighters and nurses who are going to be at risk of losing their jobs.”

Michigan could lose 100,000 jobs next year in those and related areas next year if no federal aid package is forthcoming, he said.

We can’t wait for a vaccine to stop COVID deaths and rescue the economy, as Trump is counting on. Potential virus outbreaks in auto and parts plants, for example, could again shut down the industry, with disastrous effects on Michigan.

And the United States can’t just close its borders to keep the virus out of its assembly plants. Parts from all over the world flow into those plants. The lack of just one part from a factory in, say, China or Mexico closed by a COVID outbreak can shut down an assembly plant in Michigan.

Fortunately, we have elected a deeply empathetic president who understands that restoring the economy depends on getting control of the virus. Biden’s inauguration on Jan. 20 can’t come soon enough.


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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.