Print Friendly and PDF

Detroit Area’s Hot Job Market Compares With Austin’s, but Challenges Remain

8/5/21

The Wall Street Journal

By Ben Kesling and Eric Morath 

DETROIT—Hiring in the Motor City region hasn’t been this hard for 20 years.

Seth Gold is offering $250 sign-on bonuses, something he can’t remember happening before in the roughly 80 years his family has run American Jewelry and Loan, a chain of pawnshops. Even then, he sometimes finds entry-level workers want to negotiate with him for higher pay.

“Hiring? It’s a challenge, to put it lightly,” said Mr. Gold as he walked by employees organizing pawned items in the shop’s warehouse filled with power tools, fur coats and motorcycles.

Employers across the greater Detroit region are feeling the impact of the tight labor market.

The Detroit metropolitan area unemployment rate—which can be seen as a gauge of available workers—has held below the nation’s rate since the start of the year, the first sustained period of below-average joblessness in the metro area in two decades.

But while region’s unemployment rate ranks it alongside hot job markets such as Austin, Texas, the picture isn’t entirely positive. The Detroit area has historically had a smaller share of adults seeking work, and the size of its available labor force shrank during the pandemic. Only those actively seeking a job are counted in the unemployment rate.

According to the Detroit Regional Chamber, 11% of Michigan’s workforce hasn’t returned after the pandemic, and half of those workers have.

Many in the area aren’t therefore directly benefiting from an improved economy and tight labor market and could be left out of any longer-run prosperity. Meanwhile, without a stable of available workers, some Detroit businesses may be missing out on sales and expansion opportunities.

“Detroit’s always had a participation problem,” said Tom Kelly, chief executive of Automation Alley, a technology-business association in suburban Detroit. “I’m not sure I believe our success.”

At the pawnshop, Mr. Gold said, more customers are coming in to retrieve items they have previously pawned, and fewer are seeking short-term loans. He said it could be an indicator of the region’s broader economic improvement and the government’s Covid-19 stimulus payments.

The Detroit region’s seasonally adjusted unemployment rate was 4.4% in June, compared with the national average of 5.9% that month, according to the Labor Department. The Detroit metropolitan area’s unemployment rate tied economic-exemplar Austin for the 10th lowest in the U.S. in June among large cities, the department said.

“It’s been a long time since we’ve been able to talk about Detroit’s unemployment rate in a positive light,” said Patrick Anderson, a Michigan-based economist and chief executive of the Anderson Economic Group. “In the last decade, Detroit has made a lot of positive improvements.”

The Detroit metropolitan area of 4.3 million people includes Detroit’s 670,000 residents and those in suburbs spread across six counties.

The unemployment rate for the Detroit area is returning to near pre-pandemic lows, but the rate for the city of Detroit itself was above 10% in June, according to the Labor Department. While that is down from above 30% a year earlier, it is more than double the unemployment rate in the surrounding suburbs.

The area’s low unemployment rate masks economic inequality in the region. In the city of Detroit, where 77% of residents are Black according to the Census, household income is lower than in the suburbs, and more than 30% live below the poverty line. In the broader region, where 22% of the population is Black, the poverty rate is 12.6%, near the national average.

Both Detroit’s and national unemployment rates have fallen from the spring of 2020, when the Covid-19 pandemic and related slowdowns caused unemployment to jump. Since that peak—when the Detroit area’s unemployment rate neared 25% and the nation’s was nearly 15%—Detroit’s rate fell below that of the nation.

The Detroit area economy grew from 2010 to 2019, and labor-force participation improved during that time, but during the pandemic, the share of adults working in the region fell. The share of those working or looking for work in Michigan was 2.5 percentage points lower than the country overall in June, according to the Labor Department.

Gabriel Ehrlich, an economist at the University of Michigan, said several factors were keeping labor-force participation low. The Detroit’s area’s median age is above the national average, so more people are probably retiring. Michigan kept Covid-19 restrictions for businesses and schools in place longer than many other states, exacerbating child care issues for families. The area’s sharp rise in Covid-19 cases in the spring may have delayed people starting job searches, he said.

Since the city’s bankruptcy in 2013, it has attracted new development and investment as part of an effort to diversify away from its historic auto-industry base. The area has benefited from growth in white-collar, automotive-related jobs such as engineering, testing and design. The Detroit region’s financial sector also grew. The area is home to two of the country’s largest mortgage companies: Rocket Cos. and United Wholesale Mortgage.

“There’s an absolute war for talent going on in this town,” said Ronald Hall, CEO of Bridgewater Interiors, an automotive seating manufacturer. Workers can take their pick from a variety of jobs and companies, he said, so physical labor at a manufacturing plant sometimes isn’t a first choice.

The auto industry, still the lifeblood of the Motor City, has fared well through the pandemic, a marked difference from the past two economic downturns. One reason: Federal stimulus checks served as vehicle down payments for many. And while Democratic Michigan Gov. Gretchen Whitmer kept some Covid-19-related restrictions on businesses in place well into 2021, she allowed factories to restart in-person work in May 2020.

The industry faces supply constraints and ongoing temporary layoffs tied to chip shortages, but economists forecast strong demand for vehicles to persist for the near future as those constraints ease.

Yet, just outside the city center, stretches remain blighted and suffer from disinvestment. The limited public-transit system continues to make it difficult for low-income Detroiters without vehicles to take advantage of the jobs boom.

Oregon-based FCR, a call-center company, has been part of the diversification of the city’s economy. The company expanded into the area in October with nearly 200 employees all working remotely or at home and plans to add 500 more by the end of the year, said president Matthew Achak.

The company finds itself competing with others for workers,forcing Mr. Achak to boost wages, on top of medical and dental insurance perks, but dependable employees are worth the price, he said.

“It’s a strong labor force, but you have to pay for it,” he said. “This is not a place you go where you want to find cheap labor.”

View original article here