Lisa Katz| Crain’s Detroit Blog
When will Southeast Michigan get back to pre-recession employment levels? This is a question that has been weighing on the minds of policymakers, employers and residents in Southeast Michigan since the economic downturn hit in 2009. Current data reports show employment and the labor force holding steady this quarter, including 2nd quarter labor market reports released this week by the Workforce Intelligence Network (WIN). WIN’s report also highlighted a fourth consecutive quarter of record high job postings. The disparity in data raises the question: Do record-high postings mean faster employment growth is coming? Maybe.
A deeper dive into WIN’s data can help answer these questions. What will it take to get Southeast Michigan back to pre-recession employment?
At the heart of the economic recovery is jobs. More people working in Southeast Michigan means more money spent in the region, and that turns into even more jobs — a cycle of prosperity. How close is the region to pre-recession job levels?
Below is a graph from the WIN Region Q2 2014 report showing labor force and employment levels from 2008 through May 2014. This graph emphasized that the largest trough for employment occurred in late 2009-early 2010. Since that time, though, employment in the region has been growing. Growth is slow, but the slope is positive. The data indicate a business cycle with peaks in the third and fourth quarters of each year (seasonal summer and holiday employment) with steady upward growth. Steady upward growth is what the region needs, but is it enough?
Employment is moving in the right direction. Employers in the nine-county region need to add 111,359 more jobs (4.96 percent) to get Southeast Michigan back at pre-recession job levels. But this is easier said than done: Since 2010, employment has been growing at less than a tenth of a percentage point each month (0.07 percent, in fact). The graph below shows employment and the labor force projections (assuming a linear trend), if growth in the future continues at the same rate as 2010-Q2 2014.
If the current trajectory for employment sticks, and employers add about 1,850 jobs per month, then 2008 employment levels will be reached by mid-2019, five years away. But what if the record high job postings are a signal that employers are going to start adding jobs at a faster rate than was seen between 2010 and now?
Online postings have remained at record high levels for the past four consecutive quarters, according to data highlighted by WIN. Not surprisingly, a look at employment growth for the past four quarters has shown more promise, as well. Employment growth in the past four quarters has been 0.1 percent, rather than 0.07 percent. Does that 0.03 percent-point increase make a difference?
The next graphic shows a linear projection for jobs, with both a 0.07 percent growth rate (seen from 2010-Q2 2014) and a 0.1 percent growth rate (seen in the past four quarters).
While a 0.03 percent-point difference might seem like a rounding error for monthly job growth, it is a game changer. If the 0.1 percent monthly growth from the past year continues, Southeast Michigan will reach pre-recession employment levels by early 2018, a full year and a quarter earlier than if the growth rate from the past four years holds.
No one truly can predict what aggregate employment demand will look like in the coming years. However, if Southeast Michigan employers keep posting at the same rate as the past year, the region could be back to pre-recession employment levels in about three years.
The challenge, though, is that labor force participation rates have remained sluggish, and projections do not show a return to pre-recession participation rates until 2032 — 18 years from now. In fact, labor force participation could even slow, given factors like Baby Boomer retirements. This will make it even harder to find qualified workers, which could compromise a more favorable economic and employment outlook. It is essential to keep the focus on talent, both short-term and long-term, so Southeast Michigan can maximize its future growth potential.
WIN analyzes labor market data each quarter for the city of Detroit and Wayne, Oakland, Macomb, St. Clair, Washtenaw, Genesee, Monroe, Livingston and Shiawassee counties. Check out WIN’s 2nd Quarter Labor Market Reports for employment and job posting data on the city of Detroit and each of the nine counties in the WIN Region.
This blog post was prepared with research and content from Colby Spencer-Cesaro, Director for Research, Workforce Intelligence Network.