But threats from payroll tax hike, federal budget cuts will loom throughout the year

Brian J. O’Connor| The Detroit News


The Michigan jobless rate dropped to its lowest level since the summer of 2008 in March, falling to a seasonally adjusted rate of 8.5 percent. The rate was three-tenths of a percentage point lower than in February and marked the seventh consecutive month that total employment has increased in the state.

The national unemployment rate for March was 7.6 percent, nearly a full point lower than the Michigan rate.

According to data released Wednesday by the Michigan Department of Technology, Management & Budget, 17,000 more workers had jobs in the state during March, with the number of unemployed workers falling by 14,000. Another 3,000 workers left the state labor force, either retiring, moving out of state, returning to school or dying.

“Total employment has increased in Michigan for seven consecutive months, which has gone along with the steady decline in the unemployment rate,” said Bruce Weaver, economic analyst with the Michigan Department of Technology, Management & Budget. “The unemployment rate is down by eight-tenths of a point since summer of last year.”

Despite the positive trend, the state jobs picture remains significantly worse than it was at the start of the recession.

In addition, Michigan is just now starting to see the effects of job losses from the federal budget cuts under “sequestration,” including the layoffs of 300 workers Tuesday at the Detroit Medical Center. Consumers also may pull back as the temporarily reduced payroll tax rate that was restored in January continues to nibble at their take-home pay.

The tax increase and job cuts are part of the so-called “fiscal cliff” that will continue to eat at the economy for the rest of the year. In addition, businesses, investors and consumers could get spooked if another battle over extending the nation’s debt ceiling flares up in Congress after May 18, when a temporary suspension of the debt limit will expire.

While the tax cuts may be hitting consumers now, the full effects of the sequestration job cuts won’t be seen until October, notes Robert Dye, chief economist for Comerica Bank.

“I don’t think we’ll see the full drag of fiscal tightening until the third quarter,” Dye said. “This is something that’s going to be with us for quite some time and will continue to grow in the economy in the next several months.”

As of March, Michigan’s rebound has restored less than a quarter of the jobs lost during the Great Recession. The losses peaked at more than half a million jobs in September of 2010. By March, the state had regained 115,000 of those jobs, but total employment remains lower than January 2008 by 387,000 jobs.

While Michigan’s March numbers show an increase in total employment, which includes self-employed workers, the number of payroll jobs declined by 7,000. The two different surveys tend to move in the same direction over time, though, and both show significant gains compared with March 2012.

Since March 2012, the state gained 16,000 manufacturing jobs, 10,000 in business and professional services, and 8,000 in education and health fields. The largest loss was 7,000 jobs in local government and 4,000 construction jobs.


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