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Bridgeway

Labor Market Better
But Not Vigorous

T

he Metro Detroit unemploy-
ment rate continues to show
improvement, falling in April
2015 to 6.2 percent from 8.9 percent
a year ago. Michigan's unemployment
rate dropped to 5.4 percent in April,
matching the national rate for the first
time since September 2000. At the
depth of the Great Recession, the local
unemployment rate was 16.3 percent,
among the worst rates in the nation.
Progress in the local and state labor
markets is a ripple effect
from modest national
economic growth and the
resurgence of the domestic
automobile industry. Light
vehicle sales in the U.S. are
anticipated to exceed 17
million in 2015, up from 10
million in 2009.
Although the unemploy-
ment rate has improved,
assessing the health of the
labor market requires a
look at multiple factors.
An examination of various indica-
tors shows that the local labor market
needs improvement to be considered
robust.
The underemployment rate provides
a more comprehensive look at the
state of the labor market. In addition
to unemployed workers looking for
jobs, underemployment figures include
workers who are employed part-time
but want to be working full-time, as
well as those who are not actively look-
ing for work but who want a job and
have looked for work within the past
12 months. The latter group includes
"discouraged workers" who have given
up on searching for a job.
Part-time workers occupy a tenuous
position, as they rarely receive benefits
and are often viewed as expendable
by their employers. The latest under-
employment rate for Michigan is 14.2
percent.
Another measure of labor market
health is the employment-to-popula-
tion ratio, which measures the degree
to which employment is keeping up
with the growth of the working-age
population. Nationally, it has declined
dramatically since the Great Recession
and has not recovered. The ratio stood
at 62.7 in December 2007, fell to a low
of 58.2 in June 2011, and was only 59.3
in April 2015.
There is much debate surround-
ing the reasons for the persistently
low employment-to-population rate.
Some of the low rate is due to the

retiring baby boomer generation and
safety net increases, which have caused
some to leave the workforce. However,
these factors do not explain the entire
decline. A lackluster labor market
is behind some of the decline in the
employment-to-population ratio.
The employment-to-population
rate in Metro Detroit for April 2015
is 55, substantially below the national
figure. The local figure is influenced
by the labor market distress in Detroit
where the employment-to-
population ratio was only 38
in March 2015.
Total employment of
Metro Detroit residents
stood at 1,864,646 in April
2015, up 21,517 or 1.17 per-
cent from April a year ago.
During the same period,
the national employment
count increased 2.15 percent
and the Michigan count
increased 2 percent.
Metro Detroit exceeds
the national job count growth rate in
manufacturing. Other sectors, such as
business services and retail, are grow-
ing more slowly in Metro Detroit than
the nation, however.
Wage growth is another indicator
used to measure the health of the labor
market — and a critical factor con-
sidered by the Federal Reserve. Wage
growth in Metro Detroit was negative
in April 2015 compared with a year
ago. In contrast, the U.S. experienced
wage growth of 2.17 percent, slightly
above the inflation rate.
Overall, the pace of labor market
improvement in Metro Detroit has
slowed. While the unemployment rate
continues to fall, other measures of
labor market health are not showing
enough improvement.
Employment growth of Metro Detroit
residents is positive but remains below
the national and Michigan rates. The
number employed part time but looking
for full-time work remains elevated. The
employment-to-population rate is sub-
stantially lower than the national figure.
Wages are stagnant. Labor force partici-
pation is declining faster than jobs are
being added. As a result the workforce is
declining.
Six years after the end of the Great
Recession, the local labor market is not
vigorous.

❑

Jonathan Silberman is a professor of eco-

nomics at Oakland University. You can con-

tact him at silberma@oakland.edu.

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