Michigan out 28,000 jobs – August's 7.4% jobless rate is 14-year high.

Excerpted from the Detroit News this morning. . . .  

  • Michigan‘s unemployment rate in August was the worst since since September 1993.  
  • Massive automotive buyouts and a sharp decline in residential construction were cited as factors for the state’s jobless rate. 
  • Last month 28,000 jobs were lost in Michigan, bringing the total number lost since this time last year to 96,000. 
  • Since August 2006, employment in Michigan has dropped by 2 percent while nationally it has increased by 0.8 percent. 
  • The data shows that people are leaving the state. The pool of workers dropped by 16,000 in August and has declined by 81,000 (1.6 percent) since this time last year.  

What does all of this mean? Again, on the face of it not a great deal, because all of the information is based on lagging indicators, which means the cause of everything in the above list happened six to 12 months ago.  

It’s what’s behind the scenes and between the lines that’s significant. And actually critical is a better way to describe the two things that hold our economy in the balance.  

  • The state budget impasse  

Depending on whose math you use, the state of Michigan is facing in excess of a $1.5 billion deficit in the next fiscal year. The state is hemorrhaging both jobs and people, yet the governor is unable, as usual, to make the difficult decisions necessary to actually reduce the size of government to better match the reduced population of the state. Instead, she’s looking at taking the easy, and gutless, way out by raising taxes. If you’re looking for something that will tip the balance toward an even longer recession for the state, look no further. 

  • The UAW negotiations with the automakers

To his credit, the normally bombastic and irrationally insane Ron Gettlefinger is keeping his mouth shut. It finally seems as if he realizes what’s at stake, which is nothing less than the survival of the automakers. GM has seen the light and the battleship is turning – why can’t the state? I guess that that’s the difference between leadership and politics. 

For the contrarian real estate investor, all of this is actually good news, because one of the implications is that the real estate market will continue to be soft. This is unfortunate of course, but like just about every other adversity it provides the seed of an even greater opportunity.

If you have the courage to act.

 

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