Why the coronavirus hit Michigan economy harder, longer


DETROIT — The growing economic crisis triggered by the pandemic is expected to last longer and hit harder in Michigan than in most places, as the state grapples with the fallout from a severe coronavirus outbreak and continued dependence on with regard to manufacturing.

Michigan’s economy tends to be more cyclical than the national economy, due to its heavy reliance on auto manufacturing, which has been shut down completely. The large jump in Covid-19 cases compared to the rest of the country worsens this impact, forcing the state government to implement more stringent quarantine measures than in other states.

“This is usually the case when unemployment starts to rise in the United States, unemployment in Michigan actually increases more,” said Gabriel Ehrlich, director of the Quantitative Economics Research Seminar at the University of Michigan.

Manufacturing accounts for about 20% of the state of Michigan’s gross product and 14% of its workforce, according to the National Association of Manufacturers. But the shutdown also affected the state service sector, the construction industry, the agricultural sector and the tourism sectors.

Geoff McClelland, an entrepreneur who works in the northern suburbs of Detroit, was renovating a ranch kitchen in Rochester Hills when the government’s stay-at-home order went into effect in late March. He closed all his projects to comply with the order of the state.

Contractor Geoff McClelland at a Michigan home where he was renovating the kitchen but was forced to shut down on April 27 due to the coronavirus pandemic.

Its four employees are on leave, joining the ranks of the state’s 1.1 million workers who have filed for unemployment, a figure representing more than one in five workers, one of the highest rates in the country. . His small business, Creative Professional Remodeling LLC, is now essentially on hiatus, shut down by the state government’s strict stay-at-home order.

“I have no income. I’m bleeding slowly, ”said Mr. McClelland, 36.

Coronavirus deaths in Detroit are among the highest in the country. As the city nears its expected peak in cases, health experts explain why the city’s underlying problems can lead to worse outcomes. Photo: Asha Shajahan

Michigan has reported more than 40,000 cases of Covid-19, with the largest outbreak in Detroit and surrounding counties. More than 3,600 residents of the state have died, one of the highest numbers in the country.

Detroit Airport, which connects to other global auto manufacturing centers, such as those in China and northern Italy, two hotspots for the virus, may have contributed to the early arrival of the virus, health experts said.

The auto industry aims to resume some production at its US factories by May 18; while the construction industry is expected to be allowed to resume by May 7. These reopenings could help the state’s economy begin to recover.

A playground was wrapped with duct tape at a park in Ferndale, Michigan on April 27.

Yet businesses in all industries across the state are bracing for the economic pain to last for some time. Some supply chains have been disrupted. Seasonal businesses have lost weeks of key revenue. And state manufacturers are bracing for a drop in demand for cars and other durable goods that usually accompanies a downturn.

University of Michigan economists predict the national unemployment rate will peak at 16% in May, but Michigan’s rate will rise further and remain at 23% in the second quarter of 2020.

“I don’t know what the future holds for me,” said Margie Duncan, a real estate agent who works in the suburbs and suburbs around Detroit. Ms Duncan said she had closings scheduled until May 15, but nothing beyond.

Rick Howard, co-owner of the Grace Christian Learning Center in Troy, Michigan, was inside the closed daycare on April 27.

Michigan is also a major state at a crossroads in the 2020 election. Democratic state governor Gretchen Whitmer has been discussed as a possible running mate for alleged Democratic candidate Joe Biden. She has also been criticized by Republicans across the state who say her order is too strict.

Michigan has gone beyond federal guidelines by defining essential workers more narrowly. It has shut down more of the retail, service and construction sectors and banned certain recreational and leisure activities permitted in other states. Many seasonal businesses have complained about the guidelines, saying they can operate safely and rely heavily on spring and summer revenue.

SHARE YOUR THOUGHTS

How do you think the pandemic will reshape Michigan’s economy in the long run? Join the conversation below.

STAY INFORMED

Receive a coronavirus briefing six days a week and a weekly health bulletin once the crisis subsides: sign up here.

“It stinks,” Whitmer said in a recent interview with the Wall Street Journal, referring to the impact her “heartbreaking” decisions are having on Michigan businesses. “It’s excruciating… every decree weighs heavily on me.”

For President Trump, Michigan is part of the coalition of Midwestern states he won in 2016, propelling him to the presidency. He mingled with Mrs. Whitmer by tweeting “LIBERATE MICHIGAN!” supporting the protests against the state government and calling her “the Michigan woman” at one of her recent press conferences.

Michigan Republicans have advocated a targeted approach that would allow industries to reopen if they can demonstrate they can operate safely.

Rick Howard, who co-owns the Grace Christian Learning Center with his wife in Troy, Mich., Says he’s anxious to reopen but is worried about whether his employees will feel safe coming back and what rules daycares will have to follow – he does’ I think young children will be able to tolerate masks, for example. He is currently paying the daycare mortgage out of his retirement funds, a situation that he says is acceptable in the short term but unsustainable in the long term.

“I think if the storm ends by May 15 or June 1, everything will be fine,” he said.

Spread Deli + Coffee, a popular restaurant in the Midtown area of ​​Detroit, was empty on April 28.

Write to Byron Tau at [email protected]

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8