Michigan’s Pain

It has some of the most breathtaking coastline in the United States- with miles of virtually untapped beaches- and access to the world’s largest supply of fresh water. It has ports that allow ships to enter from everywhere in the world and a world class international airport where you can fly to Paris, Rome or London. It has one of the most prestigious research universities in the world.

Yet Michigan is in the throes of what can only be described as a severe recession.

Have you seen the ads by actor Jeff Daniel on the cable channels encouraging you to invest in Michigan? (He lives there full-time, in the same small town he and his wife grew up in not far from Ann Arbor. He has restored a local theater there.)

It seems too little too late.

Detroit, in a downward slide for seemingly the last two decades, is in what can only really be described as a Depression. Detroit has lost half of its population since the auto’s heyday but thousands more continue to flee. From the Grand Haven Tribune:

Wayne County ranks fifth on the list of U.S. counties that lost the most people from 2005 to 2006 €” but the top four were hit by Hurricane Katrina.

The latest Census Bureau estimates, released today, found that the county, which includes Detroit, lost more than 19,000 people. The overall area, which has been hit hard by automotive industry layoffs, lost about 11,000 people.

Everything in Michigan is blamed on the auto industry- with good reason. It was (is?) the largest employer in the state (outside of government.) But other employers are also trimming their payrolls:

Still, the estimates don’t reflect the latest casualties of the region’s economic struggles. The Census estimates are for July 1, 2006, before the latest announcements of auto-related buyouts and layoffs. Drug maker Pfizer Inc. also announced in January that it planned to shut down facilities in Ann Arbor, Kalamazoo and suburban Detroit as part of a restructuring plan, affecting about 2,410 Michigan jobs by the end of 2008.

“I keep thinking, ‘What are the 2007 estimates going to be?”‘ Kurt Metzger, research director for the United Way for Southeastern Michigan, told The Detroit News. “They’re going to be much worse.”

How much worse can it really get? Foreclosures are a dime a dozen in Detroit and even the affluent suburbs. Last week, this shocking article appeared on Yahoo.com:

With bidding stalled on some of the least desirable residences in Detroit’s collapsing housing market, even the fast-talking auctioneer was feeling the stress.

“Folks, the ground underneath the house goes with it. You do know that, right?” he offered.

After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: “The lumber in the house is worth more than that!”

As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area: foreclosed property.

Houses selling for as little as $1300. Some for $7000. Even the rich are not spared the pain. From Yahoo:

Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction.

Bloomfield Hills is one of Detroit’s more exclusive suburbs.

Overall, the economy is dismal in Michigan. I was just in the western part of the state and a local who has lived there for 30 years told me, “why would our graduates stay here? There are no jobs.” From Yahoo:

Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.

With large swaths of the city now abandoned, banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate.

Michigan was the only state to see home prices fall in 2006. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study.

The state’s jobless rate of 7.1 percent in January was also the second highest in the nation, behind only Mississippi.

When I was there, I saw large amounts of for sale signs. I noticed a foreclosure sign on at least one house, which now stood empty. And this was in the Holland/Kalamazoo corridor (not even the Detroit area.) There was a noticeable pall of stress in the air (and gas prices that were well above the prices in Chicago- by at least 15 cents a gallon.)

Maybe it was the late winter weather I was feeling in the air. But one thing is certain- Michigan is in real trouble. From the Saginaw News:

The experts also say the state is expected to lose more clout in Congress. Michigan now has 15 seats in Congress and is expected to lose one seat in the 435-seat House of Representatives after the 2010 census. The state has lost at least one representative after each of the last four censuses. In 2000, the seat held by Bay City Democrat Jim Barcia was essentially folded into two other congressional districts.

Can Michigan be “saved”? Should it be? Or should it be left to the natural course of things- that its day in the sun is over (as head of the American auto industry and, somewhat, of industrialization) and that it is destined to lose population to nearby more competitive states and lose its best students/entrepreneurs to California, New York, and Illinois.

Or will a new wave of immigrants come in and scoop up the $1300 houses and start new businesses?

For now, the future of many parts of Michigan is not a good one. I believe we will see the more talented younger generation fleeing in larger numbers for the next several years.