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UM forecast: Detroit employment, hammered by COVID-19, won't rebound until 2023

Jordyn Grzelewski
The Detroit News

Detroit — The coronavirus pandemic's toll on the city's economy will be "deep and long-lasting," with the number of jobs in the city not expected to rebound until 2023, according to a University of Michigan economic forecast released Friday.

One potential bright spot, researchers say, is that the city — due in part to several large-scale real-estate projects that remain underway — is on track for a quicker recovery than the state. Michigan is not slated to rebound to pre-pandemic employment levels until 2024, according to the forecast. 

A view of downtown Detroit from Grand River Ave.,  March 17, 2020.

"That's the glimmer of good news," said David Massaron, the city's chief financial officer, of forecasts for steady recovery in several key industries. "But the report is also sobering, in that it reminds us that we have a lot of work to continue to do in ensuring that the residents of the city have the skills and opportunities to access the jobs where UM predicts there will be growth, so they can participate more fully in the economy."

The report — the latest in a series of economic analyses the city has commissioned from UM —  underscores the devastating toll the pandemic has taken on the city's largest employment sectors. Those industries, which account for about half of all employment in the city, were the hardest hit by pandemic-related shutdowns.

It also includes a warning that the outlook will be far worse if stronger steps to control the spread of the virus and to help residents weather the recession are not taken.

Pandemic's toll

Prior to the pandemic, the city had been on track to see its unemployment rate fall, its rate of job growth to exceed the state's, and residents' incomes to rise. 

The city was hit early, and hard, by the pandemic. The economic impact of the virus and efforts to contain it early on, starting in March, were "severe," according to the forecast: The most recent data, from April, indicate a "colossal" loss of 63,000 jobs among city residents since March.

The forecast shows the city's payroll employment rate dropping 11.3% in 2020 (which translates to about 26,000 lost jobs), and employment among city residents falling by a similar amount. Researchers project the city's unemployment rate will rise to an average of 23.8% this year, up from 8.8% in 2019.

Payroll employment (jobs located in the city) is forecast to recover by 9% in 2021 and 3.1% in 2022. Employment among people who live in the city is expected to follow a similar trend.

Researchers note that ongoing projects, such as Bedrock's redevelopment of the former Hudson's site downtown and Ford Motor Co.'s renovation of Michigan Central Depot in Corktown, are likely to buoy the city's recovery.

Hard-hit industries

Leisure and hospitality services, combined with manufacturing, make up about 20% of payroll jobs in the city. Yet they account for nearly 40% of the job losses projected for this year, reflecting the heavy impact on jobs at businesses that had to close for weeks under state shutdown orders.

In leisure and hospitality, however, UM projects a relatively steady recovery. While the forecast projects 6,000 jobs will be lost this year, by 2024 employment in that industry is expected to be higher than in 2019.

Similarly, with Michigan's manufacturing facilities now back up and running, researchers expect manufacturing jobs to rebound, with a projected gain of nearly 3,500 new jobs by 2024.

One of the most-severely impacted sectors has been education and health care services. It accounts for approximately 30% of 2020's projected payroll job losses, in line with the industry's job count. But the forecast predicts a slow recovery, with about 7,800 job losses this year and 2,000 fewer jobs expected to exist in 2024 than in 2019.

Attracting jobs to the city and providing city residents with resources to develop the skills needed for those jobs have been key focuses, as part of Mayor Mike Duggan's administration's efforts to reduce economic disparities and link residents with jobs, Massaron said. 

He noted efforts to close the digital divide in the city, the recent news that Amazon.com Inc. is eyeing the former Michigan State Fairgrounds as a potential location for a major distribution center, and the announcement Thursday of a planned Detroit-to-Ann Arbor autonomous vehicle corridor as examples of those efforts paying off. 

Wage gap grows

Detroit employees on average earn more than workers in the state overall. That is due mostly to the city having more higher-paying jobs; as such, the forecast does not see average wage growth slowing down, because the pandemic has mostly affected lower-wage jobs.

Researchers expect the gap between higher- and lower-paying jobs to widen in the next few years. And, they note, Southeast Michigan continues to grapple with "substantial racial gaps in prosperity levels."

Across the region, 26.6% of non-Hispanic white residents live in low-income households; for Black and Hispanic residents, that rate is 57.3% and 45.1%, respectively. And in the city, about two-thirds of the Black population live in lower-income households, according to 2018 data.

"That wide disparity in income distribution by race and geography in Southeast Michigan formed the backdrop to the COVID-19 recession, which will present a severe challenge to the Detroit economy," the authors wrote.

They emphasize the importance of federal aid in blunting the impact of the pandemic-induced recession, and are "watching anxiously for an extension of federal support." Enhanced unemployment benefits and direct payments the federal government sent to households will help offset income losses due to unemployment, they say. 

The outlook for the city, researchers say, comes down to whether the federal government enacts a "more vigorous" response, and whether actions are taken nationally and regionally to halt the spread of the virus: "If the course of the pandemic is significantly more severe than we have assumed, the economic recovery in Detroit will be slower and weaker than we have forecast."

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski