New Economic Fears Arise in Michigan

Abayomi Azikiwe, editor of the Pan-African News Wire, covering a Moratorium Now! Coalition demonstration outside the State Office Building, Cadillac Plaza, in the Detroit New Center Area on November 20, 2008. (Photo: Alan Pollock).
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New York Times
November 23, 2008

New Economic Fears Arise in Michigan

By SUSAN SAULNY and MONICA DAVEY

FENNVILLE, Mich. — The bad news keeps coming to Michigan, a state long stuck in recession and at ground zero in the national economic downturn. But unlike in months and years past, there are no exceptions to the despair, not even here among the bucolic resort communities along Lake Michigan.

The flailing auto industry is important here, but so is furniture building, tourism, the retail trade and construction — pieces of the economy long buffered from the downturn in Detroit. Now waves of layoffs are sweeping towns around here in wine country and elsewhere across the state, swelling the ranks of the unemployed just as tens of thousands of those already of out of work fear running out of unemployment benefits.

“You just sit and you worry,” said Pat Weber, a construction administrator in Fennville who was laid off more than a year ago. “In the last year, I’ve put in for more than 100 jobs. I stopped counting after 110. It’s just so defeating.”

All around Fennville and its neighbors here in southwest Michigan, front lawns are peppered with for-sale signs and merchants complain about slow days. But while this remains a beautiful place with none of the obvious blight of Detroit on the other side of the state, residents say the hardship beneath the surface is very real.

It is the same story in other parts of Michigan, as the state’s already entrenched recession — in at least its fifth year, according to economic experts — digs deeper as a result of the recent global financial crisis.

New data show the state’s unemployment rate crept up to 9.3 percent, almost three times what it was in 2000, and, along with Rhode Island, the highest in the country. Just last week, Herman Miller Inc., an office furniture company based in Zeeland, Mich., announced that it would eliminate or lay off 400 to 650 workers, many of them in western Michigan. SKD Automotive, an auto parts manufacturer in Jonesville, Mich., where it is the largest employer, indicated it would eliminate 300 jobs.

As a result of the steady job losses that began in the summer of 2000, 1.82 million Michigan residents, or close to 20 percent of the population, are now on some form of public assistance, including food stamps and home heating credits, a record for the state.

“It is really hard not knowing if you aren’t going to be working the next day,” said Wendy Einhardt, 47, who spent 16 years making plastic car parts before being laid off in August in Sebewaing, on Saginaw Bay of Lake Huron. “You worry a lot about what is coming.”

Around the state, home foreclosures are commonplace, the trust fund that pays unemployment benefits is millions of dollars in debt, food banks are struggling and health agencies are reporting an uptick in people with symptoms like anxiety and depression. Suicides were up in recent years, although officials caution against drawing any direct links between deaths and the economy.

In one sign of distress, in the first nine months of this year, some 130,000 Michigan residents who had lost their jobs remained out of work so long that they ran out of regular unemployment benefits. By the middle of this month, 63,000 people (who had already run out of their ordinary maximum benefit — as many as 26 weeks, at as much as $362 a week) also ran out of an extension authorized by Congress.

Without a second extension of benefits, signed by President Bush on Friday, tens of thousands of others had been expected to run out each month.

Sandra Peavley, 54, who lives in Warren, near Detroit, and had worked at a bank for 18 years before losing her job, ran out of unemployment last month. Ms. Peavley, who is divorced and had grown accustomed to earning more than $60,000 a year — plus health benefits, an annual bonus and a thriving 401(k) — said her unemployment checks were what had allowed her to stay afloat.

“There was never anything left over,” she said, “but it kept my household running.”

Ms. Peavley said she could not afford health insurance anymore, and had come to ration the antistress pills her doctor prescribed. She has not paid debts she owes on credit cards, and says she changed her phone number only to have creditors, to her mortification, call her neighbors, even distant relatives, trying to track her down.

“I don’t have the money,” Ms. Peavley said quietly. “I’m out of work. What am I supposed to do?”

Back near Fennville, Kevin Charak is concerned about the future, too. He is the owner of the Sherwood Forest Bed and Breakfast in Douglas, a lakeside town known for its charm.

“Things have gotten worse in the past six months to a year,” Mr. Charak said. “And I’m not the first guy to feel the pain; I’m the last guy to feel the pain. The phone’s just not ringing.”

Interviews in several towns with residents, elected officials and economic experts show that Michigan is straining under the weight of the prolonged hard times. And it is anxious about a future that could look even worse, particularly if any of Detroit’s Big Three automakers should collapse.

“There’s this feeling that we’ve been in the trough long before anyone got there,” said Jane Zehnder-Merrell of the Michigan League for Human Services. “It’s been a long spiral downward since 2000, really. We’ve never experienced any economic recovery.”

Ms. Weber, 58, the unemployed construction administrator here, tried to sell the two-bedroom home she designed on six acres abutting a forest in the early 1990s so she could move away from Fennville to find work, but the house languished on a weak market for months and, finally, dejected, she gave up.

She is not sure how much longer she will be able to pay her mortgage. She fears the solidly middle-class life she built for herself over decades is within a whisker of disappearance.

“The worst that will happen is that I will lose my home,” said Ms. Weber, gazing around her living room, her golden retriever at her feet.

Rick McHugh, a lawyer who focuses on Michigan for the National Employment Law Project, an advocacy group for low-wage workers, has even seen his job change. “A year ago, I felt like I could help people, give people advice or send them to a program that would help them,” Mr. McHugh said. “Now, I say, ‘I hope you have a relative with a house that’s paid off so you’ll have a place to live.’ ”

Many of the state’s unemployed are hoping to go back to school to be trained for technical, medical or so-called green jobs — areas that seem to be more in demand than old-style manufacturing.

But one barrier, some experts say, is the high number — some 1.7 million residents — who have “basic skill challenges,” like poor English or no high school diploma. As far as higher education, the state ranks 35th, below the national average, in college graduates.

Some of the newly poor were homeowners not long ago. According to state figures, 7 percent of families who are foreclosed on these days end up homeless. And Michigan’s foreclosure rate is among the top five nationwide, with the highest concentration in Wayne County, home to Detroit and some suburbs.

For Ms. Weber, who is far from destitute, there is no more going out for dinner and very little driving. Her grocery list is shorn of extras. She is not sure that her car, which needs costly repairs, will get her to Chicago for Thanksgiving dinner with friends. Life looks different now.

“This is so debilitating, so humiliating,” she said. “I feel kicked to the curb. It’s been one defeat after another, seems like forever. I feel reduced to nothing.”

Gov. Jennifer M. Granholm of Michigan, a Democrat, says that her administration has made efforts to remake basic elements of state policy — tax structure, statewide school requirements, the economy itself — anything to turn things around. But she acknowledges the progress has been slow.

“These are all long-term strategies, I know,” Ms. Granholm said. “But we didn’t get here overnight so we’ve got to do a lot of things to get out of it.”

After six years of cuts in the state’s budget, more trims seem inevitable because of a shortfall this fiscal year, expected by one estimate to be $400 million.

As for more cuts, Ms. Granholm lamented, “People are used to it now.”

State officials see Michigan as being, at least in part, the victim of a globalized economy and an automobile industry that failed to keep up with consumer demand. But others see a much broader explanation rooted in the state’s inability to diversify its economy.

“We put all our chips on a poker hand called durable goods manufacturing, particularly the autos,” said Charles L. Ballard, a professor of economics at Michigan State University. “In the middle of the 20th century, every time we turned over the hand it was four aces, a straight flush. If you have an undiversified economy based on a sector that’s booming, great.”

That is not the case anymore.

In fact, more than half of the people employed nationwide by the Big Three automakers live in Michigan. And together, their market share has plummeted 30 percentage points to something approaching 44 percent of the overall auto market in the last 13 years. It has had a ripple effect across the state.

Steve Landaal, the president of Landaal Packaging Systems in Burton, Mich., said he had no choice but to begin a painful string of layoffs of his employees in April. In the end, nearly 70 have been laid off from the company’s packaging division, which once had 250 employees boxing and distributing products — plenty of them General Motors car parts.

“The hardest thing in my job I’ve ever had to do is lay people off,” Mr. Landaal said. “At this point, around here, finding a job is like getting blood out of a stone.”

Susan Saulny reported from Fennville, and Monica Davey from Lansing.