Tuesday, July 14, 2009

Economic freefall part 1

A recent study by the University of Michigan estimates that michigan unemployment should peak in 2010 at nearly 16%. This is a staggering estimation keeping in mind that Michigan's current unemployment rate is over 12% and climbing and the full effects of manufacturing and tool and die unemployment may increase as the big three auto makers 'make-over' their companies. The one ominous fact left out in this study was an estimation for the future.

While they believe the unemployment rate will stabilize in 2010, there is no further estimation for when things 'go back to normal'. Unless they believe this high level of unemployment is the new normal (in which case we are all in trouble). I guess what I am trying to say is that our state, and the state of our economy is in big trouble. When you begin to measure the number of unemployed people as a fraction of 1 in 7 (actually higher than this), you begin to wonder how to take these people off the unemployment roles.

Many people talk about education as the key. What most people fail to understand is that many highly educated people are out of work. Yes we have lost many jobs related to GM, Chrysler and others, but many of the jobs are tool and die related jobs that take highly skilled laborers and are very worker intensive. When Michigan businesses look back at this time they will think one of two things, either this change was needed to bring us into the 'new economy', or this was the wake up call (that we missed) showing us how important manufacturing really is to our nations' economy. I am not trying to strike fear in the hearts of Americans, and I would very much like to be wrong, but as the days pass I am leaning much more toward the later.

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