U-M Economists: Oakland County Recovering Slightly Faster Than State as a Whole

For Dave Coulter, there were a couple of surprises in the annual Oakland County economic outlook report from the University of Michigan unveiled Wednesday.

Oakland County Executive David Coulter

For instance, there was a chart included in the report, the 36th annual report prepared by economists from U-M, that showed the economic breakdown among eight regions of the county, something Coulter said they hadn’t done before.

According to Coulter, the former mayor of Ferndale who now serves as the Oakland County Executive, the chart showed how “flat” the last two decades have been among lower-income jobs.

“Our focus has been on job creation and rightly so over the decade, but the need for policy and strategies around wage increases and reducing that disparity was brought home to me in that report,” Coulter said in a press conference following the presentation of the report. “Even though I knew that instinctively, having been to the south end of the county and the mayor of Ferndale, I know the vast differences in the lifestyle, the economy, the educational attainment … seeing it broke out will go a long way to help us refine our strategies around how we address the issues in Oakland County.

“It’s not a one-size-fits-all, even in our economic development efforts,” Coulter added.

Weathering the storm
Overall, according to the report, Oakland County has been weathering the pandemic storm, with forecasts calling for the jobless rate to decline—and jobs to recover—slightly faster than the rest of the state, according to University of Michigan economists.

Oakland, one of the most populous and prosperous counties in Michigan, is expected to return to its pre-COVID-19 employment level by early 2023, a mark the state is not thought to reach until late that year. The county is expected to spend 2023 with unemployment well below 3%, near the record low seen in 1999.

In its annual forecast of the Oakland County economy, the U-M Research Seminar in Quantitative Economics predicts the number of jobs will grow by 4.1% in 2021, 4.6% the next year and 2.5% in 2023. The county had recovered about 60% of its initial pandemic job losses by the first quarter of this year, putting it roughly in line with the state’s job recovery, the report says.

Joe Bauman, president of the Birmingham Bloomfield Chamber, said he was “encouraged” by what the report had to say.

“The forecast shows Oakland County in terms of economic activity has come a long way in putting the pandemic behinds us,” Bauman said. “As was the case in the “Great Recession” of 2009-10, Oakland County recovered stronger and faster than the rest of the state. Challenges remain for certain industry sectors like restaurants, hospitality and retail, but overall the county is regaining its financial footing.”

Oakland’s unemployment rate had jumped to 18% during the second quarter of last year amid the depths of the pandemic. The economists expect Oakland’s jobless rate—2.3% in April—to nudge back up over the coming months as residents come back into the labor force (the official unemployment rate excludes people who have stopped looking for a job). It then edges back down to 2.4% by the end of 2023.

Not a surprise
The one thing that wasn’t a surprise to Coulter: While the county as a whole seems to be on its way to recovery from the negative economic effects of the COVID-19 pandemic, it’s not going to be a smooth ride for small businesses.

In an effort to improve things for those “mom-and-pop” “main-street” businesses, Coulter’s administration is going to present a couple of programs to the Board of Commissioners, which has the final say.

First, there’s a 2-to-1 match program that will see the county match local investment dollars tailored to the businesses hardest hit. Coulter believes local municipalities have a better understanding of their needs and will be willing to invest funds knowing the county will match them 2-to-1.

“It will be tailored to those businesses hardest hit – retailers, restaurants, small businesses,” Coulter said. ”I think (communities) will take us up on that to really lean into pr0pping them up in the short term … keeping those businesses open and in business for the next six months or so.”

The second program will be designed to meet more chronic needs for what Coulter called “wrap-around services” – legal, accounting, business support services – with dollars coming into the county from the American Recovery Plan Act.

“That part of the report did not surprise me, that our small businesses are going to have a more challenging time,” Coulter said. We’re going to lean into that.”

Rebound anticipation
Oakland’s relatively rapid rebound was anticipated based on high education levels, strong family incomes and large share of managerial and professional jobs in the county north of Detroit.

“Oakland County is well on the path toward recovery from the COVID-19 pandemic-induced recession,” said Donald Grimes, a regional economic specialist with RSQE. “The county’s unemployment rate is already near record low levels, although that is partly a reflection of people exiting the labor force during the pandemic. If people don’t rejoin the labor force as we are expecting, finding new workers to hire will become even harder than we currently expect.”

Employment in Oakland County’s blue-collar industries will exceed the pre-pandemic level by 6% at the end of 2023, and higher-education services industries will exceed their previous peak by 3%.

Bauman said the report matches what chamber officials are hearing from members, that professional and financial services are doing “extremely well,” while service-related industries “continue to suffer.”

“The 15-month ban on in-office work crushed not only our local downtowns and central business districts, but clothing, dry cleaners, salons and the like took a huge hit due to the majority of office jobs being done remotely,” he said. “I think the pandemic has forever altered the retail landscape and how people will shop, but there also are opportunities for local retailers to expand their customer base by hosting their own online stores.

The economic forecast would seem to agree with Bauman. Employment in the county’s lower-education services industries will remain 3% lower than the pre-pandemic level even by the end of 2023.

“We think the environment is favorable for Oakland County’s economy to make a strong economic comeback, led by production and professional industries that tend to pay high wages,” said Gabriel Ehrlich, RSQE director. “We do expect a bit of an uneven recovery. The lower-education services sector is where we expect the recovery to take the longest. We’re not expecting a full recovery even by the end of 2023 in our forecast.

“The hole we’re in right now is still very deep,” Ehrlich added. “We do expect a lot of progress, but it’s going to take time. Digging out of this is not going to be an instantaneous process. (Supporting small businesses) was an important part during the pandemic to keep small businesses viable. It’s going to be an important part as we move out of the pandemic.”

Both the county and state overall saw a big jump in average real wages during last year’s recession, growing by a little over 6% in Oakland and just under that statewide. But the economists note the wage spike “represented the disproportionate loss of lower-paying jobs relative to the higher-paying jobs caused by the COVID-19 pandemic,” and “few individual workers experienced wage increases of that magnitude.”