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Saturday, August 16, 2008

Michigan makes another bad list...

From one of the news feeds that I get, I think this was from the Forbes real estate section, comes this story of yet another list that you really don't want to be on and which finds Michigan well represented.

The story was about cities in America that are dying - losing significant portions of their population - mainly due to the loss of manufacturing jobs. Obviously that means the rust-belt of America, the Mid-West.

Where's it worst? Ohio, according to the analysis, which racked up four of the 10 cities on the list: Youngstown, Canton, Dayton and Cleveland. The runner-up is Michigan, with two cities — Detroit and Flint — making the ranking. That's no surprise, but still not a distinction that we need in Michigan right now.

These, and four other metropolitan statistical areas, as defined by the U.S. Census Bureau, face fleeing populations, painful waves of unemployment and barely growing economies. They've struggled the worst of any areas in the nation in the 21st century. And they face even bleaker futures.

It wasn't always this way. Despite years of economic decline, in the first years of the new century the employment situation did not look so bad — 3 percent to 4 percent unemployment was the norm, along the lines of metropolitan areas elsewhere in the country. The rest of the decade was not so kind. Thanks to a crushing downturn for automakers like General Motors and Ford, Detroit and Flint, Mich., have seen unemployment approach 10 percent.

Another brutal statistic all the cities share is a diminishing population. So far this decade, 115,000 people have left Cleveland, for other climes. Smaller changes in other regions can be just as painful. Nearly 30,000 people have left Youngstown, Ohio, and they aren't being replaced by either new babies or new immigrants.

Still, the cities found to be struggling don't vary widely by age, and this factor had little influence in the rankings. The oldest city in the top 10, Scranton, Pa., had 45 percent of its population over 45; the youngest, Flint had 38 percent over 45.

The worst news is, of course, economic. When the authors looked at the most recent gross domestic product estimates for 155 metropolitan statistical areas estimated to have $10 billion or more GDP in 2005 — economies about the size of Asheville, N.C., or Tallahassee, Fla. — the news was predictably terrible for the Rust Belt.

In the fall of 2007, the U.S. Bureau of Economic Analysis (BEA) published its GDP estimates from 2001 to 2005. Nearly every city in the country grew during this period (New Orleans, devastated from Hurricane Katrina, was the notable exception), but the struggling cities on our list grew more sluggishly. None of them grew more than 1.9 percent a year, versus a nationwide average of 2.7 percent. Canton, Ohio, managed to grow its economy just 0.7 percent annually. Flint was worse still at 0.4 percent.

None of these cities now face the huge declines in real estate prices seen by Phoenix, Miami or Las Vegas, where the Case-Shiller Home Price Index shows nearly 30 percent declines from a year ago. Detroit is off only about 15 percent, Cleveland only 8 percent. Don't call it a bright spot. Prices never went up in these areas in the first place.

What isn't reported in articles like these is the affect that the decline of these cities have on the suburbs that surround them. If they are the hub around which the suburbs developed, what happens when the hub collapses? The jobs that have disappeared in these large metropolitan areas are the ones that people in the suburbs were driving in to get to. That's why there is such high default and foreclosure rate in the suburbs around those areas.

I had this discussion with an acquaintance who happened to have move here from Pittsburgh many years ago, when that metro area was declining. He said that it took decades for the decline to stop and that the Pittsburgh of the golden era of the big steel companies is long gone. Sure, there's still a Pittsburgh, but it is a metropolitan area that is much smaller than in it's Big Steel heydays and with a much more diverse and maybe somewhat less prosperous economy.

What will Michigan and the Detroit area be like in 10-20 years? Likely a lot smaller and a lot less dependent upon the automotive industry. Hopefully all of the ads that we see on TV about what a great place Michigan is to put a business in will pay some dividends and we'll get some of the high tech or medical and pharmaceutical companies that the are trying to attract. Big cities like Cleveland and Detroit won't really die, but they will significantly change as they evolve with economic and social changes. It may well be that growing and more prosperous suburbs, like the cites of Warren and Troy in Macomb and Oakland Counties, will become the new hubs around which people and the local economies revolve. We shall see.

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