I I I I I I I I I I I r I .llDl'f; o/b/”’// Ill llllllj l ll’llll llllllll ll {ll l l l 3 1 93 00692 4587 LIBRARY Michigan State University This is to certify that the thesis entitled "Industrial Structure and Regional Employment Change: A Shift-Share Analysis of Michigan's SMSA's 1962-1982." presented by Lasford E. Douglas has been accepted towards fulfillment of the requirements for M.A. degree in Geography 5 @flifl: V V ,- 'Major profe or Date January 12’ 1989 0-7639 MSU is an Affirmative Action/Equal Opportunity Institution PLACE IN RETURN BOX to remove this checkout from your record. TO AVOID FINES return on or betore one due. 'DATE DUE «DATE DUE DATE DUE usu Is An Mimic». AdlerVEquel Opponunity Institution cadmium-9.1 INDUSTRIAL STRUCTURE AND REGIONAL EMPLOYMENT CHANGE A SHIFT-SHARE ANALYSIS OF MICHIGAN’S SMSA’S 1962-1982 BY Lasford E. Douglas A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF ARTS Department of Geography 1988 ix"); ”'1 . r ”’1' 3'1": V.) i 41’ ABSTRACT INDUSTRIAL STRUCTURE AND REGIONAL EMPLOYMENT CHANGE A SHIFT-SHARE ANALYSIS OF MICHIGAN’S SMSA’S 1962-1982 By Lasford E. Douglas Industrial activity haas long been associated with the concept of development ever since the initial stages of the industrial revolution. AWT§§9E consequence of the industrial growth is the creationaof~a'significant“number.of new employment opportunities in a resign. Therefore, a region’s growth can be interpreted in terms of its industrial structure. The attention of this research is directed towards the examination and analysis of the patterns of change within the economic structure of Michigan’s Standard Metropolitan Statistical Areas over the period 1962-1982. The study shows how each SMSA exhibited various degrees of cyclical sensitivity, and which local economic activities appear to be most sensitive to national economic trends. The results of the analysis suggests that areas specializing in auto-related industries. experienced greater than average relative employment loss, during periods of slow economic growth. Typically the effects of the national recessions have been deeper and more prolonged in Michigan than nationally. Clearly, the state’s heavy reliance on the auto industry has been the principal factor responsible for the large declines in employment opportunities. In part, the cyclical nature of employment in the region during the movement towards a more diversified industrial composition, results from a basic connection between manufacturing and non-manufacturing employment. This study provides an excellent take-off point for identifying industries in terms of competitiveness and growth. It pinpoints, in a general way, industries that are growing in the region or in specific areas faster than similar industries in the nation, and those that have enjoyed a relatively competitive advantage compared to national standards. FOR MY WYFE: VILMA DOUGLAS. CHILDREN: KEYLA. SHEYLA, EMILIO, LEYLA. ALBY ANN. PARENTS: CLARENCE AND MARJORIE DOUGLAS. iv My sincere appreciation to Dr. Assefa Mehretus for his willingness to take on the responsibility of advising me in this research. His timely criticisms and suggestions were of incalculable value. I also wish to extend my appreciation to Dr. Joe Darden and Dr. John Hunter for their participation in the evaluation committee and their constructive suggestions during the progress of this research. Thanks are due to Dr. Gary Manson, chairperson of the department for granting me the admition to the department. Special thanks to the department’s staff, particularly to Mrs. Carolyn Brookins (graduate’s secretary) for her assitance at all levels of my program. Above all... ”Thanks to you Lord” TABLE OF CONTENTS Page LIST OF TABLES .............................. x CHAPTER 1. GENERAL INTRODUCTION .................... 1 A. Statement of the Problem ............. 3 B. Objectives of the Study .............. 5 C. The Study Region ..................... 6 D. Data Collection and Method of Analysis .......................... 7 E. Relevance of Study .................. 11 2. PATTERNS OF EMPLOYMENT CHANGE IN MICHIGAN .............................. 13 A. The Michigan Trend in Wage and Salary Employment ................... 13 ' B. Relative Differences in Employment Patterns Between Manufacturing and Non Manufacturing Sectors ........... 16 C. Differential Impact of Recessions on Michigan Employment Behavior ..... 18 D. Sectoral Employment Changes in Michigan Industrial Region .......... 21 INDUSTRIAL COMPOSITION AND EMPLOYMENT BEHAVIOR ............................... 26 A. MIR Industrial Mix and Patterns of Employment ....................... 27 B. Local Industrial Mix and Subregional differences ............. 33 C. Local industrial Structure and Economic Performance ................ 38 1.0 First Cluster Characteristics...39 1.1 General Characteristics ..... 39 a. Benton Harbor SMSA ....... 39 b. Flint SMSA ............... 40 c. Lansing-East Lansing SMSA ..................... 40 d. Detroit SMSA ............. 41 e. Jackson SMSA ............. 41 1.2 Employment Distribution Trends ...................... 42 a. Benton Harbor SMSA ....... 42 b. Flint SMSA ............... 44 c. Lansing-East Lansing SMSA ..................... 46 d. Detroit SMSA ............. 48 e. Jackson SMSA ............. 48 1.3 Industrial Mix and Employment Behavior ......... 53 a. Benton Harbor SMSA ....... 53 b. Flint SMSA ............... 55 c. Lansing-East Lansing SMSA ..................... 56 d. Detroit SMSA ............. 58 e. Jackson SMSA ............. 59 2.0 Second Cluster Characteristics..61 2.1 General Characteristics ..... 61 a. Ann Arbor SMSA ........... 61 b. Saginaw SMSA ............. 62 c. Battle Creek SMSA ........ 62 d. Muskegon SMSA ............ 63 2.2 Employment Distribution and Trends .................. 63 a. Ann Arbor SMSA ........... 63 b. Saginaw SMSA ............. 65 0. Battle Creek SMSA ........ 67 d. Muskegon SMSA ............ 69 2.3 Industrial Mix and Employment Behavior ......... 71 4. a. Ann Arbor SMSA ........... 71 b. Saginaw SMSA ............. 73 c. Battle Creek SMSA ........ 75 d. Muskegon SMSA ............ 76 3.0 Third Cluster Characteristics...78 3.1 General Characteristics ..... 78 a. Bay City SMSA ............ 78 b. Grand Rapids SMSA ........ 78 c. Kalamazoo SMSA ........... 79 3.2 Employment Distribution and Trends .................. 80 a. Bay City SMSA ............ 80 b. Grand Rapids ............. 81 c. Kalamazoo SMSA ........... 83 3.3 Industrial Mix and Employment Behavior ......... 85 a. Bay City SMSA ............ 85 b. Grand Rapids SMSA ........ 87 c. Kalamazoo SMSA ........... 88 THE IMPACT OF SECTORAL COMPETITIVENESS ON THE EMPLOYMENT 0F MIR ............... 91 A. Competitive Share of Employment in MIR .............................. 92 B. Differential Shifts and Employment Behavior ............................ 97 1.0 First Cluster Characteristics...97 1.1 Benton Harbor SMSA .......... 97 1.2 Battle Creek SMSA ........... 99 1.3 Jackson SMSA ............... 100 1.4 Detroit SMSA ............... 101 2.0 Second Cluster Characteristics.102 2.1 Saginaw SMSA ............... 102 2.2 Flint SMSA ................. 104 2.3 Bay City SMSA .............. 105 2.4 Lansing-East Lansing SMSA..106 viii 2.5 Muskegon SMSA .............. 108 3.0 Third Cluster Characteristics..109 3.1 Kalamazoo SMSA ............. 109 3.2 Grand Rapids ............... 110 3.3 Ann Arbor .................. 112 5. CONCLUSIONS .......................... 115 APPENDICES A .............................. 124 B .............................. 131 BIBLIOGRAPHY ......................... 157 TABLE .2A .2B LIST OF TABLES Page Michigan Manufacturing ........................... 4 Percent Distribution of Total Wage and Salary Employment in Michigan and the 0.5. Selected Years. 1962-1982 ................................ 15 Civilian Unemployment Rate In Michigan and the 0.5. 1962-1982 .................................. 19 Percent Change of Employment in Michigan During Recessions 1973-1975, 1979-1980 and 1982 ........ 20 Absolute Employment and Percent Change in Michigan Industrial Region 1962-72 and 1972-82..23 Percent Distribution of Total Wage and Salary Employment MIR 1962-1982 ........................ 28 Industry Mix Factor Michigan Industrial Region Between 1962-1972 ............................... 30 Industry Mix Factor Michigan Industrial Regions Between 1972-1982 ............................... 32 Total Wage and Manufacturing Employment Michigan Industrial Region ...................... 36 Index of Diversification for Michigan SMSA’S 1962-1982 ....................................... 37 Per Capita Income Michigan Industrial Region 1976-1984 ....................................... 39 Competitive Share Factor Michigan Industrial Region Between 1962-1972 ........................ 94 Competitive Share Factor Michigan Industrial Region Between 1972-1982 ....................... 96 Percent Distribution of Total Wage and Salary Employment Benton Harbor SMSA 1962-1982 ........ 124 Percent Distribution of Total Wage and Salary Employment Flint SMSA 1962-1982 ................ 124 Percent Distribution of Total Wage and Salary Employment Lansing-East Lansing SMSA 1962-1982 ...................................... 125 .10 .11 .12 .13 .14 Percent Distribution of Total Wage and Salary Employment Detroit SMSA 1962-1982 .............. 125 Percent Distribution of Total Wage and Salary Employment Jackson SMSA 1962-1982 .............. 126 Percent Distribution of Total Wage and Salary Employment Ann Arbor SMSA 1962-1982 ............ 126 Percent Distribution of Total Wage and Salary Employment Saginaw SMSA 1962-1982 .............. 127 Percent Distribution of Total Wage and Salary Employment Battle Creek SMSA 1962-1982 ......... 127 Percent Distribution of Total Wage and Salary Employment Muskegon SMSA 1962-1982 ............. 128 Manufacturing Employment Growth Rates Michigan SMSA’S 1962-1982 ............................... 128 Percent Distribution of Total Wage and Salary Employment Bay City SMSA 1962-1982 ............. 129 Percent Distribution of Total Wage and Salary Employment Grand Rapids SMSA 1962-1982 ......... 129 Percent Distribution of Durable Manufacturing Grand Rapids SMSA and Michigan ................. 130 Percent Distribution of Total Wage and Salary Employment Kalamazoo SMSA 1962-1982 ............ 130 Shift-Share Analysis Michigan Industrial Region 1962-1972 ............................... 131 Shift-Share Analysis Michigan Industrial Region 1972-1982 ............................... 132 Shift-Share Analysis Benton Harbor SMSA 1962-1972 ...................................... 133 Shift-Share Analysis Benton Harbor SMSA 1972-1982 ...................................... 134 Shift-Share Analysis Battle Creek SMSA 1962-1972 ...................................... 135 Shift-Share Analysis Battle Creek SMSA 1972-1982 ...................................... 136 Shift-Share Analysis Jackson SMSA 1962-1972 ...................................... 137 Shift-Share Analysis Jackson SMSA 1972-1982 ...................................... 138 Shift-Share Analysis Detroit SMSA 1962-1972 ...................................... 139 Shift-Share Analysis Detroit SMSA 1972-1982 ...................................... 140 Shift-Share Analysis Saginaw SMSA 1962-1972 ...................................... 141 Shift-Share Analysis Saginaw SMSA 1972-1982 ...................................... 142 Shift-Share Analysis Flint SMSA 1962-1972 ...................................... 143 Shift-Share Analysis Flint SMSA 1972-1982 ...................................... 144 Shift-Share Analysis Bay City SMSA 1962-1972 ...................................... 145 Shift-Share Analysis Bay City SMSA 1972-1982 ...................................... 146 Shift-Share Analysis Lansing-East Lansing SMSA 1962-1972 ................................. 147 Shift-Share Analysis Lansing-East Lansing SMSA 1972-1982 ................................. 148 Shift-Share Analysis Muskegon SMSA 1962-1972 ...................................... 149 Shift-Share Analysis Muskegon SMSA 1972-1982 ...................................... 150 Shift-Share Analysis Kalamazoo SMSA 1962-1972 ...................................... 151 Shift-Share Analysis Kalamazoo SMSA 1972-1982 ...................................... 152 Shift-Share Analysis Grand Rapids SMSA 1962-1972 ...................................... 153 Shift-Share Analysis Grand Rapids SMSA 1972-1982 ...................................... 154 Shift-Share Analysis Ann Arbor SMSA 1962-1972............... ....................... 155 B.26 Shift-Share Analysis Ann Arbor SMSA 1972-1982 ...................................... 156 CHAPTER ONE WIDE The purpose of this research is directed towards the examination and analysis of the patterns of change within the economic structure of Michigan’s Standard Metropolitan Statistical Areas over the period 1962-1982. This study will also show how each SMSA exhibited various degrees of cyclical sensitivity, and which local economic activities appear to be most sensitive to the national economic trend. The concept of development emphasizes some aspect of improvement and growth. When applied to a nation, region, or community, there is an implication that the improvement is not only good and desirable but necessary. For most economic geographers, development and growth are seen as comparable goals for the area to which their energies are directed. However, Friedmann distinguishes between development and growth. He suggests that dggglgpment is .. i: an ”innqyajireieteeeea --.l.sa.<..iinm 129--.??? “structaral transformation 9£159°1Sl systems,” while growth,” refers to an expansion of the system in one or more dimensions without " “"fl—n'm- _.._..._ .‘wi—vhm-fl’EF-hg‘s- a change in its structure ” (Friedmann, 1964). Industrial activity has long been associated with the concept of development ever since the initial stages of the industrial revolution in Great Britain in the second half of the eighteenth century. The industrial revolution brought not only an intensification of production, but also an expanded distribution of the benefits of such innovations. Through simultaneous improvements in transportation facilities, new locational possibilities for industrial expansion in manufacturing were created, strengthening even more the association between industrial growth and regional economic development. This happens when a new manufacturing plant enters a city and its region because the location provides cost related advantages for the firm to operate and obtain reasonable profits (Moriarty, 1980). A major consequence of the industrial growth is the creation of a significant number of new employment opportunities in the community, through what is known as (1) "circular and cumulative Process" (Pred, 1966) and (2) the "multiplier effect" both of which produce a need for additional enterprises in business, services, construction, and transportation. This will lead to an enlarged labor force. Industrial growth creates basic sectors and non- basic or service activities in the community. In order for a community to sustain its development, it must manufacture and export goods and services to regions beyond its own area or in some way engage in activities that will bring "new money” into its own economy (Isard, 1960). A region’s growth can be interpreted in terms of the dynamics of its industrial structure. For the purpose of this study economic structure will be defined " as the economic organization of a community in which each sector’s behavior is influenced by national economic forces". In consequence, growth performance of an individual region or community can be assessed against the background of developments in national economy. A. STATEMENT OF THE PROBLEM For many years Michigan has enjoyed economic growth well above the national average. Currently, as shown by the U.S. census, personal income in Michigan exceeds thirty other states. Average hourly earnings of production workers is the highest in the country. In addition, production per worker is higher than the U.S. average. The developmental advantages of Michigan may be largely attributed to its automotive industry, which dominates all other activities in the State. Miehééeatvhevevsr» has.ha§-FV?-tféfiiii9salusr9bl°¥3‘ (1) higher than national average unemployment and (2) extreme economic cysliggl fluctuations. One of the most persistent problems to arise from Michigan’s economic instability is the exceedingly high percentage of labor force of the state that is unemployed as a result of the closings or relocation of manufacturing plants. Table 1 shows that Michigan as a whole experienced a loSs of 232,000 manufacturing Jobs, a percentage decline of 26.2 percent during the period 1977-1982. Table 1 Michigan Manufacturing 1977-1982 Item 1977 1982 %change Number of establishments: 15,627 15,158 -3.1 Total Employment: 1,115,900 883,900 -26.2 Source: U.S. Census of manufacturers,Michigan 1977 & 1982 Every state is affected by the fluctuations and swings of the national economy. Generally, a state which has a diversified industrial structure will be less affected by national fluctuations than a state which has a more specialized pattern of activity. Michigan, which relies heavily on the automobile industry, is affected by national fluctuations in demand for cars and related products. The automotive industry is subject to the effects of what is known as the product life cycle: introduction, growth, maturation, saturation, and decline. Each stage of the life cycle contains its inherent unstable characteristics. In the initial stages, the automotive industry gives rise to considerable productivity and growth as it did to the U.S. in the 1940’s and currently for Japan and Korea. When it enters the maturation/saturation stage it becomes a slow growth/no growth industry. Currently, Michigan is showing signs of maturation and saturation with plant closings and rising unemployment. One of the most persistent problems to arise as a result of Michigan’s economic instability is the exceedingly high percentage of labor force of the state that is unemployed. This is mostly caused by closings or out-of-state relocation of manufacturing plants. All regions in the state have felt the effects of industrial unemployment, particularly those with a high percentage of their labor force employed in the auto related industry. B OBJECTIVES OF THE STUDY This study is intended to examine the patterns of change of the economic structure within Michigan’s SMSA, as reflected by the patterns of change in industrial employment levels. Under this main objective, this thesis will focus on the economic activity in the metropolitan areas over a twenty- year period, from 1962 to 1982. This period was marked with a fairly high degree of cyclical instability. Inflationary pressures, four recessions, and the energy crisis, made this period a particularly trying one for all sectors of the economy. Michigan has nearly always been a "feast-or- famine" state and one of the reasons of this is its heavy dependence on the volatile automobile industry which is concentrated in the metropolitan areas. In order to contribute to the understanding on the effects of these cyclical swings in the economy of the state’s metropolitan areas, this study will focus its attention on the following research questions: (1) What were the changes that occurred in employment and in the economic structure in Michigan’s SMSA’s during the twenty-year period ? (2) What industrial sector in the local economy of each SMSA’s economic structure appears to be the most sensitive to the swings in the national economy? (3) What characterizes those SMSA’s which exhibit the greatest degree of cyclical sensitivity? (4) How did the degree of concentration or industrial specialization of an area correlate with differences in performance in a cyclical economy? C. THE STUDY REGION In 1985, Michigan’s population was estimated at 9.1 million. About 81 percent of Michigan residents live in the states 12 metropolitan areas. All of Michigan’s SMSA’s are located in the southern half of the lower peninsula (see Map 1). These areas, as defined by the Bureau of Management and budget are ”areas comprising a county containing a central city (or twin cities) of 50,000 inhabitants or more, plus contiguous counties that are socially and economically integrated with the central city”. These 12 metropolitan areas can be viewed as small, open, regional economies which vary in size, industrial structure, and rates of growth. The Detroit SMSA, which includes six counties, had in 1985 a population of 4,187,800, more than seven times the size of the second largest SMSA, Grand Rapids. As shown in Table 2, the other metropolitan areas have relatively small populations with each having less than half-million residents. Industrial activity in Michigan is concentrated in these twelve metropolitan areas. In 1982, 88 percent of total manufacturing jobs were located in these areas. The Detroit SMSA, as the dominant industrial area accounts for 49.9 percent of total wage and salary employment in the state, 48.8 percent of manufacturing, 52.3 percent of non- manufacturing, and 38 percent of total government employment. The Detroit SMSA also accounted for 50.1 percent of all jobs in durable goods industries. The concentration of industrial activity in the metropolitan areas, therefore , suggests that the state’s cyclical behavior emanates from swings in business activity within those areas. D. DATA COLLECTION AND METHOD OF ANALYSIS The data used by this study were obtained from publications and reports of the Bureau of Research and statistics, Michigan Employment Security commission, Business employment patterns statistics, and the U.S. Bureau of the Census. The data are available in two-digit SIC (Standard Industrial Classification) aggregation by SMSA for Michigan as well as for the U.S. Data for the period 1962- 1982 was used for the analysis. For the purpose of this study it was judged that the two-digit level of aggregation would best suit the input requirements, although it was recognized that a higher level of disaggregation will be required for manufacturing. The method used in the analysis is known as Shift-Share Analysis. This technique has been widely used in the study of Regional economic growth. ( Ashby 1968, Floyd 1975, Bendavid-val 1983) This method divides the growth of a regional variable, such as employment, into three components. The first is referred to has the Nationalp Growth Effect Component (NGE). It may be regarded as the amount by which total employment in the region would have grown during the period studied if it grew at precisely the same rate as total employment in the nation as a whole. The equation for the NGE is as follows: 22E1:* iJ' NGE: 2E1: X ------ - 2E1: i ZZEij i 11 where: E1: = base year employment in industry 1 and region i Eij* = employment in terminal period * national employment in i industry (E1) 2E1: J 2E1: total regional employment (E.j) i ZZEiJ = total national employment in all industries. iJ The national growth component will measure the potential change in local (SMSA’s) employment as compared with national levels. This component is calculated by multiplying the base year employment, by the national rate of growth and then summing over all sectors. The results will show how many jobs were created or lost in each of Michigan’s SMSA’s due to national economic trends. The second measure is the Industrial Mix Component (IM) or (Proportionality Shift). This may be thought of as the degree by which employment in the region has grown or declined as a result of the region specializing in nationally fast-growing or slow-growing industries. The industry mix (IM) will be positive for regions specializing in fast-growing industries and negative for regions specializing in slow-growing industries. The equation for IM is as follows: 2Eij* 22E15* i 13 1M: 2 ( ----- ) - ( ------ ) X Eij) ZEij ZZEiJ t 1: Symbols as defined above. The industrial mix will help determine whether the local economy is concentrated in industries that are growing slower or faster than the national average. The industry mix component is determine by multiplying the local employment 10 of each economic sector by the difference in the national growth rate for the sector and the growth rate for the whole economy . The third measure is the Competitive Share Component (CS) (or Differential Share) This item reflects the relative shift in employment growth in the region resulting from industries in the region that grow at a faster or slower rate than the national growth rate. A region in which employment grew faster than its industrial mix would suggest a positive competitive share , while the share would be negative in the case of a region in which employment grew more slowly than its industrial mix would suggest. The equation for the Competitive Share (CS) is as follows: CS: Z(Eij* - ------ X E15) 1 Symbols as defined above. This third component will measure the ability of each SMSA to capture an increasing or decreasing share of a particular sector’s growth. It is computed by multiplying the local employment in each economic sector by the difference in the growth rate of that sector nationally and locally. The three components, therefore, are exhaustive of the actual regional growth of total employment. In summary, this technique will attempt to: measure how many new jobs were created locally due to national economic trends, determine 11 whether the local economy is concentrated in industries that are slower or faster than the national average, and determine whether local businesses are growing faster or slower than similar businesses in the nation, i.e., more competitive or less competitive. E. RELEVANCE OF STUDY There are literally thousands of organizations of different sizes working at various levels (national, regional, state, and local) engaged in community development activities who would be interested in the relative performance of various regions in industrial employment. Urban and economic geographers also are aware of the need of examining patterns of change of the economic structure within urban areas as reflected by the patterns of change in employment in specific industries (Perloff 1961, Ashby 1968, Hale 1971, Stokes 1974, Floyd 1975). At a time when it is crucial for Michigan in general, and the southeastern region in particular to stabilize its economy and become more competitive, this study will help explore the regional and sectoral patterns of decline in employment and provide some clues about past trends of economic performance which in terms may enable planners to prepare for the challenges of tomorrow. Understanding the structural weaknesses of a community’s industrial organization will assist those interested in its development 12 to correct them by improving the economic well-being of the community they serve. CHAPTER TWO BAITERNiiQLEMELQXMENTflANfiEMIN-.MI_C_I:I.I.G.AN-1.96.2.119.8.2 . The purpose of this chapter is to examine the structure of the Michigan economy and changes it has gone through over the period of 1962-1982. The first part of this chapter will focus on the composition of employment in Michigan with emphasis on manufacturing. The study will also compare employment patterns in the state during the three major recessions of 1973-1975, 1979-80, and 1982. In the second part, this chapter will focus on sectorial employment changes by sector that have occurred in Michigan SMSA’s (hereafter called Michigan Industrial Region) with special attention on long term employment trends in the region. 1 . WWW aWW The main reference point throughout the analysis of Michigan’s total employment change pattern and its change will be the national economic trends. Employment in manufacturing has experienced a steady decline at the: national level as well as in.Michigan. This can be seen from Table 2.1 which presents a breakdown of total employment between manufacturing, non-manufacturing, and government sectors for selected years. During the study period, employment in the state has been more concentrated in 13 l4 sectors for selected years. During the study period, employment in the state has been more concentrated in manufacturing industries than the national average. In 1982, 27 percent of total wage and salary employment of the state was in manufacturing, the lowest proportion in over forty years, yet it was still six percent higher than the corresponding national proportion. The relatively high concentration of Michigan’s employment in slow-growing manufacturing sector contributed significantly to the state’s slow growth in total employment. The breakdown of total manufacturing employment into durable and non-durable goods shows that both the national and state patterns have been stable over the study period. However, there have been significant differences between the national and the state shares. Manufacturing employment in Michigan, is much more concentrated in durable goods. Indeed, in 1982, Michigan’s share in durable manufacturing employment was approximately 20 percentage points higher than the U.S. An even more dramatic illustration of the relatively low degree of diversification in Michigan’s economy is obtained by comparing the national/state levels in the manufacture of motor vehicles (SIC 371) (Table 2.1). The single most important fact that characterizes the state’s economy and the one that underlies employment instabilities in the state 15 Table 2.1 Percent Distribution of Total Wage and Salary Employment in the Michigan and the U.S. Selected Years. 1962-1982 Region Sector Percent of Total % Change Employment 1962-1972 1962 64 66 68 70 1972 0.9 MANUFACTURING 30 29 30 29 27 25 -16.6 Durable 56 57 59 59 58 58 -Motor Vehicle 17 17 18 18 16 16 Non Durable 44 43 41 41 42 42 NON-MANUFACTURING 54 55 54 54 56 57 5.6 GOVERNMENT 16 16 16 17 17 18 12.5 Michigan MANUFACTURING 41 41 41 39 36 35 -14.6 Durable 79 80 81 81 80 80 -Motor Vehicle 42 42 41 43 41 43 Non Durable 21 20 19 19 20 20 NON-MANUFACTURING 44 44 43 45 47 48 9.1 GOVERNMENT 15 15 16 16 17 17 13.3 Region Sectors Percent of Total % Change Employment 1972-1982 1972 74 76 78 80 1982 U.S. MANUFACTURING 25 25 23 23 22 21 -16.0 Durable 58 59 58 60 60 59 -Motor Vehicle 16 15 16 16 16 16 Non Durable 42 41 42 40 40 41 NON-MANUFACTURING 57 57 59 59 61 61 7.0 GOVERNMENT 18 18 18 18 17 18 0.0 Michigan MANUFACTURING 35 34 32 33 29 27 -23.0 Durable 80 80 80 81 80 78 -Motor Vehicle 43 42 43 45 43 44 Non Durable 20 20 20 19 20 22 NON-MANUFACTURING 48 49 50 50 53 54 12.5 GOVERNMENT 17 17 18 17 18 25 47.1 —,.'&"’2 -1 ----------------------------------------------------- ‘N [SourcegiU.S. Department of Labor and Michigan Employment ---e““ Security Commission. 16 is that Michigan had in 1982 three times more in share of employment concentrated in motor vehicles production than the nation as a whole. Although the manufacturing sector in Michigan’s economy accounts for no more than one third of total employment, its importance lies in its sensitivity to cyclical changes of the business climate. This is clearly demonstrated by the drastic drop in manufacturing employment relative to total employment during the recession years. In the 1973-1975 recession, while total wage and salary employment dropped by only 4.5 percent, manufacturing employment fell 17.5 percent, 13 percentage points higher than the drop in total employment. B. WWWa WWW Much of the growth in National employment during the period 1962-1982 is attributable to the private non- manufacturing sector. During this period, the average annual growth rate in private non-manufacturing employment was 3.2 percent, 0.6 percentage points above the growth rate for wage and salary employment. Over the same period, Michigan’s annual average growth in this sector was 2.7 percent, which is considerably lower than the national figure, but 1.2 percentage points higher than the state’s average rate of growth in total wage and salary employment. The number of 17 new jobs created by non-manufacturing industries during these 20 years reflected an increase of 13.6 percent nationally and 22.7 for the state of Michigan. In addition, to enjoying stronger growth than their respective manufacturing counterparts, employment in non- manufacturing industries for the state has been generally less sensitive to fluctuations in business climate. During the recession of 1982 while the state’s employment in manufacturing fell by 10.4 percent, non-manufacturing industries fell by only 2.7 percent. A more striking difference was experienced during the severe 1973-1975 recession. In that recession, employment in manufacturing declined by 16.8 percent while non-manufacturing employment experienced only less than one percent decline. During the study period, both state and national employment rates in government have experienced the most rapid growth. When state/national levels in all three employment categories, manufacturing, non-manufacturing and government are compared, only in government employment has the state kept pace with that of the nation ( see Table 2.1). An examination of government employment figures during the three recession periods mentioned above, reveals that the government employment sector is remarkably "insensitive" to the fluctuations in economic activity. In fact, during the 1973-1975 and 1980 recessions, while all other sectors experienced decline in employment the government sector 18 experienced a relative gain by 9.1 and 3.2 percent respectively. The Michigan economy has experienced slow growth in total employment during the 1962-1982 periodL The most important problem in the state’s employment has been its sensitivity to fluctuations in economic activity along the business cycle largely due to its relative concentration of employment in durable goods manufactures especially in motor vehicles and related industries. Much of Michigan’s variation in total employment can be accounted for by the swings in employment in the durable goods sector. C. DifferentiaL-Imeact-.cLBecesaicns_.cn_Michisan_Emnlczmeni Bahama: . In 1982, Michigan experienced unemployment rate in excess of 10 percent while the national rate remained below 10 percent (Table 2.2). This was the third time in twenty years (others are 1975 and 1980) in which state unemployment rates exceeded of the nation. The nature of Michigan’s economic structure and why its manufacturing sector is oversensitive, causing it to sustain a high degree of downturn whenever the national economy experiences anything more than a mild recession (see Table 2.2), has been of interest to researchers and policy makers; 19 Table 2.2 Civilian Unemployment Rate in Michigan and the U.S. 1962-1982 Years Michigan U S Years Michigan U S 1962 7.0 5.5 1973 5.9 4.9 1963 5.6 5.7 1974 7.4 5.6 1964 4.8 5.2 1975!* 12.5 8.5 1965 3.9 4.5 1976 9.4 7.7 1966 3.5 3.8 1977 8.2 7.1 1967 4.5 3.8 1978 6.9 6.1 1968 4.3 3.6 1979 7.8 5.8 1969 4.0 3.5 1980** 12.4 7.1 1970 6.7 4.9 1981 12.3 7.6 1971 7.6 5.9 1982** 15.5 9.7 1972 7.0 5.6 _‘ '“ ** Recession Year. a» _i ”I u Although the 1980 recession was declared "the briefest on record" by the National Bureau of Economic Research, the' unemployment rate in Michigan averaged to 12.4 percent, more than double the average national rate. This disparity between the state and the nation within just one year, indicates the rapidity in which Michigan manufacturing responds to national trends. The longer recessions of 1973- 1975 and 1979-80 produced the same patterns, with employment in manufacturing suffering substantial losses (see Table 2.3). 20 Table 2.3 Percent Change of Employment in Michigan During Recessions (1973-1975, 1979-80 and 1982) Sector 1973-75 1979-80 1982 MANUFACTURING -16.5 -15.3 -10.4 Durable Goods -18.4 -16.6 -12.0 Motor Vehicle -20.0 -19.7 -10.1 Non-Durable Goods -9.4 -10.1 -4.2 NON-MANUFACTURING -.08 -.1 -2.7 Construction -19.1 -16.0 -16.2 Transportation -6.2 -2.4 -3.1 Wholesale 3 -2.1 -3.0 GOVERNMENT 9.1 3.2 -3.4 Source: Michigan Employment Security Commission. 1984 Employment in motor vehicle and transportation equipment (SIC 3700) suffered the highest rate of decline in 1973-1975 and 1980. Losses in motor vehicle employment accounted in 1973-1975 for 48.1 percent, 53.1 percent in 1980 and 34.4 percent in 1982. Table 2.3 clearly shows that non-manufacturing activities and the government sector have remained the least sensitive to cyclical downturns in economic activity. Although the aggregate non-manufacturing sector was less affected by the economic recessions some subsectors exhibited significant declines in employment (Table 2.3). Construction (SIC 15-17) declined by 19.1 percent during the largest recession (1973-1975) and 16.2 percent during the shortest recession (1980). 21 Transportation and Public Utilities (SIC 40-42,44-49) declined in all three periods with 6.2, 2.4 and 3.1 percent respectively. Employment in the government sector experienced growth during the longest and worst recession (1973-1975) (9.1 percent) the following 1979-80 recession (3.2 percent), but it also suffered a decline in the latest recession by 3.4 percent. Even though some sectors of the state’s economy fared better in the 1979-80 and 1982 recessions than in the 1973- 1975 crisis, the decline in total employment was somewhat worse in the more recent period (Table 2.3). As a result, the growth rate in personal income in 1982 at only 2.3 percent, was significantly less than the growth in 1980 at 6.2 percent and 1975 5.6 percent. D. WWW Resign. Michigan industria1_activity i§-largely concentrated in its metropolitan areas. In 1982, for example, 86 percent of total wage and salary workers were located in the state’s twelve metropolitan areas, accounting for 85 percent of all jobs in durable goods industries. As a result, these areas are considered the economic hearth of the state. For the purpose of this study, Michigan SMSA’s, as described in Chapter 1, will be referred to as Michigan Industrial Region (M.I.R.). 22 During the twenty years covered by this analysis, the total salary and wage earning employment in the industrial region increased from 1,997,500 workers in 1962 to 2,728,600 workers in 1982. This constituted a total employment gain of 37.0 percent during this period (Table 2.5). This was about the same rate of growth experienced by the state as a whole (36.9 percent). However, it is lower than the nationwide total employment gain of 77.7 percent. When sectorial patterns are examined more closely, several significant and differential developments have occurred. First, the total employment growth rate of the region (MIR) during the first ten years (1962-1972), was 34.3 percent (Table 2.4), almost the same as the 35.7 percent for the nation. 0n the other hand, the employment rate during the 1972-1982 decade experienced a dramatic change registering a slight increase of only 1.6 percent. As shown on Table 2.4 the change was more than 30 percentage points lower than the growth experienced during the previous decade. The nation, on the other hand, increased its employment by 31 percent. 23 Table 2.4 Absolute Employment and Percent Change in Michigan Industrial Region: 1962-72 and 1972-82 Sectors (Employment in thousands) %Change %Change 1962 1972 1982 1962-72 1972-82 MANUFACTURING 848.1 969.3 766.4 14.3 -20.9 -Durable Goods 692.3 797.8 617.8 15.2 -22.6 -Non-durable 155.6 171.5 148.3 10 2 -13 5 NON MANUFACTURING 874.7 1283.5 1498.8 46.7 17.4 -Construction 74.0 104.7 71.2 41.4 -32.9 -Transportation 110.8 126.4 123.9 14.1 -1.9 -Wholesale Trade 366.8 509.4 600.4 38.9 17.8 -Finance 78.5 139.8 136.6 78.1 -2.3 -Services&Mining 244.6 403.2 566.7 65.0 40.5 GOVERNMENT 274.7 430.7 463.4 56.7 7.6 TOTAL EMPLOYMENT 1997 5 2683 5 2728 6 34 3 1 6 Source) Michigan Employment Security Commission. Second, looking at the results produced by the shift/share method, two important developments seem to have been partially responsible for the differential between MIR and the national patterns. These are --the industrial composition and the competitive position of the region. During the 1962-1972 decade the favorable competitive position was not enough to offset the unfavorable industrial structure of the region. Manufacturing, for example, lost 166,373 jobs by itself, indicating that the concentration of employment in this slow growth sector did not help the region in its overall economic performance. The total net effect for this period was a loss of 23,859 jobs. However 24 during the 1972-82 decade the employment situation worsened primarily by the effects of the recessions. As it was mentioned before, manufacturing activities, especially the durable goods production is the most sensitive sector to economic downturns. Michigan industrial region with one third (34.5 percent) of its employment located in manufacturing suffered severally. Between 1972 and 1982 the region experienced a net loss of more than 1 million jobs (1,185,750), more than it would if it had a more diversified employment. Now let us examine some of the significant empioyment changes that occurred among the various industrial_secto£§ of the region, In terms of changes in absolute numbers of employees between 1962 and 1982, the most affected sector was durable goods manufacturing, particularly the motor vehicle and transportation equipment subsector. However, the employment growth rates for these industry sectors were significantly different (see Table 2.4). While professional and related services employment expanded by 131.6 percent during the 1962-1982 period; wholesale trade and finance increased by 64 percent and 74 percent respectively, manufacturing as a whole shrank by 9.6 percent. Within manufacturing, the durable goods employment declined by 10.8 percent, particularly in motor vehicles and transportation equipment sector (SIC 371) were employment declined by 22.5 percent. Furthermore, Textile, and mill products (SIC 220) decline by 61.2 . Chemical and allied products suffered a 25 loss of 45 percent. Contract construction employment showed a high degree of sensitivity particularly during the 1972- 1982 decade. During this period construction employment fell by 33 percent, more than 70 percentage points below its performance during the previous decade (Table 2.4). In summary, Growth in employment in the Michigan Industrial Region during the twenty years period was significantly influenced by the high concentration of employment in durable goods manufacturing, particularly in the motor vehicle and equipment manufacturing. The unfavorable employment situation of the region during the periods analyzed was largely a result of the drop in demand for automobiles, particularly during recession, coupled with a trend towards decentralization in that industry. CHAPTER THREE INDUSTRIALWCQMBQSIIIQN_AND1EMPLQXMENI_BEHAXIQR INTRODUCTION The content of this chapter will focus on the industrial composition and its impact on employment growth in the Michigan Industrial Region over the period 1962-1982. In the first section, this chapter will examine the region’s industrial mix component as well as the patterns of employment in specific sectors. Special attention will be given to the influence that manufacturing activities have had over the region’s performance. In the second part, the study will look at each subregion (each SMSA) to establish differences in performance related to: (1) concentration of employment in fast or slow growing industries, (2) employment behavior during economic crises and cyclical sensitivity and (3) economic recuperation process. The economic growth of a region is the result of a complex interaction of various forces. One of the variables that will influence the region’s performance in both short and long terms is the distribution of, in this case, employment in either slow or fast growing industries. Regions that are highly concentrated in industries experiencing a slower growth than the national average will suffer higher than average unemployment and overall economic decline, particularly, during economic slowdowns and 26 27 will have the opposite outcome of increasing employment opportunities. However, it is important to understand that shifts in demand for certain products affected by price, taste, technology and economic restraints, can transform industries considered fast growing in one period of time into slow growing and declining in another. Therefore, diversification as opposed to concentration 'seems to be in the_best interest of a region’s economic well-being. A. MIR INDUSTRIAL MIX AND PATTERNS OF EMPLOYMENT. Looking at the MIR’s distribution of employment among industrial sectors, Table 3.1 shows the distribution of employment between manufacturing, non-manufacturing and government sectors for 1962, 1972, and 1982. Throughout the period, we can observe steady patterns of growth or decline in terms of employment distribution among the sectors presented. Inmthe MIR, manufacturing experienced aflsteady _.._.’—a~.— decline throughout the 1962-1982 period from 42 percent to o--—-—-r--—.-__.._~ .. _ _. less than 30 percent (28 percent) of_total wage and salary employment, a decline of 33.3 percent. The overall deciine in manufacturing was largely offset by increases in non- manufacturing employment, which increasedflfrom_44fipergentfi3f total employment in 1962 to 55.percentninM19Q2. Government employment remained relatively constant. This sector registered a 21.4 percent increase from the 1962 employment levels. 28 TABLE 3.1 Percent Distribution of total Wage and Salary Employment Michigan Industrial Region 1962-1982 Percent Distribution of Employment Sector 1962 1972 1982 Manufacturing ................ ié ..... éé ..... éé ............... -Durable Goods (82) (82) (81) -Non Durable (18) (18) (19) Non Manufacturing 44 48 55 Government 14 16 17 Source: Michigan Employment Security Commission. 1984 A fundamental question is, how has the region’s economic structure or industrial mix affected its employment behavior throughout the period 1962-1982? Also, which sectors of the economic structure of the region are responsible for either its growth or decline in employment. These questions can be addressed by measuring the proportional shift or mix effects of the shift-share analysis. As stated earlier in this study, the mix effect component of the analysis shows how regional or local growth or decline in employment has been stimulated because of a regional concentration of industrial activities in relatively faster or slower economic sectors. The industry mix factor of MIR over the period 1962- 1982 was negative (Table 3.2a and Table 3.2b). This negative mix result suggests that the region’s economy had 186,059 less jobs than it would that if its economic structure was identical to that of the nation. Independent 29 from national influences or national effect, the local sectors, on balance, grew slower than the national average causing a decline in local employment. The unfavorable industry mix deteriorated drastically during the period of 1972-1982. The effects of two recessions (1980 and 1982) were accentuated in the region’s performance primarily because of the high concentrations of employment in slow growth industries. The unfavorable elements of the region’s industry mix evolved around the reduction of over 86,000 job opportunities. As noted in Table 3.2b, all sectors of the region’s economy did not register a negative mix effect. . However, the concentration of employment in fast growing sectors like services and mining, finance and wholesale trade were not enough to offset the poor performance of manufacturing, contract construction and transportation. These three sectors together accounted for a reduction of 303,942 job opportunities. However, interesting enough, 75 percent (277,229 jobs) of the decline in jobs was primarily the result of the MIR concentration in manufacturing activities, particularly in the highly recession-sensitive, durable goods manufacturing. The leading position of durable goods and manufacturing, in general, has been reduced over the years as noted from Table 3.1. 30 Table 3.2A Industry Mix Factor Michigan Industrial Regions Between 1962-1972 Manftg. A.Arbor B. Creek Bay City B. Harbor Detroit Flint Jackson G. Rapids Kalamazoo Lansing Muskegon Saginaw Transp. Fin. Svc -147 100 1629 -l47 191 1474 -102 41 853 -102 91 1241 -4568 4637 41550 -333 241 2973 -250 83 1008 -615 448 4913 -154 149 1784 -237 299 3051 -135 100 1189 -269 133 1577 -6440 7719 60364 Source: Michigan Employment Security Commission, 31 As mentioned earlier, through the 1962-1982 period, employment located in manufacturing activities declined over 33 percent. During the same twenty-year period, durable goods manufacturing employment also experienced decline, while on the other hand, non-manufacturing employment increased its size. However, it seems that the relative decline in durable goods manufacturing and the consequent increase share of employment by other sectors did not reduce the tendency for the region to experience an overall negative proportional shift (industry mix effect) and greater than average cyclical unemployment. A relative decline in the employment share in durable goods activities in the region has been observed as a potential cure for the well known cyclical nature of the states employment; however, the rate at which diversification is taking place, is not fast enough to correct the susceptibility of the region and the state to cyclical downturns. In addition, part of the reason for the cyclical character of the region’s poor performance in relation to employment growth, during the movement towards a more diversified wage and salary structure, probably results from a basic connection between manufacturing and non-manufacturing employment. A. Arbor B. Creek Bay City B. Harbor Detroit Flint Jackson G. Rapids Kalamazoo Lansing Muskegon Saginaw Const. 32 Table 3.2B Industry Mix Factor Michigan Industrial Regions Between 1972-1982 Manftg. -l72666 -23842 -5403 -23323 -10252 -12303 -12303 -10105 -277229 Transp. Fin. 4060 -7364 Source: Michigan Employment Security Commission, 33 Layoffs in durable goods industries reduce the personal income stream which in turn has a negative impact on the demand for non-manufacturing goods and services. A decline in the region’s major durable goods industry (motor vehicle, SIC 3700) creates a negative multiplicative effect in the whole complex of related industries. Declines in auto production reduces the demand for steel, glass, plastic, rubber, machine tools, electric components, metal finishing and component auto parts that further reduce the income stream and employment prospects for the region. B. LOCAL INDUSTRIAL MIX AND SUB-REGIONAL DIFFERENCES. The twelve metropolitan areas which make up what we have defined as Michigan’s Industrial Region (MIR), vary in population size, industrial diversification and rate of growth. These local economies have exhibited, due to their particular industrial structure varying degrees of sensitivity to the swings of the national economy, during recessionary periods. During the 1973-1975 recession, manufacturing employment exhibited sizable downswings in the Ann Arbor, Flint, Benton Harbor, Detroit, Jackson, Lansing- East Lansing, and Saginaw SMSA’s (Table 3.3). This is not at all surprising, considering that each of those areas is heavily dependant on the automobile industry. In that recession, manufacturing employment fell 19.1 percent in Ann Arbor, 19.4 percent in Flint, 20 percent in Lansing-East 34 Lansing, and 17 percent in Saginaw SMSA’s. These areas exhibited the most severe cyclical sensitivity in their manufacturing sector. In contrast, three areas least dependent on durable goods, Bay City, Kalamazoo and Battle Creek experienced the lowest degree of cyclical sensitivity within their manufacturing sectors. During the 1973-1975 recession, manufacturing employment fell by 8.8 percent in Bay City, 10.9 percent in Kalamazoo and 13.1 in Battle Creek. Manufacturing employment in Lansing-East Lansing SMSA area exhibited the most cyclical sensitivity, while Bay City SMSA exhibited the least. Note that despite having highly volatile manufacturing sectors, contractions in total wage and salary employment in Ann Arbor, Grand Rapids, and particularly Lansing SMSA’s were relatively mild, due to the moderate influence of the large and fairly stable non- manufacturing and government sectors in each area. I Using the 1973-1975 recession, one has to show the differences that exist among Michigan SMSA’s in their response to downward swings in the national economy; we may observe that metropolitan areas in Michigan which have a large and highly volatile manufacturing base are also susceptible to sizable swings in unemployment. The Ann Arbor and Flint SMSA’s on the one hand, and the Kalamazoo SMSA on the other hand are excellent examples. Ann Arbor and Flint SMSA’s are good examples of local instability. Both areas experienced sharp declines in manufacturing employment during the 1973-1975 recession (Table 3.3) 35 resulting from the fall off in activity mainly in the automobile industry. As a result, the unemployment rate between 1973 and 1975 increased from 4.2 to 13.9 percent in the Ann Arbor SMSA and from 5.4 percent to 17.3 percent in the Flint SMSA, during the same period. The latter represents the highest quarterly jobless rate among the Michigan metropolitan areas during that recession. At the other extreme, is the Kalamazoo SMSA which experienced one of the mildest downswings in manufacturing employment in its jobless rate from 4.5 percent to 11.7 percent, between 1973 and 1975. Although the latter was well above the national average, it was below the statewide high of 13.4 percent in 1975 and was the lowest among the 12 Metropolitan areas. Beside the degree of sensitivity to the swings in the national economy and the varying effects that this phenomenon has for each local economy, there is another aspect that makes distinctions among the 12 sub-regional economies. Each area has its particular industrial structure with varying rates of diversification. A index for testing the diversification of employment in a region that was developed by Gibbs and Martin (1962) was used to examine this problem. If the labor force in a region is concentrated wholly in one industry the index is zero; if it is evenly distributed throughout every industry (i.e., maximum diversification) the index approaches 1 (Clements and Sturgis, 1971). Using this method, Table 3.4 summarizes the level of diversification of each subregion. 36 Table 3.3 Total Wage and Manufacturing Employment Michigan Industrial Region 1973-1975 Manufacturing Total SMSA Employment Employment Ann Arbor -19.1 -3.9 Battle Creek -13.1 -5.8 Bay City -8.8 -0.9 Benton Harbor -19.4 -10.0 Detroit -18.0 -5.7 Flint -19.4 -8.8 Jackson -18.0 -7.0 Grand Rapids -15.4 -1.9 Kalamazoo -10.9 2.3 Lansing-East Lansing -20.0 -1.2 Muskegon -9.0 0.1 Saginaw -17.1 -5.5 Source: Michigan Employment Security Commission, 1984. In order to make adequate comparisons among areas, the city size must be taken into consideration because of the direct relationship that exist between city size and extent of the diversification of its industrial structure (Duncan, 1960; Thompson, 1967). A comprehension of differences in level of diversification among Michigan SMSA’s can be obtained by comparing similar size subregions (in terms of population). Flint, Grand Rapids, and Lansing-East Lansing SMSA’s can be grouped together as large areas. However, Flint SMSA with the lowest level of diversification (.63) in 1962, among the three SMSA’s has registered the highest diversification rate during the 1962-1982 period (21 percent), more than 20 percentage points above the national 37 area rate (1.2 percent). On the other hand, the Lansing- East Lansing SMSA, highly dependent on the automobile industry, registered the highest level of diversification in 1962, but the lowest (1.3 percent) diversification rate increase within all the SMSA’s of the state. Table 3.4 Index of Diversification for Michigan SMSA’s 1962-1982 Index rate SMSA 1962 1972 1982 1962-72 1972-82 1962-82 Ann Arbor .71 .73 .77 2.8 5.4 8.4 Battle Creek .72 .75 .79 4.2 5.3 9.7 Bay City .76 .78 .79 2.6 1.3 3.9 Benton Harbor .67 .71 .77 .5.9 8.4 15.0 Detroit .75 .79 .79 4.2 O 5 Flint .63 .72 .76 14.3 5.5 21.0 Grand Rapids .73 .76 .77 4.1 1.3 5 Jackson .74 .78 .81 5.4 3.8 9.4 Kalamazoo .71 .76 .78 7.0 2.6 9.8 Lansing-E. lansing .76 .77 .77 1.3 0 1.3 Muskegon .65 .74 .78 13.8 5 20.0 Saginaw .73 .74 78 1.3 5.4 6 8 Complete Concentration=.0 complet Diversification=.86 Source: Michigan Employment Security Commission, 1984. In fact during the 1972-1982 decade while Flint SMSA registered a 5.5 percent increase and Grand Rapids SMSA a 1.3 percent increase Lansing-East Lansing SMSA registered absolutely no variation in diversification levels in the ten year period. Controlling population size, the rate at which each sub-area is diversifying its economy is another factor that can assist in establishing measurable differences among the metropolitan areas in Michigan. 38 Finally, there are significant differences among the 12 subregions in relation to per capita income (Table 3.5). The SMSA’s with the highest per capita income are those with a high concentration of the well-paid auto related jobs. However, the process of diversification that is taking place at different rates in each local economy is producing notable differences. Ann Arbor with a 8.4 percent change in diversification level during the 1962-1982 period produced a 112.8 percent change in per capita income for the period of 1976-1984, 26 percentage points higher than Flint which registered twice the rate of diversification but with a per capita income change of only 86.5 percent. In other words diversification does not necessary mean higher wages. C. LOCAL INDUSTRIAL STRUCTURE AND ECONOMIC PERFORMANCE.. This section of the study will analyze the industrial structure of each subregion (SMSA’s) to establish differences in performance related to the proportional share of employment among fast/slow growing industries, cyclical sensitivity and economic recuperation. However, to facilitate the analysis all metropolitan areas have been grouped into three clusters, based on the magnitude of their employment loss (or gain), related to industry mix and the employment behavior of each SMSA during the 1973-1975 recession. The latter was included because of its relative severity and length. 39 Table 3.5 Per Capita Income Michigan Industrial Region 1976-1984 SMSA 1976 1984 % Change Ann Arbor 6895 14670 112.8 Battle Creek 6713 11729 74.8 Benton Harbor 5907 11149 88.7 Detroit 7482 13943 86.3 Flint 7066 13181 86.5 Grand Rapids 6293 12385 96.8 Jackson 6154 11166 81.4 Kalamazoo 6656 12817 92.6 Lansing-E. lansing 6504 12325 89.5 Muskegon 5665 10498 85.3 Saginagi 6564 11757 79.1 (Source: Bureau of Economic Analysis. ‘..\ ~____,,/" 1.0 The first cluster is made up of those SMSA’s that exhibited the highest cyclical sensitivity and the greatest losses of employment in proportion to total employed labor force. This gggup includes: Benton Harbor, Flint, Lansing- East Lansing, Detroit, and the Jackson SMSA’s. 1.1 Ganaral_flhaxasiarifilinfi a-WSMSA The Benton Harbor SMSA, is a relativelygsmgll metropolitan area encompassing the single county of Berrien. M— In 1985, 163,800 people lived in the area, making it the fougib Smallest metropolitanwarfia in the state. Between 1980 and 1985, Benton Harbor SMSA’s experienced a decline in populatign of 4.3 percent, the third largest decline 40 exceeded only by Jackson and Saginaw SMSA’s with 5.1 percent and 4.8 percent respectively. In terms of per capita income, the Benton Harbor SMSA ranked 10th among all metropolitan areas of the state. This area increased its per capita income from $5,907 to $11,149, representing a 88.7 percent over the eight year period. b. Elint_SM§A The Flint SMSA is located South of Saginaw SMSA and East of the Lansing-East Lansing SMSA. This Metropolitan area is made up of the Shiawasee and Genesee counties. In 1985, this area had a population 502,400 people, the third largest behind Detroit and Grand Rapids SMSA’S. In terms of per capita income, the Flint SMSA ranked third in 1984 with $13,181, representing a 86.5 percent increase since the 1976 level of $7,066. It should be noted, however, that because of its heavy dependence on automobiles, more than in any other Michigan metropolitan area, personal income in the Flint SMSA varied considerably over the business cycle c. Lansinngaat_Lanains_SMSAI Four counties make up the Lansing-East Lansing SMSA: Ionia, Eaton, Clinton and Ingham. In 1985, the population of this area was estimated at 471,200, people making this metropolitan area the fourth largest in the state. Between 1980 and 1985, the population of this area increased by .07 percent, this area had one of the lowest declines of population among Michigan metropolitan area. Although four counties comprise this metropolitan area, about 60 percent 41 of the population lives in Ingham county where the central cities of Lansing and East Lansing are located. In terms of per capita income, this metropolitan area ranked sixth in 1984. The Lansing-East Lansing SMSA increased its per capita income from $6,504 in 1974 to $12,325 in 1984, representing a 89.5 percent change over the eight year period, and the fourth highest increase among all twelve metropolitan areas of the state. d. DairQiL_§M§A The Detroit SMSA is composed of six counties in southeastern Michigan, it is by far the largest urban area in the state with a population of 4,187,800 in 1982. In that year, 46 percent of the state’s residents lived in the Detroit SMSA. The Detroit SMSA is one of the major metropolitan areas in the nation. However, this area has experienced negative population growth during the 1970’s and 1980’s. Between 1980 and 1985, this area’s population had fallen from 4,353,413 to 4,187,800 a 3.8 percent decline. In terms of per capita income, the Detroit SMSA ranked second in 1984 with $13,943, following the Ann Arbor SMSA with a per capita income of $14,670. Between 1976 and 1984, this area experienced a income growth of 86.3 percent similar to the state’s increase of 86.4, but the fifth lowest among all 12 metropolitan areas of the state. e.lackson_SMSA The Jackson SMSA is composed of the single county of Jackson. One of Michigan’s smallest metropolitan areas, it 42 ranks eleventh among the state’s twelve metropolitan areas. In 1985, this area had a population of 143,700, only the Bay City SMSA was smaller. In addition, this county experienced a drop in population between 1980 and 1985 of 5.1 percent, the highest decrease among the twelve metropolitan areas. In 1976, the Jackson SMSA had a per capita income level of $6,154, at this time, it was the second lowest among metropolitan areas. This situation improved in 1984 with a per capita income of $11,166, ranking ninth among the states SMSA. However, in terms of per capita growth as in the case of population, only the Bay City SMSA had a lower income growth than Jackson, 79 percent and 81.4 percent, respectively. a. W Looking at the empioymentwdistribution in the Benton “--‘_..._—.-.- Harbor area, we find that thiswarea’s employment comparedhto that of the state is heavily concentrated in manufacturing activities (see Table A.1 in Appendix A). In 1982, Benton Harbor SMSA had 35 percentflof its total wage and salary employment located in manufacturing. In fact, the Benton Harbor metropolitan area had the second highest concentration of employment in manufacturing among the state’s 12 metropolitan areas. Only the Flint SMSA manufacturing had a higher share of total employment (37 percent) with more than a third of its employment located in the highly recession sensitive manufacturing sector. The 43 Benton Harbor industrial structure imparts a high degree of cyclical volatility particularly during economic recessions. Several indicators of employment behavior in the Benton Harbor SMSA reveal the sensitivity, particularly the behavior of manufacturing employment. Between 1962 and 1982, total wage and salary employment increased from 45,500 workers in 1962 to 56,200 workers in 1982, representing a 23.5 percent increase in twenty years. However, this increase was significantly lower than the state’s average, ranking eleventh among the twelve metropolitan areas of Michigan. The behavior of total wage and salary employment is largely determined in the Benton Harbor metropolitan area by the performance of the manufacturing sectors. During the 1973-1975 recession, manufacturing employment experienced a decline of 19.4 percent, ranking second along with the Flint SMSA, exceeded only by the 20 percent drop experienced in the Lansing-East Lansing SMSA. 0n the other hand, non-manufacturing employment fell by 6.2 percent in this recession, the highest drop in the MIR. Consequently, during this recession, total wage and salary employment in the Benton Harbor SMSA shrinked by 10 percent, which was much less than that of manufacturing employment, but still the most severe downswing in the MIR. Not surprisingly, SMSA’s with high concentration of employment in manufacturing, such as, Flint, Detroit and the Battle Creek SMSA’s, experienced similar trends. 44 In addition, the employment expansion in the area following the 1973-1975 recession had been very weak. During the expansion period (1976-1978), total wage employment in the Benton Harbor SMSA increased by only 2.3 percent. Moreover, this increase was the second lowest expansion rate only ahead of the Muskegon SMSA. The Benton Harbor total employment did not reach, much less surpass, its pro-recession peak by the end of 1978. b.ElinLSMSA The employment distribution in_the Flint SMSA, shows that employment is heavily skewed toward manufacturing(see Table A.2 in Appendix A). In 1982, despite a decline in its share, manufacturing had 36 percent of total employment, 9 percentage points higher than the state. Moreover, nearly all manufacturing employment in the Flint SMSA was located in the durable goods manufacturing, particularly in the motor vehicle industry. In 1982, for example, 95 percent of all manufacturing labor was in durable goods activities, compared to 78 percent of the state. Within the durable goods manufacturing, 77 percent of its labor were employed by the transportation equipment industry, this represented more than 30 percentage points above the state’s share. The autc:related production is largely dominated in this area by General Motors. Flint had the highest concentration of employment in transportation equipment (SIC 37) in the MIR, followed by the Lansing-East Lansing SMSA, with 75 percent. The heavy concentration in automobile production in the 45 Flint SMSA explains the area’s relatively high per capita income because of the high wages and long work week in the automobile industry. However, this area has a boom or bust reputation, due to a highly cyclical economy and an industrial structure that is greatly sensitive to economic slowdowns. Between 1962-1972, total employment in the Flint area grew from 133,900 workers in 1962 to 173,500 workers in 1972, representing a 29.6 percent increase relatively close to the state’s average of 33.0 percent. The effects of the three recessions that affected the economy between 1972 and 1982, caused employment to shrink in many of its sectors. In 1982, total employment in the Flint SMSA was 172,900 workers, a decrease of 0.3 percent since 1972 levels, this was among the three worst performances of the MIR. The deterioration of Flint SMSA labor market during the 1972- 1982 decade revealed the high degree of cyclical sensitivity that characterized this area’s economy. The behavior of total wage and salary employment in the Flint SMSA is largely determined by changes in the manufacturing sector. During the 1973-1975 recession, employment in manufacturing activities fell by 19.4 percent, this decline was higher than the state’s drop (16.5 percent) and the second most severe decline among the states 12 metropolitan areas, just behind the Lansing-East Lansing SMSA. The Flint SMSA economic structure proved to be one of the mast sensitive metropolitan areas of the states. For example, during the shortest recession on record (1980), 46 manufacturing employment in the Flint area shrinked by 17.2 percent, the highest in the MIR. On the other hand, non- manufacturing activities fell by 2.9 and 2.3 percent during the 1973-1975 and 1980 recession respectively. Consequently, total wage and salary employment in the Flint sub-region declined during the above-mentioned recessions by 8.8 and 7.6 percent respectively, less than that of manufacturing employment, but still the most severe downswing in the MIR. During the twenty year period total wage and salary employment in the Flint sub-region increased by 29.1 percent, slightly slower than the state. However, the performance from one decade (1962-1972) to the other (1972-1982) was markedly different. Between 1962 and 1972, total employment vigorously increased by 30 percent, in contrast, during the economic slowdowns of the 1972-1982 period total employment grew by less than than 1 percent, a shrink in rate of more than 30 percent in 10 years. 0. LansinszEast_Lansins_SMSA The most notorious aspect of the Lansing-East Lansing SMSA employment structure is the“largemgovernmgntwsectgg compared to most other metropolitan areas (see Table A.3 in Appendix A). This high concentration of employment in the government sectors is explained by the fact that the city of Lansing is the state's capital and East Lansing, on the other hand, is the hometown for Michigan State University. In 1982, 35 percent of total wage and salary employment was located in public funded jobs compared to 25 percent of the 47 state, as a whole. In fact, it was the highest in the MIR. The manufacturing sector accounts for a smaller proportion of wage and salary employment in the area than the state, as a whole. In 1982, 20 percent of total wage and salary employment in this area was accounted for by manufacturing industries lower than the statewide average. Within manufacturing, 88 percent of all workers were located in durable goods activity. In 1982, 75.5 percent of the durable goods employment were involved in the automobile industry. Among the state’s metropolitan areas, only the Flint SMSA had a higher percentage of its manufacturing workers employed by the transportation equipment industry. The Lansing-East Lansing SMSA has a relatively high wage structure and a relative long work week, similar to the other metropolitan areas in the state that are heavily dependent upon the automobile industry. As a result, it is this industry that largely accounts for the sizable cyclical swings in manufacturing employment in this part of the state. The~employment behavior during recessions reveal a fairly high degree of cyclical sensitivity in local manufacturing employment and relative stability in non- manufacturing and government employment. 1 During the 1973-1975 recession, manufacturing employment in the area fell by 20 percent, compared to 16.5 percent decline statewide. In fact, the employment contraction experienced by the manufacturing sector in this area was the highest (Table 3.3) among all 12 metropolitan 48 areas in the state. During the "brief“ 1980 recession, manufacturing in this area was adversely affected, dropping by 15.2 percent, again, significantly higher than the state as a whole. As a result, total wage and salary employment experienced a 1.4 percent decline during the 1973-1975 recession. However, the area’s decline was relatively lower than the state’s drop of 4.3 percent. Total wage and salary employment did not experience a higher degree of cyclical sensitivity due to the contribution of the relatively stable non-manufacturing and government sectors. The latter was unaffected by the 1973-1975 recession and continued to grow. Between 1973 and 1975, government employment increased by 10 percent. Non-manufacturing employment in the_Lansing-Easth miles. “BSA increased durinsfihis. recesses: smut—‘99»- government employment, the areas of non-manufacturing activities_also increased by 10 percent compared to a statewide decline of 0.8 percent. Despite the declining experience of the manufacturing sector, the Lansing-East Lansing SMSA experienced a vigorous recuperation. Between 1976 and 1978, this area’s manufacturing had a strong recovery, increasing by 15 percent. This increase was only exceeded by the Ann Arbor and Grand Rapids SMSA’s with 19.5 percent and 17.4 percent respectively. d.Detrci_t__SMSA The industrial structure_of_thenDetroithMSA is concentrated in manufacturing (see Table A.4 in Appendix A). M—.- Mrv" In 1982, 27 percent of the area’s total wage and salary 49 workers were employed by manufacturing firms, primarily durahie goods producers. The durable goods sector, which accounted for about 83 percent of manufacturing employment in the Detroit SMSA, is dominated by automobile producers. In 1982, the transportation equipment industry accounted for 50.1 percent of employment in the local durable goods manufacturing sector, compared to 44 percent statewide. Overall, the distribution of employment of the Detroit SMSA is quite similar to that of the state, although the former has a smaller government sector and slightly larger manufacturing and non-manufacturing sectors. However, the state’s employment distribution is affected significantly by the Detroit SMSA, due to its size and economic importance. In 1982, the six-county area accounted for 48.1 percent of the state’s manufacturing employment, 52.1 percent of non- manufacturing employment and 39.1 percent of government employment. Thus, the Detroit SMSA’s absolute and relative size in terms of population, income and employment makes it the dominant region in Michigan. In addition, its industrial structure with heavy concentration in durable goods production, particularly automobiles, lends a great deal to cyclical instability to the local area and inevitably contributes significantly to the total economic performance in the state. Within the industrial structure of the Detroit SMSA, the manufacturing sector exhibits the most cyclical sensitivity and largely accounted for the downswings in total wage and salary employment during the 50 national recessions, particularly the 1973-1975, considered the most dramatic. Local manufacturing employment during the 1973-1975 recession experienced in this area a 18 percent decline. While that drop exceeded the 16.5 percent decline statewide, it ranked sixth in relative severity in the MIR. The Lansing-East Lansing SMSA ranked first with a decline in manufacturing employment of 20 percent, followed by Benton Harbor and the Flint SMSA’s both with 19.4 percent, and the Jackson SMSA with a decline of 18.1 percent. However, because of the size of the Detroit SMSA, job losses in manufacturing amounted to approximately 106,000 or about 55 percent of total decline in manufacturing employment in Michigan during this recession. Non-manufacturing employment in the Detroit SMSA fell only by 1.1 percent, slightly higher than the state’s decline of 0.8 percent. Government employment rose by 8.9 percent and continued to increase until 1979. The cyclical contraction in local employment, particularly in manufacturing produced a 5.7 percent decline in total wage and salary employment during the 1973-1975 recession. This was the fifth most severe contraction among the twelve metropolitan areas and slightly above the 5.5 percent decline statewide. As was the case in all of the state’s SMSA’s, the relative stability of non-manufacturing and government employment tempered the severity of the contractions in the manufacturing sector in the Detroit SMSA. Following the 1973-1975 recession, total wage and salary employment 51 expanded 11.7 percent between 1976 and 1978, compared to 11.1 percent statewide increase during the same period. This represented a fairly high rate of increase during expansion years, typical of those SMSA’s with a large share of employment in the motor vehicle industries. e. la9k59n_§M§A The Jackson SMSA employment distribution is very similar to the state’s (see Table A.5 in Appendix A). In 1982, 25Mpercent of total wage and salary employment was accounted by manufacturing industries. Both in the state and in the Jackson SMSA, 78 percent of all manufacturing employment was engaged in durable_gqods productign. Within the durable goods manufacturing, transportation equipment (SIC 37) had the largest share (27 percent), followed by fabricated metal (SIC 34) with 26 percent and non- electrical machinery accounting for 22 percent of total durable goods employment. A sizable portion of the activity of these industries is closely related to the volatile automobile industry. The Jackson SMSA had one of the smallest labor markets in the MIR. In addition, this area had one of the slowest growth rates in the region, in terms of employment. Total wage and salary employment grew by only 22.9 percent during the 1962-1982 period, compared to 37 percent increase of the state. This area’s performance in manufacturing was unfavorable between 1962-1982. While the state’s manufacturing employment declined by 7.9 percent, in the 52 Jackson area manufacturing employment dropped by 25 percent, this was more than triple the statewide decrease. Looking at employment behavior during recessions, the performance of the local manufacturing was particularly weak during the 1973-1975 recession. Employment in this sector fell by 18 percent compared to metropolitan areas of similar size and structure such as the Bay City SMSA that registered a decline of only 8.8 percent in its manufacturing employment. During the 1972-1982 decade, the most unstable of the periods analyzed, the Jackson SMSA manufacturing employment shrank by 30 percent, more than 10 percentage points higher than the state’s average. This represents the second fastest downtrend among the twelve metropolitan areas, exceeded only by the Lansing-East Lansing SMSA and the Grand Rapids SMSA areas whivh showed increases in their manufacturing employment during the 1972-1982 period by only 8.6 and 10.6 percent respectively. Although, the drop in the Jackson SMSA manufacturing employment suffered during this recession was lower than that suffered by the Ann Arbor SMSA (19.1 percent) and the Lansing-East Lansing SMSA (20 percent), unlike those two areas, where manufacturing employment recovered and then expanded to levels above pre-recession peaks, the recovery in manufacturing employment in this area was quite weak. At the end of 1978 two years after the recession, manufacturing employment was only 11.5 percent above the low registered in 1976 compared to Ann Arbor’s SMSA which had 19.5 percent and 53 the Lansing-East Lansing SMSA which had 16 percent. As a result, total wage and salary employment in the area performed poorly compared to other metropolitan areas in the state. The Jackson SMSA total wage and salary employment was reduced by 7.1 percent during the 1973-1975 recession, the third highest decline in the MIR. Again, the recovery was weak, as total wage and salary employment rose by only 7.6 percent compared to 10 percent increase statewide. a. W During the 1962-1982 period, the analysis of the Benton Harbor SMSA revealed that the majority of its employment was located in slow growing industries, which gave it a negative industry mix factor as a result of an unfavorable industrial structure. In terms of the creation of job opportunities in the area, all sectors combined produced a loss of 7,913 jobs (Table 3.2a). Between 1962-1972, the Benton Harbor SMSA’s total wage and salary employment grew from 45,500 workers to 64,000 representing a 40 percent increase over the ten year period one of the fastest growth rates in the MIR. This area produced a positive industry mix factor. During this decade, this area’s manufacturing employment lost over 1,700 job opportunities, more than 95 percent of all job loss in the area. However, the combined contribution of the non- manufacturing sectors were enough to offset the manufacturing loss and as a result, produced a total of 186 new job opportunities. Although the number of jobs created 54 seems low, this was a clear indication that the industrial structure of the Benton Harbor SMSA between 1962 and 1972 hygrew faster than the national average. Within the non- manufecturing sector, the serviceslcomponent made the highest contribution. On the contrary, Table 3.2b shows that during the following decade (1972-1982), the Benton Harbor SMSA did not grow at the same pace as the nation. Due to an unfavorable industrial structure, this area lost 5,259 job opportunities. During this economically unstable period, manufacturing exhibited a high degree of cyclical sensitivity. As a result, manufacturing activities reduced its employment share, losing 9,219 employment possibilities, making more than 96 percent of all employment loss within the economical structure of Benton Harbor of that period. The construction sector, also exhibited cyclical sensitivity within the industrial structure by losing 671 job opportunities. In summary, the Benton Harbor industrial structure r-‘qr‘m .1 proved to be extremely sensitive to economic siowdowns and recessions. During the 1972-1982 period, this area experienced the most severe decline in total wage and 3§l§£z empieyment. In addition, during post-recessional periods, the expansion rate had been below the state average and one of the lowest among the twelve metropolitan areas of the state. 55 b. Elint_SMSA During the 1962-1972 decade, the Flint SMSA experienced an unfavorable industry mix factor. Table 3.2a shows that during this decade, a high percentage of the area’s employment was concentrated in slow growing industries, in this case, the motor vehicle manufacturing. The manufacturing sector, as a whole, was responsible for the loss of 15,145 jobs during the 1962-1972 period, indicating that this sector of Flint SMSA economic structure grew at a slower rate than the national average. In additicn to manufacturinS- the transeortatiqa and ethismntiliiiasfii§lc 42) 8129 infigsfintsden. -unf avorab la. industry- mix .. faster-1. by .ueev- {"1“ losing 333 job opportunities during the_same period. Althcugh all sectors_of the non-manufacturinfl.component Pr°du°ed §_29§i£ixs.indu§try six faster. the number 9f employment opportunities generated by non-manufacturins activities were not enough to offset the losses produced by manufacturing. During the 1972-1982 decade the analysis of the Flint SMSA industrial structure shown on Table 3.2b produced a negative mix factor. The deterioration of this area’s economy was almost exclusively the result of the decline in the motor vehicle and equipment manufacturing production. This sector was responsible for a net loss of 23,842 employment opportunities in the area. Not surprisingly, construction with a high cyclical sensitivity had a net loss of 880 job opportunities. All sectors combined, the Flint SMSA industrial structure during the 56 1972-1982 decade proved to be disadvantageous, especially because of the marked reductions in employment potential of the motor vehicle manufacturing and the slow pace at which this sector grew in the area. c.Lansins:East_Lansins_SMSA During the 1962-1982 period, the Lansing-East Lansing SMSA had an unfavorable industrial structure. The industrial mix factor wasnegative, indicating that the area lost 6,024 job opportunities due to a high concentration of employment in industries that grew slower than the national average. Not surprisingly, the_manufacturing sector with 88 percent of its employment located in the highly cyclical sensitive durable goods activities was chief responsible for these results. This sector lost a total of 20,631 job opportunities or 82 percent of all job loss registered in this metropolitan area over the twenty year period. Between 1962 and 1972, total employment in the area grew from 108,500 workers to 159,500 workers respectively, this represented an increase of 47 percent. Unlike most other metropolitan areas in the state, the Lansing-East Lansing SMSA had a positive industry mix factor. Manufacturing during this period grew at less than the national average, resulting in the loss of 6,678 job opportunities. However, non-manufacturing and the government sectors grew faster generating more than 7,000 job opportunities, enough to offset the loss from manufacturing. As a result, 348 job opportunities materialized in the Lansing-East Lansing SMSA 57 particularly by the favorable contribution of the services sector and new government employment openings. On the other hand, Table 3.2b shows that during the 1972-1982 decade, the Lansing-East Lansing SMSA industry, as a whole grew at lower rates that the national average. Due to an unfavorable industrial factor, this area lost over 5,000 job opportunities, again, the highly cyclical manufacturing sector caused the heavier losses with a decline of 12,303 jobs in this ten year period. The high concentration of employment in the durable goods activities, particularly, in the auto related industry contributed to the areas’s low performance in terms of job creation. The construction sector, also exhibited high cyclical sensitivity, this was reflected by its negative industry mix factor and by the loss of 850 job opportunities. The non- manufacturing sector (wholesale trade, finance and services) grew faster than the national average, however, this increase was not enough to offset the losses produced by manufacturing and by the government sector. In_§ummary, the Lansing-East Lansing SMSA exhibited a good deal of variation in growth and fluctuation among local economic activities. Total wage and salary employment was characterized by relative cyclical stability and fairly strong growth compared to the other metropolitan areas in the state with high dependence on durable goods manufacturing. On the other hand, the manufacturtngusecter 58 exhibited a good deal of cyclical volatility, with employment experiencing sizable cyclicallity. a ”,“H_M, . . 7 In 1982, the Detroit SMSA’s total employment was estimated at 1,500,800 workers, this represented an increase of 29.1 percent over the 1962 level of 1,201,200 workers. This area is the largest labor market in the state, containing 49.4 percent of total employment of Michigan. During the 1962-1982 period, this area had a negative industry mix factor indicating that industrial structure of the Detroit SMSA grew at a slower rate than the nation’s average. The area lost 76,345 job opportunities over the twenty year period. In the 1962-1972 period, more than 98 percent of all the employment opportunities lost were produced by the manufacturing sector. Transportation and public utilities also had an employment setback with a loss of 4,568 job opportunities in the rest of the sectors registered a positive industry mix factor, indicating that these were fast growing activities; however, the rate of increase within the non-manufacturing sector was not enough to offset the loss produced by the manufacturing sectors, resulting in a total loss of 32,784 jobs, due to the concentration of the majority of its employment in slow growing industries. In the 1972-1982 decade, things became worse for the Detroit SMSA, when total wage and salary employment declined by 2 percent compared to a 2 percent increase in the state. 59 In addition, manufacturing employment experienced a 25.8 percent decline, higher than the statewide average. The industry mix results shown on Table 3.2b show a significant loss of job opportunities during the period. This area experienced a drop of 43,561 in job opportunities. Not surprisingly, manufacturing had the greatest responsibility in this loss, with a drop of 172,666 job opportunities. The loss in manufacturing jobs in the Detroit area was the largest among all metropolitan areas of the state. The construction sector also loss more than 9,000 job opportunities between 1972 and 1982.During the twenty year period under analysis, total employment in this area expanded from 38,900 workers in 1962 to 47,800 workers in 1982, a modest growth increase of 22 percent. a. 11W The Jackson SMSA only exceeded two other metropolitan areas in terms of employment growth, the Bay City SMSA and the Muskegon SMSA with 18.2 percent and 18.6 percent, respectively. In fact, the area’s rate of employment change was considerably lower than the average rates of the state and the nation. In terms of the creation of job opportunities in the area, the Jackson SMSA increased its job market during the 1962-1982 period with the addition of 8,900 jobs. These new openings were however not the result of a favorable industry mix or an outstanding competitive performance of its economic sectors. These jobs were due to national economic 60 trends independent from local performance. The analysis of the industrial structure of the Jackson SMSA shows that this area had a negative industry mix factor and an unfavorable competitive position, over the twenty year period. During the 1962-1972 decade, the area had the majority of its employment engaged in slow growing industries. The manufacturing sector was responsible for 93 percent of the loss in job opportunities during the 1962-1972 decade. Non- manufacturing activities in the area grew faster than the national average, with the only exception of transportation and public utilities. However, the additional new job opportunities by the non-manufacturing sector was not enough to offset the loss produced by manufacturing. Table 3.2b shows that between 1962 and 1972, the Jackson SMSA had 1,609 less jobs than it would have had if its economic structure had grown at the same pace as a national economy. Similar to the experience of the previous decade, the area produced a negative industry mix factor. This very unstable decade worsened the situation for the Jackson SMSA. The highly cyclical sensitivity of the manufacturing sector caused the greatest loss. In fact, this sector experienced a loss of more than 5,000 jobs (Table 3.2b). Within non-manufacturing, the construction sector experienced a loss of 283 job opportunities in the area, on the other hand, the wholesale trade sector and the service sectors generated together more than 5,000 new job openings in the area; however, this gain did not surpass the 61 loss produced by the slow growing sectors, such as manufacturing and construction. All sectors combined, the area experienced a loss of 2,191 jobs during the 1972-1982 decade, mainly due to losses in durable goods manufacturing employment. in summary, overall economic activity in the Jackson SMSA has been relatively weak, particularly over the 1972- 1982 decade. The area has experienced slow growth in wage and salary employment, attributable largely to the decline in its manufacturing base. Certainly, this area has been severely hurt by the several recessions that affected the nation, particularly, the one between 1973-1975. Based on the analysis covered in this study, the economic recovery and expansion since the recession have not been vigorous. In fact, compared to other metropolitan areas in the state the economic expansion after 1975 has been rather weak. 2.0 Wigs The following analysis describes the SUSAismth? expenienced_a_moderate_cyclical sensitivity during recessions and a fair loss of employment. This_glgste£ is. made SEEEEE Ann Arbor, Saginaw, Battle Creek and the .....__.__.. m... Muskegon SMSA’s. 2.1«Geziaraljharactsristics a. W The Ann Arbor economic subregion is the sixth largest among Michigan’s 14 metropolitan areas in terms of 62 population. In 1985, this area had a population of 262,300 people which represented 3.6 percent of all of MIR. In 1984, the per capita income in Ann Arbor exceeded all metropolitan areas in the state (Table 3.5) with $14,670 compared to Michigan’s average of $11,112 ($11,259 nationwide). The relatively high increase levels in the Ann Arbor subregion were the result of above average level wages paid by the durable goods industries including the auto- related manufacturing firms located there. b- SasinaanMSA The Saginaw SMSA is a single-county metropolitan area. In 1985, the population of this area was 216,900, making it the seventh largest among the 12 metropolitan areas. Between 1980 and 1985, the area’s population dropped 4.8 percent. In terms of per capita income, the Saginaw SMSA ranked seventh among the state’s metropolitan areas, with a level of $11,757 in 1984. Average hourly earnings of manufacturing workers in Saginaw are among the highest in the state, due to the heavy dependence on the automobile industry. As in the Flint SMSA to the south, General Motors is the largest employer in the Saginaw SMSA, given those two adjacent metropolitan areas the highest hourly wage rates in Michigan. c. Baiilfi_flz§§k_§M5A The Battle Creek subregion encompasses Barry and Calhoun counties. This area ranks eight in population size among the 12 metropolitan areas of Michigan. In 1985, the 63 Battle Creek SMSA had a population of 183,400 approximately 2.5 percent of the MIR (Table 3.6). This area had one of the lowest per capita income of all metropolitan areas in Michigan, in 1984 (Table 3.5). d.M11ak§£9n_.§M§A The Muskegon SMSA is one ofthe smallest Metropolitan areas in Michigan, in terms of population. In 1985 the areas had a population of 179,200 people, the fourth smallest metropolitan in the state. Between 1980 and 1985, this two county metropolitan area (Muskegon and Oceana) had a slight 2 percent decrease in its population, only two other counties had a more stable population performance, the Grand Rapids and the Kalamazoo SMSA’s. In 1976, the Muskegon metropolitan area had a per capita income level of $5,065, the lowest among all 12 metropolitan areas. The income per capita levels increased to $10,498 in 1984, representing a 85.4 percent increase. Again, this was the lowest per capita income registered in all metropolitan areas of the state. 2-2- We a. WSMSA In terms of employment, the Ann Arbor SMSA contains the fifth largest labor marked in the state with a civilian wage and salary employment of 149,200 workers. In 1985, more than half (57 percent) of the population was employed, representing a 3 percent increase over the 1980 labor force figure, compared to the states increase of only 1 percent. 64 Over the period of 1962-1982, the Ann Arbor SMSA has had constant changes in its employment profile. The_eccn9mxmh§§ ransegw f gem 3-}1439 concentration.-of.--emplo¥ment-in,,...the NEEEESEEBEEBSH§QQP9¥.AB.19621 to a fairly dixersified structure in 1972, to a skewed distributionwtowards non: manufacturing in 1982 as shown in Table A.6 of A998991§-§;. The distribution of employment in this area, particularly in the government sector is affected by the fact that two state universities are located there, the University of Michigan and Eastern Michigan University. In 1972, manufacturing industries in the Ann Arbor SMSA employed 36,800 persons, an increase of 34.2 percent over the workers employed in 1962. This increase was above the state’s average increase of 15.4 percent and the nation’s 15.9 percent. During the period, 1962-82 employment change within each sector has varied significantly particularly between manufacturing and non-manufacturing activities. While manufacturing share of employment has declined by 40 percent during those twenty-years, non-manufacturing activities have increased their numbers by 68 percent. For the same period total wage and salary employment and its major components manufacturing-non-manufacturing, and government employment-varied significantly. In other words, these two employment series increased during national expansion periods and declined during recessions. While non-manufacturing employment displayed a slight, cyclical sensitivity government employment did not. The size of the 65 government employment in the Ann Arbor SMSA remained relatively the same in the period between recessions. Manufacturing in this subregion is heavily weighted toward the highly recession-sensitive durable goods production. Consequently, manufacturing employment in the area experienced a severe contraction during the 1973-1975 recession, falling by 19.1 percent. That was the fourth largest relative decline in manufacturing employment in the MIR. b .' W The Saginaw SMSA is heavily concentrated in manufacturing. In 1982, 32 percent of the area’s wage and salary workers. were employed by manufeetiaaias. riné‘fiftflssr. Manufacturing employment is predominantly in durable goods industry (see Table A.7 of Appendix A). In11982, 90 percent of the area’s manufacturing employment was located in durable goods activities. Only the Flint SMSA had a higher proportion of workers in durable goods manufacturing. Within durable goods production, the transportation equipment and the primary metal sectors accounted for 87 percent of total durable goods employment. As a result, similar to the Flint SMSA, this area has an industrial structure dominated by the cyclical sensitive, but high wage automobile industry. Over the 1962-1982 period, the Saginaw SMSA experienced a slightly higher SIQWth rate than_the‘ma state in terms of total wage and salary employment; For the ——.—_—~(—r——" twenty-year period, the Saginaw’s SMSA total wage and salary 66 employment grew by 37.4 percent compared to 37 percent of the state. This represents the fifth largest expansion among all twelve metropolitan areas of Michigan. During the 1962-1982 period, Saginaw SMSA experienced a 0.4 percent decline in its manufacturing employment compared to 7.9 percent decline statewide. However, looking at the 1972-1982 decade period in which the economy was affected by the recessions, manufacturing employment declined by 25.6 percent, compared to the state’s 20 percent decline. Behavior in manufacturing employment was not steady, but was subject to sizable cyclical swings, of course this is not surprising, giving the area’s heavy dependence on the automobile industry. During the 1973-1975 recession, local manufacturing employment fell by 17.1 percent, slightly higher than the state’s 16.5 percent decline and contributing substantially to the 5.5 percent drop in the area’s total wage and salary employment. It should be noted, however, that the downswing in manufacturing employment in the Saginaw SMSA ranks as the seventh most severe, behind the decline of the Lansing-East Lansing, Flint, Benton Harbor, Detroit, Ann Arbor and Jackson SMSA’s. During the 1973-1975 recession, the non-manufacturing sector did not show any change. In contrast, government employment rose by 16 percent during this recession, as it did in most metropolitan areas and in the state, as a whole. Employment in the Saginaw SMSA has expanded substantially since the 1973-1975 recession. By the end of 1978, manufacturing 67 employment, which suffered the largest setback during the recession, was up 26 percent over its recession low, and as a result was 5.1 percent above its pre-recession peak. Combined with the steady increases of non-manufacturing and government employment, the recovery in manufacturing resulted in a level of total wage and salary employment at the end of 1978 that was 11 percent above its previous cyclical high, which occurred in 1973. c. Ballla_9z§§k_§M§A In teaser: _.-em219msnt.-the Battlagrassjufiam of this {evestsaoviss_.1.a129.§._sazlse§s331.12.139.3’93139t “Ruining 2.2 percent of total wage and salary employment in the MIR. Since the 1960’s, the employment profile of Battle Creek SMSA has constantly changed. In 1962, 46 percent of its labor was located in manufacturing activities. Twenty years later, this was reduced to 30 percent (see Table A.8 in Appendix A). Non-manufacturing activities increased its employment share from 40 percent to 50 percent. A very significant difference between the area’s industrial structure and that of the larger metropolitan areas and the state is that there is a more even distribution of employment within the manufacturing sector. Durable goods and non-durable goods Manufacturing are more evenly divided in the Battle Creek area. In 1982, non-durable goods manufacturing employed close to 50 percent of all manufacturing labor, compared to 17 percent in Detroit, 28 percent in Grand Rapids and 11 percent in Lansing. 68 Statewide, the non-durable manufacturing share of employment was 22 percent in 1982. The food_and kindred products industry_(SIC 20) accounted for the largest share of non-durable manufacturing employment;. In 1982, for example, 75 percent of local non- wwflw_irmm durabie workers were employed in that_sector- The importance of employment in the non-durable manufacturing sector is shown by the presence of the two largest cereal companies in the world, the Kelloggs Company and General Foods in Battle Creek, giving it the notoriety as the cereal capital of the world. For this reason, we would expect that the industrial structure of the Battle Creek area would be less cyclically sensitive when compared with larger metropolitan areas and the state as a whole. During_the recession period of 1972-1982, manufacturing employment in Battle Creek was the most cyclically sensitive, falling by 30 percent, more than 10 percentage points above the states average. Within the manufacturing sector in Battle Creek, the durable goods manufacturing experienced a decline 3 times larger than the non-durable manufacturing sector. Between 1972 and 1982, the area’s manufacturing employment registered an increase of 12.6 percent, lower the state’s 16.3 percent increase. Total wage and salary employment increased during the 1962-1982 period by 17.7 percent, significantly lower than the 36 percent of the state and the 77.7 percent nationwide. The expansion in the area’s total wage and salary employment (17.7 percent) _‘ A i. + 69 resulted largely from increases in the manufacturing and government sectors. With the exception of Jackson SMSA, the Battle Creek area represents the poorest performance in manufacturing employment in MIR. d.Muskeson_SMSA The Muskegon SMSA is highly dependent on the manufacturing sector for employment. In 1982, this area had __...» ._, . “”- "— “ ‘ " ' ‘ r..m-u.mmuwm - 32 percent of all salary employment located in manufacturing (see Table A.9 of Appendix A). In fact, it was only exceeded by the Flint and Benton Harbor SMSA’s by 36 percent and 35 percent respectively. The Muskegon SMSA is also heavily concentrated in durable goods. Within the manufacturing industries, the non-electrical machinery (SIC 35) and the primary metal (SIC 33) are the major employers in the area, accounting for slightly more than 60 percent of durable goods manufacturing employment in 1982. However, these industries have not been expanding in the Muskegon SMSA and as a result, the areas manufacturing base has been shrinking. The most notable feature of total wage and salary employment in the Muskegon area during the 1962-1982 period is its relatively slow growth. Total wage and salary employment grew by 17 percent, compared to the 37 percent of the state, as a whole. Moreover, the employment growth in the Muskegon SMSA only ranks ahead of the Bay City SMSA which had a growth rate for wage and salary employment of 18.2 percent, over the twenty year period. 70 Between 1962 and 1982, the Muskegon SMSA experienced a ":\I‘ksj ‘4‘ negatizg grow hflin manufacturing employment. Table A.9 (see Appendix A) shows that the Muskegon SMSA had a decline of 30 percent compared to a 7.9 percent drop in statewide manufacturing employment. During the 1973-1975 recession local manufacturing employment fell by 9.0 percent (Table 3.3), this was the second mildest cyclical decline among the state’s 12 metropolitan areas, and was followed by a weak recovery. By the end of 1978, local manufacturing employment was 9 percent above its recession low. This area had the lowest recovery among all metropolitan areas of Michigan. The relative stability of manufacturing employment and the rise in government employment during the 1973-1975 recession helped total wage and salary employment to perform comparatively well, declining by only one percent from peak to trough. That was one of the mildest contraction among the state’s metropolitan areas, ranking just behind the Kalamazoo metropolitan area. Construction employment, a well known sector for its cyclical sensitivity, experienced a fairly low decline during the 1973-1975 period. From peak to trough, construction employment fell by 9 percent compared to 19.1 percent decline of the state, as a whole. 71 2.3 Indus;zifil_flix_nnd_Em2lQXMQn1_B§h§XiQI a. Ann_Athr_§M§A Looking at the results of the shift-share analysis for the period 1962-1982, Table 3.2a shows that the Ann Arbor subregion had experienced a negative industrial mix component. These results indicate that the area had a high concentration of employment located in slow growing industries or industries that were growing at a slower pace than the national average for those sectors. Independent from national influences, the local sectors, on balance, produced a reduction in employment opportunities of 10,469 Jobs due to the unfavorable industrial structure of the area. A breaking down of the twenty-year period into two ten-year periods (1962-1972 and 1972-1982 will yied a better picture of the area’s employment behavior. Between 1962-1972 Ann Arbor SMSA's total wage and salary employment grew from 73,700 in 1962 to 106,900 workers in 1972. This constituted a total employment gain of 45 percent. As a result, this area was one of the fastest growing within the region. In 1972, manufacturing industries in the Ann Arbor SMSA employed 36,500 persons, an increase of 34.2 percent over the workers employed in 1962 but the region experienced a negative shift in manufacturing employment. The Ann Arbor region has a relatively high concentration of durable goods manufacturing. In 1972, the region had 88 percent of its total manufacturing employment in durable goods, compared to 80 percent for the state and 72 58 percent nationwide. Manufacturing of transportation equipment (SIC 37) constitutes the major durable goods activity in the area. During the 1972-82 period, the effects of several national recessions will be felt in Michigan’s economy. Manufacturing shrank by 12.3, as well as its two major components durable goods (13.9 percent) and non-durable goods (2.4 percent). The non-manufacturing sectors grew despite the recession slowdown. as a whole it experienced an expansion of 66.2 percent. Within the non- manufacturing industries the service and the construction sectors were the two extremes. On one hand, construction employment in the area exhibited a high degree of cyclical sensitivity with a net loss of 15 percent of its employment opportunities at the end of the decade. On the other hand, the service sector, apparently the less recession sensitive sector, experienced a remarkable increase of 109 percent in employment, more than double the states increase (41.5 percent) and more than 40 percentage points higher than the national growth rate (69 percent). The Ann Arbor SMSA during the 1972-82 period had a negative industry mix factor (Table 3.2b), indicating that the majority of local employment was concentrated in the slow growth industries, particularly in the durable goods manufacturing. Despite a fairly high rate of diversification during the period 1972-82 (Table 3.4), this area had 9,343 less jobs than it would if its economic structure was less concentrated in slow growing industries 73 Infliummary, the behavior of the manufacturing §99§9§_ within the economic structure.of the-Ann Arbor SMSA reveals its highly cyclically senaitixe-nature. The negative industry mix factor obtained for the whole twenty year period is a clear indication of the unfavorable structure °£_Ph9 areas economy. b. Sasinan_SMSA During the twenty-year period under analysis, total employment in this area expanded from 56,100 workers in 1962 to 77,100 workers in 1982. This was an increase of 37.4 percent over the period, representing the fifth largest increase among the states metropolitan areas. In terms of the creation of job opportunities in the area, the Saginaw SMSA during the 1962-1982 period, this area had_§flnegative industry mix_factor, indicating that the.majorityiquits emP1°ym°9?._"§-°L19°31'92“}?§}9‘?.-.§.1€9*!19§.. industries“. ’ As a result, 6,541 job opportunities were lost in this area. Manufacturing accounted for over 90 percent (4,909) of the total loss in job opportunities. On the other hand, the non-manufacturing sector had a combined increase of 2,205, plus the government contribution of 536 jobs for a total of 2,741 new jobs created due to a growth rate higher than the national average. Despite this vigorous increase in the non-manufacturing sector and government sector employment, these were not enough to offset the drop in the slow growing industries. As a result, the area loss 2,417 job opportunities. 74 During the 1972-1982 decade, the analysis of the Saginaw SMSA industrial structure showed a negative industry mix factor. The deterioration of the area’s economy is almost exclusively the result of the decline in the motor vehicle and equipment manufacturing. This sector was responsible for a loss of over 10,000 job opportunities in the Saginaw area. The effects of the recession, particularly the 1973-1975 recession also caused the construction sector to suffer a loss of 462 jobs. The transportation sector declined severely in terms of job offerings losing more than 3,800 jobs. All sectors combined, the Saginaw SMSA industrial structure proved during the 1972-1982 period to be disadvantageous, especially because of the labor reduction in the motor vehicle industry and the slow pace at which this sector (durable goods) grew in this area. In summary, the Saginaw SMSA exhibited relatively rapid growth and a comparative higher degree of stability in total wage and salary employment. Manufacturing, on the other hand, was characterized by sizable cyclical swings, not unexpectable results for an area with such a heavy concentration of employment in auto-related production. Therefore, similar to other metropolitan areas in the state, with a heavy dependence on the automobile industry, the Saginaw SMSA experienced large declines in manufacturing employment duringrecession, but these slumps were followed by vigorous expansions. 75 c. BflI&1§_Q£§§k_§MSA Total employment in the Battle Creek SMSA increased from 50,200 workers in 1962 to 59,100 workers in 1982. On employment basis, Battle Creek was one of Michigan’s slowest growing areas during the 1962-1982 period. During the twenty year period, this area experienced a negative industry mix factor, indicating that the majority of Battle Creek’s salary and wage employment was concentrated in slow growing industries. The unfavorable industrial composition of the area produced a reduction of 6,581 employment opportunities. During the 1962-1972 decade, Battle Creek’s total wage and salary employment grew by 24.1 percent, below the statewide average change of 33.5 percent. During this ten year period, this area registered a negative industry mix (Table 3.2a). Manufacturing, in both decades, was mainly responsible for the loss of employment opportunities in Battle Creek. As noticed in Table 3.2a, all sectors did not have an unfavorable mix factor, wholesale trade, finance and specially the service sector were moving faster than the national average, however that growth was offset by manufacturing and transportation resulting, in a total of 2,119 fewer jobs in the area. During the 1972-1982 decade, a similar situation is observed, however, worsen by the effects of several economic recessions. The Construction grew at a slower rate than the nation’s performance. Total construction in Battle Creek 76 SMSA exhibited high degree of cyclical sensitivity. During the 1973-1975 recession, construction employment fell 21 percent from its level in 1973, which exceeds the statewide decline of 17 percent. In summary, taken by itself, the industrial structure of the Battle Creek area was less cyclica11Y489nSitive than the state as a whole. Figures for the three recessions show that in total wage and salary employment the economic slowdowns affected Battle Creek less intensively than the state. Manufacturing and construction exhibited a moderate degree of sensitivity to cyclical downturns in the national economy._ \ da’nunksmmsnms In terms of industry mix and employment behavior, the analysis show in Table 3.2a that the Muskegon area had a geggglys industry p13 radio? for the 1962-1982 period. These results indicate that the area had majority of its employment located in slow growing industries. Separate from national effects all sectors combined produced during the twenty year period a reduction of 9,152 in job opportunities due to the unfavorable industrial situation of the area. Between 1962 and 1972 the Muskegon SMSA total wage and salary employment grew from 46,800 workers in 1962 to 54,200 workers in 1972, representing a 17 percent increase. Manufacturing produced the highest employment loss in this area, this sector lost more than 5,000 job opportunities, 77 far more than the gains produced by the non-manufacturing and the government sectors. Wholesale trade (SIC 50) and the services sectors grew faster than the national average. -n.A.—-- u... (er-94W u "’ "" " “an!“ Both produced 1,450 job opportunities in this area. -_.,. “a. w-flv'lh However, their continuation was not enough to offset the loss in manufacturing, transportation and public utilities (SIC 40). Between 1972 and 1982, the Muskegon SMSA lost 3,363 job opportunities. Again, manufacturing carried the heavier loss with a decline of 6,960 jobs. As mentioned before, the high concentration of employment in the durable goods manufacturing (84 percent) contributed to this area’s low performance in terms of job creation. Within non- manufacturing, the construction sector exhibited a moderate degree of cyclical sensitivity, this was reflected by the loss of 268 jobs during this period. On the other hand, the wholesale trade, finance and services sectors increased rapidly above the national average, however, their performance was shadowed by the declines in manufacturing and government employment. In summery,_the high concentration of employment in manufacturing activities in the Muskegon area, has affected its employment behavior during the twenty-year period .analyzed. However, the stability of this labor market is the result of significant contribution by the non manufacturing sector particularlywtheuggrgiee industries. “go-M‘fi :- a In relation to the other metropolitan areas of the state, the Muskegon SMSA labor market behaved comparatively well. 78 3.0jihftd filQSIQI Characteristics: The third cluster is made up of those SMSA’s that exhibited the least cyclical sensitivity, thus, the areas with the” '-"‘~--_._...... -Hw- ---H"'r"—"" -.—-. 1*..." most stable industrial structure. q—ufi—D—n nan—-a-II-fln- q. ‘a—v—Ihflfiu up. “- - 3.1mm admgmsum This area consists of Bay County with Bay City as it urban center. Compared to the rest of Michigan’s metropolitan areas, Bay City SMSA is the smallest in terms of population. In 1985, it had a population of 115,300 which represented only 1.6 percent of Michigan’s metropolitan area’s population. The Grand Bapids SMSA is the second largest among Michigan’s 12 metropolitan areas in terms of population, exceeded only by the Detroit SMSA. This metropolitan area. which encompasses Ottawa and Kent counties, experienced a population increase of 5.5 percent from 601,686 in 1980 to 635,000 in 1985, it was the fastest growing metropolitan area in the state. The area also experienced relatively strong growth of per capita income. From $6,293 in 1976 to $12,385 in 1984, an increase of 96.8 percent, the second highest increase rate behind the Ann Arbor SMSA. However, in terms of absolute dollars, in 1984 this area’s per capita income ranked fifth, below Ann Arbor ($14,670), Detroit ($13,943), Flint ($13,181) and Kalamazoo ($12,817). The 79 relatively low per capita income level in the Grand Rapids SMSA is attributable largely to the fact that it is not a high wage area. This of course, is due to a local industry mix that is not heavily dependent on the highewage automobile industry. In fact, in 1982, the average weekly wage in this area’s manufacturing was the second lowest ($364.49), exceeding only that of Benton Harbor SMSA ($350.14). c.Kalamaz99_§MSA The Kalamazoo SMSA is made up of Kalamazoo and Van Bureau counties, with the Battle Creek SMSA bordering on the east and Lake Michigan to the west. In 1985, the Kalamazoo SMSA had a population of 282,100 making it the fifth largest metropolitan area in the state. Between 1980 and 1985, the two-county area’s population increased by 13 percent, the second fastest growing metropolitan in the state, behind the Grand Rapids SMSA. The Kalamazoo SMSA ranked fourth among the state’s metropolitan area’s in terms of per capita income. In 1984, this area had a per capita income of $12,817 which represented a 92.6 percent growth since 1976 levels. The Kalamazoo SMSA is not a high wage area. In 1982, the Kalamazoo SMSA had a total average wage earning of $449.36, this was below the statewide average of_$449;00 and one of the lowest in the MIR. This, of course, is due in part to the fact that the automobile industryaccounts fer a relatively small share of the manufacturing case in the, \ -.._ .__.._. _.....-_. _ _ ____ v-u- own...— ”a—fi‘w1 II - - v..- anv- I 80 area. _ The employment distribution in the Bay City SMSA is very similar to that of the state. During the twenty year period over 50 percent of all wage and salary workers in the area worked in non-manufacturing activities, the highest proportion in the MIR (see Table A.11 in Appendix A). The majority of manufacturing workers in Bay City SMSA are employed by the durable goods industries. Despite the similarity of Bay City SMSA’s economic structure to that of the state in general, this area has exhibited less cyclical sensitivity than the state as a whole. During the 1973-1975 recession while Bay City’s total wage and salary employment declined by less than 1 percent the states total employment declined by 4.5 percent. Manufacturing in this metropolitan area was only reduced during this recession by 8.8 percent, compared to the 16.5 percent reduction in the state’s manufacturing employment. In fact, this area’s manufacturing experienced the lowest sensitivity during recession among all 12 metropolitan areas. Over the twenty year period (1962-1982), the area’s labor market grew by 35 percent, the sixth fastest increase among the state’s metropolitan areas. All sectors of the economy did not grow at the same rate. Non-manufacturing employment grew by 50 percent, compared to the state’s 81 growth by 67 percent. Over those twenty years, manufacturing employment experienced a different behavior in each of its two components. Durable goods manufacturing -—.______‘_ _ -——_. www- declined 92'. __..1._§_.11?6.£Qen1},_-3_hi $1-399- 92.13.1219. -. 39°95 . °."‘P_1 ”19999....“ (W thflgfiifixarsa, grew by, 2.9., 225,921.12; Similar to other metropolitan areas previously described, the relative cyclical sensitivity of the manufacturing sector, particularly the durable goods activities, were offset to some degree, by the relative cyclical stability of the non- manufacturing and government sectors. As noted above, this area’s high concentration of employment in the durable goods industries in a similar proportion to the state caused the area not to have a markedly different cyclical behavior of employment over the period 1962-1982. However, the local areadid experience somewhat greater growth of employment, particularly in the non durable manufacturing sector. H Employment distribution in the Grand Rapids SMSA, does not differ greatly from the state configuration, except that the government sector is substantially smaller in the Grand Rapids area. In 1982, the proportion of total wage and salary employment accounted for by manufacturing activities was similar to that of the state. Within manufacturing, the durable goods industry was relatively higher in the state by 7 percentage points. However, the aggregate shown in Table 82 A.12 (see Appendix A), masks the mayor difference between this area and the state: the key durable goods industries in the Grand Rapids SMSA are not linked to automobile production. In 1982, the transportation equipment industry accounted for only 6 percent of all durable goods manufacturing employment in the area, compared to 44.2 percent of the state. Within the durable goods industries in the Grand Rapids area the highest percent of employment was located in furniture and fixtures (SIC 25), which accounted for 25.1 percent of total durable goods manufacturing, compared to 3.1 percent of the state as a whole (see Table A.13 in Appendix A). In fact, 70.1 percent of all furniture and fixture employment of the state was located in the Grand Rapids SMSA. The fabricated metals industry (SIC 34) accounted for 22 percent of total durable goods activities in the area, followed by machinery (SIC 35) with 20 percent. Thus, the industrial composition of the Grand Rapids SMSA is substantially different from most other metropolitan areas in Michigan. In terms of growth and cyclical stability, the Grand Rapids SMSA had an outstanding performance during the 1962-1982 period. The manufacturing sector in this area out performed all other metropolitan areas of the state in the twenty year period. As a whole, manufacturing grew in this area by 30 percent, the highest increase in the MIR. In fact, only two other metropolitan areas experienced an increase in manufacturing employment, the Ann Arbor SMSA and 83 the Lansing-East Lansing SMSA with 17.6 percent and 10 percent, respectively. During the 1973-1975 recession, manufacturing employment shrank in this area by 15.4 percent, and that largely accounted for the area’s 1.9 decline in total wage and salary employment. On the other hand, non-manufacturing and government employment were relatively stable during the 1973-1975 recession. The former experienced a 4 percent increase compared to a slight statewide decrease of .08 percent. The Grand Rapids SMSA had the second best performance in non-manufacturing employment during the 1973-1975 recession, only behind the 10 percent increase of the Kalamazoo SMSA. mKalmaznsLSMSA There is one outstanding differented between the industrial structure_of the Kalamazoo SMSAandthat ofthex state’s. While, manufacturing employment in the state is heavily concentrated in durable good industries (78 percent of manufacturing employment), in contrast, durable goods industry accounted for only 45 percent of all manufacturing jobs in the Kalamazoo SMSA as shown in Table A.14 (see Appendix A). Furthermore, the major manufacturing activity in the area is in the non-durable sector. Chemicals and petroleum (SIC 28,29) is the largest employer in the area, it holds 46 percent of all jobs in non-durable goods I, activities in the area. As a result, the Kalamazoo SMSA has been characterized by a relatively high degree of cyclical stability. Similar to the Grand Rapids SMSA, the Kalamazoo 84 area 1,33. “0t hanflY .993¢,9.nt£§t951-in...autcm.obileproduction- In 1982, the transportation equipment industry accounted for only 9.1 percent of manufacturing employment in the area, well below the 35.1 percent share of the state. Fabricated metal production (SIC 34) accounted for 14 percent of the areas manufacturing employment in 1977 with the bulk of activity linking to the automotive industry. Nevertheless, the Kalamazoo SMSA has one of the most diversified manufacturing bases among the metropolitan areas in Michigan. In addition, a large state university, Western Michigan University, and several colleges (Kalamazoo’s College, Kalamazoo’s Valley Community College, etc) are located in this area. This heavy concentration of higher educational institutions makes the Kalamazoo SMSA similar to the Lansing-East Lansing and Ann Arbor SMSA’s in this respect. In terms of growth and cyclical stability the several indicators analyzed in this study show that the Kalamazoo area has a relatively high degree of cyclical stability and fairly strong growth. Looking at employment behavior in the area during the severe recession of 1973-1975, we find that during these unstable years total wage and salary employment increased by 2.3 percent in the Kalamazoo area, compared to a statewide drop of 4.3 percent. In fact, Kalamazoo was the only SMSA that experienced a significant growth in total employment among all 12 metropolitan areas. The relatively low decline in manufacturing employment during this 85 recession was offset to a large extent by increases of employment in non-manufacturing activities (10 percent) and 11 percent in government employment. This area experienced the highest increase in non-manufacturing employment during 1973-1975 recessic . the MIR. While the size and stability of the non manufacturing and government sectors contributed to the overall stability of wage and salary employment in this area, it should be noted that it exhibited less severe cyclical swings compared to other metropolitan areas in Michigan. As noted above, this is due to the fact that the area does not specialize in the highly sensitive durable goods manufacturing, particularly in auto- related production, to the extent evident in most other Michigan metropolitan areas. 13.3 W a. WA Over the twenty year period, the B§Y_Qit¥.§n$Arh9d_§ negative mgyement in employment, indicating_that the area had“§39 fewer jobs than it would have had if it had kept pace with the national growth rate. The main sector responsible for this negative performance was manufacturing, which for that period lost 4,660 employment opportunities.‘ Despite the overall unfavorable structure of the area’s economy, not all sectors had a negative performance. on h-fl-h—H Wholesale trade, finance and the serviges_segtgrs had a M GWh‘b positive factor, indicating that these sectors grew faster than the national average. During the 1962-1972 decade, Bay 86 City SMSA total wage salary employment grew from 23,900 workers in 1962 to 30,500 workers in 1972. This constituted a 27.6 percent increase, lower than the state’s 33 percent growth. During this decade the area registered a negative industry mix factor due to a high concentration of employment in durable goods manufacturing. Manufacturing employment grew slower than the nation’s average. This sector was responsible for 94 percent of all the employment opportunities lost between 1962 and 1972. The non- manufacturing component, had a positive industrial mix factor, as an indication that these sectors (wholesale trade, finance and services) grew faster than the national average. The results of the industry mix factors for the 1972-1982 decade, show that the unfavorable structure of Bay City worsened under the economic pressure of the several recessions that affected the nation in this period. Manufacturing, appeared as the most recession sensitive of all sectors. Within the non-manufacturing activities, the construction sector (SIC 15) exhibited a high degree of cyclical sensitivity, measured by total employment in the local construction industry. During the 1973-1975 recession declined in construction employment was more severe than in all other sectors of the Bay City structure. While manufacturing employment fell by 8.8 percent, construction employment declined by 23.0 percent, four percentage points higher than the state. In fact, this was the most severe 87 drop in construction employment in the MIR. Between 1972- 1982 construction lost 179 jobs opportunities in the area. b. Ezand_B§21d§_§M§A Between 1962 and 1972 period, the Grand Rapids SMSA total wage and salary employment grew from 148,500 workers in 1962 to 203,700 workers in 1972. However, the ecengmic ._ _._._.,_.....-— structure of this area had a high concentration of its employment in slow growing industries, particularly manufacturing. Employment in the manufacturing sector grew slower than the national average, producing a negative industry mix factor. This sector was responsible for 96 percent of all the employment opportunities lost during this ten year period. Despite the rapid increase of non mangfacturing employment in the area, Grand Rapids SMSA had a total net loss of 5,669 job opportunities between 1962 999 1972. The results of the analysis for the 1972-1982 decade, shows that the economic structure of Grand Rapids did not worsen under the effects of the economic recession occurred during this period. A lower concentration of employment into the highly cyclical sensitive motor vehicle transportation equipment sector and a rapid increase in services sector, tempered negative trends in employment. Due to an unfavorable economic structure, the Grand Rapids SMSA obtained a negative industry mix factor, however, the loss of 3,804 job opportunities in the area was relatively lower compared to the losses in the 1962-1972 period. Again, 88 manufacturing had the greatest responsibility in producing this negative result, due to its sensitivity to cyclical slowdowns. Within non-manufacturing, transportation, public utilities and the construction sector exhibited a negative industry mix factor. Overall, construction loss a total of 1,447 job opportunities showing a high degree of cyclical sensitivity. The service sector produced a positive industry mix factor indicating that it grew faster than similar activities nationwide. As a result, 13,445 job opportunities were created in the area. Thevgeneral behavior of total employment suggests that the Grand Rapids SMSA was one of the most cyclically stahle metropelitan areas in Michigan: Such stability appears to be tended to industrial diversification and less reliable on the automobile industry than in most other metropolitan areas in the state, at the expense of having the second lowest average weekly wages among all 12 metropolitan areas of Michigan. c-W In terms of industrial mix and employment behavior, the analysis show in Table 3.2a that the Kalamazoo SMSA had a negative industrial mix factor for the period 1962:1982. These results indicate that the area despite its increasing rate of diversification still had the majority of its employment located in slow growing industries. Separate from national affects, all sectors combined produced during the twenty-years of the study a reduction in job 89 opportunities of over 10,000 jobs, due to the unfavorable industrial structure of the area. Between 1962 and 1972 the manufacturing sector lost more than 6,000 j b opportunities_far T9re thanwthqlsaiBS W wig—dam,— ‘1. ,_.-.r-- Pr0099e9_by the non-manufacturing sectors combined.“ Wholesale trade, finance and the service sectors appeared to be growing faster than similar sectors at a national level, however, their contribution was shadowed by the poor performance of manufacturing. During the 1972-1982 decade, the effects of several recessions made the situation worse for the economy of all SMSA’s of the state, particularly those with a large share of employment located in manufacturing. Fortunately, the Kalamazoo metropolitan area with a diversified economy appeared to suffer less than most other areas. Total employment in the area increased from 89,300 workers in 1972 to 105,500 workers in 1982, representing an increase of 18.1 percent. Total wage and salary employment in its area proved to be the least recession sensitive among all metropolitan areas of the state. Despite this advantage over other metropolitan areas of the state, during the 1972-1982 decade this area lost 4,599 jobs. Manufacturing lost 10,257 job opportunities in the area reflecting its sensitivity to changes in the economy. Within, the non-manufacturing sector, both the construction and the transportation and public utilities also experienced job decreases. During the 1973-1975 recession, the 90 construction sector (SIC 15) experienced a drop in its employment by only 7.1 percent compared to a statewide decline of 15.5 percent. Overall, then, the Kalamazoo SMSA was in terms of wage and salary employment the most cyclically stable metropolitan area in the state. However, the employment distribution in the area appears to be concentrated in slow growing industries, particularly manufacturing. In summary, the behavior of employment in the MIR during the 1962-1982 period, appears to be closely linked to the degree of concentration in durable goods manufacturing, particularly auto related industries. As a consequence, areas such as the Flint SMSA and the Benton Harbor SMSA, exhibited extreme sensitivity to economic slowdowns. In addition, these areas experienced a great deal of variation in terms of economic growth and creation of job opportunities. On the other hand, areas less specialized in automobile production were characterized by relative cyclical stability compared to the other metropolitan areas in the state. CHAPTER FOUR THEllMBAQI“QE_§EQIQRIALMQQMBETIIIYENESE Qfl__IHE_EMELQXMENTWQE_THE”MIR INTRODUCTION This chapter will focus its attention on the comparative advantage of Michigan Industrial Region (MIR) in relation to the rest of the nation during the 1962-1982 period. The first part of this chapter will examine_the regional competitive performance, as well as the comparatiye .. -——--—-—-qu 'm \u» r- v- advantage of each employment sector within the regional "M" W— MTV—'— economy. In its second part, this chapter "111.199? at the nit-W interfmetropolitan area differential in sectorial competitiveness and relative position in terms of: a. attracting growth b. locational advantages . c. total net employment shifts. The competitive share component of the shift- share *flmuw— I'L.4“‘ u.,,_ wa~fl~'-.~~fl analysis allows us to measure the ability of a region’s industry and to expand or shrink its share of growth in a particular sector. Share differential or efficiency differences will occur between regions due to the fact that some regions are expanding in certain employment sectors more rapidly than other regions. The rate of growth at which a given region or area expands is directly related to its access to markets for it production at competitive inruu 5.. costs. Thus, regions/areas that show a positive competitive share of employment are those with a better access to basic inputs or to markets compared to other regions/areas engaged ‘w __,_.—_ 91 92 in the same activity. An upward share of employment would suggest that the area has a greater locational (comparative) advantage for the operation of giving activities or industries. The results of each sector’s performance can be aggregated to estimate if the region is more/less competitive in securing additional employment over that due to national growth and its industry mix. A. WMQW During the period of 1962-1972, Michigan industrial region experienced an overall positive comparative advantage. In this ten year period, the region gained 40,340 jobs over that due to national economic trends and its industrial composition. However, not all sectors analyzed had an increase of employment share during this time (Table 4.1). The region experienced several advantages in relation to the nation, particularly in the non- manufacturing sector. Comparative advantages were obserxpd , “Employment 199???? in. the fast savoring msg#12199: “n‘nm‘ -—_-..--.- finance, and services industry. The finance 999§9£1(SIC 60- 67) made_themhisbest,..contributipn. producing 26.689 Jobs. followed by the services sector (SIC 70:89) 3t§§_1889}199V jobs gained for the region. On the other hand, the manufacturing sector had a negative contribution in terms of .a QR," .-"-.—-- ‘p-r-r F‘ competitive share. This sector lost 13,820 jobs. The transportation and public utilities and wholesale trade sectors together lost more than 14,000 job opportunities. ."’- I, 93 The employment gains of the fast growing and more competitive sectors did however offset the loss produced by the less competitive sectors. It is important to note, however, that most of these new jobs created in_the_area during the 1962:1972 period,due to a favorable competitive position, were relatively low paying. Furthermore, the competitive advantage of construction activities during this period may not be sustainable, due to the fact that this sector is closely tied to the volatility of the market. Therefore, construction represents a highly sensitive industry with substantial unemployment rates during recessionary periods. The Michigan’s Industrial Region experienced a negative net shift of employment between 1962 and 1972. This is the result of a negative industry mix component that produced a loss of 64,199 employment opportunities, outweighing the effects of the favorable competitive position which generated 40,340 in the area. As a result, the total net-effect of both components produced a loss of 23,859 jobs during this period. During the 1972-1982 decade, Michigan Industrial region experienced a significant deterioration in terms of the comparative advantage of its industries. The region’s performance was greatly affected by the three recessions that hit the national economy during this period. In fact, 94 Table 4.1 Competitive Share Factor Michigan Industrial Region Between 1962-1972 Const. Manftg. Transp. Fin. Svc. A. Arbor B. Creek Bay City B. Harbor Detroit Flint Jackson G. Rapids Kalamazoo Lansing Muskegon Saginaw -102 4970 -876 771 1316 ~201 -1609 -676 186 -214 —341 -4859 -70 -20 -734 2959 20115 -70 15 241 1525 -4264 -7255 -6746 -5374 -264 —10231 -326 621 1710 359 -1311 -646 59 896 —1226 936 -3421 19 4366 -783 -3610 —105 206 1446 237 1351 -987 1613 3325 -301 -6644 -17 -329 64 —402 4466 -1734 795 7399, 1045 -13620 12355 26689 7601 Sourcezl Michigan Employment Security Commission. 95 the competitive advantage that the region posed in the previous decade was completely reversed. All sectors that made up the industrial composition of the region suffered severely. None were able to match the growth in similar sectors nationwide. Within the non-manufacturing sector, we find that sectors like finance that experienced relatively high growth in the past decade had a drastic reverse performance and lost more than 57,000 jobs during this period (Table 4.2). The wholesale trade sector had the largest decline within non-manufacturing employment, losing 194,416 jobs during this highly unfavorable period. Manufacturing also had its share of responsibility in the negative competitive performance of the region, by losing 206,529 jobs during this period. As a result of this highly unfavorable competitive performance, the origin had an overall loss of 688,391 work opportunities during the 1972-1982 period. In addition to this competitive disadvantage that the region experienced during the 1972-1982 period, it also had an unfavorable industry mix factor, indicating that majority of employment was located in slow growth industries. As a result, the combination of both components of the analysis show that the region had a net total employment loss of 783,610 Jobs. 96 Table 4.2 Competitive Share Factor Michigan Industrial Region Between 1972-1982 Area Const Manftg Transp. Fin. Svc Total XT'R;£;I~""’"’IISZS’TZEEQ """ 762'"'Eéé'"'2322""136" 151;,1 B. Creek -803 -7790 -633 -760 -3627 -18716 Bay City -492 -1334 -777 428 -1083 -7324 B. Harbor -3319 -10907 -177 -322 -1735 -22306 Detroit -32484 -148301 -25319 -14979-77509 -476481 Flint —3442 -15776 -1706 -565 -5945 '42070 Jackson -1103 -5463 -129 -483 -2581 -15057 G. Rapids -2049 7830 304 169 -7384 -2063 Kalamazoo -991 -2719 435 112 483 -6779 Lansing -2810 -3543 984 -220 -7998 -39259 Muskegon 113 -5081 -309 -444 -1989 -11281 Saginaw -1795 -8617 303 -405 -3634 -21362 MIR -50218 -206329 -26320 -57527-115458 -688391 53323;-"’-9131};;;;E;;1;;;;;?é;;;££;-63553;}; ””””” 97 B. Diffiergnl1§115hiiii_enQ_EmBLQXm§niiflehexigr This section of the study will examine the competitive share component of Michigan’s Standard Metropolitan Areas (SMSA) to establish differences in performance related to the efficiency of each area to secure employment compared to other areas nationwide. Also, sectorial competitiveness will be examined to understand which sectors within the local structure had a negative/positive contribution in the overall performance of the local economy. To facilitate this presentation, all metrepelitan §?9?§_P9Y9-999918I9“P9d into three clusters, based on the percentage of employment lost in proportion to total local employment in 1982. _._.___._._ 1.0 Wish The first cluster is made up of those SMSA’s that experienced employment loss above 30 percent: Benton Harbor, w —'--’--_-4 . Battle Creek, Jacksen and the Detroit SMSA’s. fi-r—I-u- . ”9»... 1.1 W The Benton Harbor SMSA exhibited during the 1962-1972 decade a positive competitive position. The largest employment contribution was produced by the manufacturing sector with a gain of 20,115 jobs (see Table B.3 in Appendix B). Within non-manufacturing activities we find that the main contributors were wholesale trade and construction with 2,062 jobs and 2,959 jobs, respectively. On the other hand, the transportation and public utilities sector showed a loss 98 of 70 jobs, due to a slight unfavorable competitive position. The large gains produced by the rest of sectors largely outweighed the minor loss produced by transportation. During the 1972-1982 decade, the Benton Harbor SMSA fell short of its performance in the previous decade. All sectors exhibited a negative competitive performance when compare to national standards. There is no doubt that the economic instability caused by the recessions affected severely the economy of this area. The greatest loss was produced by manufacturing with 10,907 jobs, followed by wholesale trade with a decline of 5,695. All sectors combined, produced a reduction of 22,306 jobs in the area due to the unfavorable competitive position of its economic sectors during the 1972-1962 period.. Inmsgmmary, the Benton Harbor SMSA suffered the most severe reversals among the 12 metropolitan areas of the state. This area had between 1962 and 1972 both a favorable industry mix and a positive competitive position, but in the follewing decade (1972 -1982) the situation was reversed in both;components. During this period this area experienced a highly unfavorable industry mix and an economy unable to meet competitive standards of other sectors nationwide.- 99 12me The Battle Creek SMSA exhibited a very unfavorable competitive position during the twenty years analyzed in this study. Between 1962 and 1972, this area lost 3,748 jobs due to a weak competitive performance. In fact, all but one sector (Finance) experienced decline in terms of employment opportunities (see Table 8.5 in Appendix B). Among those with a negative competition performance, we find that wholesale trade and manufacturing experienced the lowest competitiveness by losing 1,846 and 1,609 jobs respectively. On the other hand, the finance sector gained 186 jobs because of a favorable competitive position. The government sector also contributed to the area with 612 jobs. As a result of the favorable competitive position combined with a negative industry mix, the Battle Creek SMSA had a net total employment loss of 5,867 jobs between 1962 and 1972. The poor competitive performance of this highly industrialized area was made worse during the 1972-1982 period. Between 1972 and 1982, the Battle Creek SMSA competitive position deteriorated drastically, losing a total of 18,716 jobs (see Table B.6 in appendix B). “In summary, the economic structure and sectoral competitiveness of the Battle Creek SMSA during the 1962:1972 and 1972-1982 periods did not enjoy a favorable position. In both decades the poor competitive performance of the industrial body accelerated the areas employment situation in a downward trend.“ 100 1.3 WW The Jackson SMSA exhibited a negative performance in terms of competitive position between 1962 and 1982. During the 1962-1972 decade, most of the sectors of this area’s economy had a negative competitive status ( see Table B.7 in appendix B). Typical of all metropolitan areas of the state highly skewed towards durable goods production, we find that manufacturing had the worse performance. The manufacturing sector loss 1,311 jobs. Transportation and public activities and the wholesale trade sector also produced losses, in terms of competitiveness. Together, those two sectors lost 1,160 jobs opportunities. On the other hand, the service sector gained 896 jobs. The favorable competitive position of the service sector was the most significant in terms of employment gain in the Jackson SMSA. Construction activities in the area also exhibited a positive competitive position. However, the employment gains achieved by the service and the construction sector were not enough to outweigh the losses produced by the other sectors. As a result, the area lost a total of 1,517 job opportunities due to a negative competitive status (see Table B.7 in Appendix B). Between 1972 and 1982 the Jackson SMSA competitive position was made worse, to a point where there was not a sector that appeared with employment gains. The ability of the area to secure employment in terms of competitiveness was weakened significantly during this recessionary period (see Table B.8 in Appendix B). Again, manufacturing had the 101 worse performance and experienced a loss of 5,463 job opportunities. The wholesale trade sector did not perform better than similar activities nationwide, declining its share of employment by 4,099 jobs. As a whole, the Jackson SMSA loss 15,057 jobs due to a negative competitive performance during the 1972-1982 period. The interplay of a negative competitive position and an unfavorable industry mix produced a not total employment loss of 17,248 jobs. It is important to note, that the majority of employment loss in the Jackson area during the twenty years period (1962- 1982) was mainly determined by the very unfavorable competitive performance of its industries. 1.4 W As it was mentioned earlier, the Detroit Metropolitan area is the most important SMSA in the state. During the 1962-1972 period, this area experienced a negative competitive position. The wholesale trade experienced a negative competitive performance, producing a loss of 13,807 jobs. The loss of employment in the whole trade sector was the most significant in terms of absolute numbers. The manufacturing sector experienced a loss of 4264 jobs, the lowest employment decline among those sectors that experienced a negative competitive performance. The construction sector was the only activity besides government that increased its employment share. Overall, the combined effect of the competitive performance of the Detroit SMSA economic activities, produced a loss of 16,093 jobs between 102 1962 and 1972. shows that the competitive situation for the Detroit SMSA worsened during the 1972-1982 period (see Table 8.10 in Appendix B). At this time, we find that there was not an industry in the area that had a positive competitive performance. The manufacturing sector had a decline of 148,301 jobs, representing more than 32 percent of the total employment loss of the area. Inusnmmagy, dufiiflfixib°,l§§?f 1912 decade, the Detroit SMSA had both a negative competitive P9§i§i°n 999 §P_unf§V°rabl§ industrx mix producing a total net loss of 48,877 jobs. Between 1912 and 1982, again we find this area had a negative competitive situation and a negative industry mix producing a net total employment loss of 520,042 jobs. 2. 0 W The second cluster is made up of those SMSA’s that experienced a moderate loss of employment (between20 and 30_ percent) in proportion to total labor. 2 :Wmancel During the 1962-1972 period, the Saginaw SMSA exhibited a positive competitive position. This area was able to increase its share of employment due to a competitive advantage over similar activities in the nation (see Table B.11 in Appendix B). 103 The manufacturing sector had the largest employment contribution, increasing its share of employment with 4,468 new jobs. The combined effect of several non-manufacturing sectors where also significant in terms of employment contribution. The finance sector produced 795 jobs followed by the gain of 739 jobs in the service sector. On the other hand, we find that the construction sector and the transportation and public utilities sector exhibited a negative competitive position. The former had an employment decline of 402 jobs while the latter lost 1,734 job opportunities in this area. The performance of the Saginaw SMSA, produced a total gain of 4,501 jobs due to the overall competitive advantage of the industrial structure of the area during the 1962-1972 period. Between 1972 and 1982, the competitive situation of this area changed significantly. During this period the Saginaw SMSA experienced a negative competitive position (see Table B.12 in Appendix B). The transportation and public utilities sector had the most severe decline in employment opportunities experiencing the loss of 31,429 jobs. The manufacturing sector suffered from this unfavorable competitiveness losing 8,617 jobs. Overall, the Saginaw SMSA had a net total loss of 53,094 jobs between 1972 and 1982. This represents one of the largest drops in employment opportunities for a metropolitan area of this size in this state. 104 In the twenty year period covered in this analysis, we find that thecompetitive position have been a determining factor, both in the net total employment gain of the 1962- 1972 period and in the net total employment loss during the 1972-1982 decade. 2.2 WWW During the 1962-1972 period the Flint SMSA exhibited a positive competitive position, indicating that the area gained additional jobs over that due to national economic trends. The wholesale trade sector increased its employment share by gaining 6,653 new jobs opportunities for the area. The manufacturing sector was highly uncompetitive during this period. This sector loss a total of 10,231 jobs or 96 percent of all jobs loss in the area (see Table B.13 in Appendix B). Fortunately, the job gains produced by wholesale trade, finance (621), services (1,710) and government 3,468 were enough to offset the losses produced by construction (264), transportation 328 and manufacturing. As a result, the area as a whole, had a positive competitive position gaining 1,629 new jobs. During the 1972-1982 period the Flint SMSA had a negative performance both in competitive position and in industrial mix (see Table B.14 in Appendix B). The economic instability of this period greatly affected the economy of the Flint SMSA due to its high concentration of employment in the recession sensitive durable goods manufacturing. All sectors of the economic structure of this area exhibited a negative competitive 105 position. The manufacturing sector was the most affected by losing 15,776 jobs, followed by wholesale trade activities with a total loss of 13,706 employment opportunities. The combined effect of the Flint SMSA competitive position and industry mix between 1972 and 1982 produced a net total employment loss of 54,278 jobs. Inhsummary, between 1962 and 1972,_F1£nt SMSA enjoyed a faverable competitive position but the unfavorable industry mix outweighed the competition advantage of the areas economy. Between 1972 and 1982 the competition advantage was loss and the negative industry mix factor was maintained, producing greater employment losses in the area. 3.3 NW The Bay City SMSA exhibited a negative performance in terms of competitive position between 1962 and 1982. During the 1962-1972 decade, we find that all sectors of the economy, with the exception of government, had a negative competitive status. The Wholesale Trade and the finance activities failed to capture their share of employment when compared to national standards of efficiency. Together, these sectors lost more than 1,500 jobs, representing 63 percent of total employment decline in the area. The manufacturing sector appeared to be less competitive in this area reducing employment opportunities by 485 jobs. The employment gains of the government sector (877) did not alleviate the situation for the Bay City area because of the low performance of all the other sectors. Overall, the Bay 106 City with the negative competitive position of its economy, combined with losses produced by a unfavorable industry mix had a net total employment loss of 1,954 jobs between 1962 and 1972 (see Table B.15 in Appendix B). Looking at the following decade (1972-1982), Table B.16 (see Appendix B) shows that the employment situation in the area did not improve, in terms of competitive position. The ability of each sector to increase its share of the national growth was weakened severely, particularly the manufacturing sector. As a whole, the Bay City SMSA declined by 7,324 jobs its share of employment. In summary, the Bay City SMSA experienced during the 1962-1982 period an industrial structure that was unfavorable both in terms of competitiveness and industrial mix. However, the employment loss in the area was more. intensively determined by the weak competitive perfermance of its economic sectors. 2.4 WW1mfierfomm During the 1962-1972 decade, the Lansing-East Lansing SMSA exhibited a positive competitive position. The largest employment contribution was in the service sector with a gain of 3,325 jobs. The wholesale trade sector also exhibited employment gains of over 3,000 jobs. On the other hand, the only sector that did not experience a positive competitive position was transportation and public utilities with an employment decline of 987 jobs. All sectors combined produced for the area a total gain of 11,687 jobs. 107 In consequence, the effects of the competitive position, added to the favorable industry mix, produced a net total employment gain of 12,028 new jobs in the area (see Table B.17 in Appendix B). It is evident that this increase in employment opportunities was controlled by the competitive position of the Lansing-East Lansing SMSA industries. During the 1972-1982 decade, the Lansing-East Lansing % SMSA competitiveness fell short of its performance during l the past decade. The majority of the area’s industries experienced an unfavorable competitive performance. The service sector exhibited the most dramatic change, from a gain of over 3,000 jobs in the 1962-1972 period to a loss of 7,998 jobs between 1972 and 1982. Another sector that suffered a loss in employment was wholesale trade with a shrink in its employment opportunities of 8,276 jobs. On the other hand, the only sector that experienced employment gains due to a favorable competitive position was the transportation and public utilities sector. It is interesting to note, that this was the only sector that had a negative competitive performance in the previous decade, but improved its competitive situation during the 1972-1982 period by gaining 984 new jobs. The combined effect of all sectors of the Lansing-East Lansing SMSA produced a total loss of 17,396 employment opportunities during this unstable decade. Inmsummary, the Lansinngast Lansing SMSA was blessed with an employment gain of more than 12,000 jobs during the 108 t§§?f%91?129?39d' due to a highly favorable competitive position of its_economic sectors. In contrast, this situation changed between the 1972 and 1982 period where we find both a negative competitive position and an unfavorable industry mix. It is important to note that in the twenty year period, the behavior of employment in the Lansing-East Lansing SMSA was controlled by the competitive performanCe of%its_industries. 2.5 90W During the 1962-1972 decade, the Muskegon SMSA exhibited a negative competitive position (see Table 8.19 in Appendix B). The manufacturing sector experienced the worst performance losing 6,644 jobs during this period. The wholesale trade activities in the area, also declined in employment opportunities by 810 jobs. On the other hand, the service and government sector exhibited an employment increase due to favorable competitive performance. Service activities gained only 64 new jobs, while the government sector contributed with 1,244 jobs. The combined performance of all sectors produced a total net loss of 6,793 jobs in the Muskegon SMSA. During the 1972-1982 decade, the competitive situation of the Muskegon SMSA did not improve, in fact, it became worse (see Table B.20). Only the construction sector produced gains in terms of competitiveness. This activity gained 113 jobs during the 1972-1982 decade due to a favorable competitive performance. The combined performance 109 of the major economic activities in this area, produced in terms of competitiveness a net total employment loss 14,644 jobs. In summary, the Muskegon SMSA hadanegative competitive position and an unfavorable industry mix during the twenty years here analyzed. Through the whole period manufacturing had the worse competitive performance and due to its size was the controlling sector in this areas general employment behavior. 3.0 Ihirdilusterfiharacteristicsi The third cluster is made up of the SMSA’s that experienced the smallest amount of employment loss (below 10 percent) in . ”Wv‘ prOportion to total employment, in terms of competitive advantage. 34me During the 1962-1972 decade, the Kalamazoo SMSA exhibited a negative competitive position, indicating that the combined competitive performance of the economic activities of this area were below the national standards (see Table 8.21 in Appendix B). The manufacturing sector had the worst competitive performance. This activity lost 3,610 jobs, more than 80 percent of the total employment lost in this area. The construction sector also exhibited a negative competitive position, by losing 783 jobs. On the other hand, the service sector made the highest contribution of employment by increasing its share with 1,446 new jobs. 110 Adding the contribution of all sectors of the Kalamazoo SMSA, we find that the area lost 2,501 jobs due to overall unfavorable competitive performance. Between 1972 and 1982, the competitive situation did not improve, (see Table B.22 in Appendix B) but it did not get significantly worse, as in most metropolitan areas of the state. In fact, manufacturing activities in the area improved their competitiveness by losing less jobs during this period than in the previous decade, a highly unusual situation among the metropolitan areas in the state. The wholesale trade and the manufacturing sectors experienced the major losses with 3,121 jobs and 2,719 job loss, respectively. The modest gain of employment opportunities by the service sector (483) and the transportation and public utilities sectors were not enough to offset the losses produced by wholesale trade and manufacturing. As a result the Kalamazoo SMSA lost 6,779 job opportunities due to the overall negative performance of itsweconomic sectors. 32W During the 1962-1972 period the Grand Rapids SMSA exhibited a positive competitive position, indicating that this area was able to increase its share of employment by gaining additional jobs over those due to national trends and industrial mix (see Table B.23 in Appendix B). The service sector experienced the largest gains, increasing its employment share with 4,386 new jobs. Another positive contribution came from the wholesale trade sector which 111 produced 4,213 jobs due to a favorable competitive performance. The contribution of manufacturing activities in the area (936) was not as large but nevertheless important, in terms of new high paying jobs for the area. On the other hand, there were two sectors that did not produce employments gains in relation to their competitiveness. These were the construction and the transportation and public utilities sector with a decline of 1,226 job opportunities and 3,421 jobs opportunities respectively. The total contribution of all sectors produced for the area a net increase of 7,914 job opportunities. During the 1972-1982 period we find that the Grand Rapids SMSA lost the competitive advantage that many of its sectors enjoyed in the past decade (see Table B.24 in Appendix B). While the manufacturing sector decreased its competitive gains of employment in most of the state metropolitan areas during this recessionary period, we find that in the Grand Rapids SMSA it exhibited increase. The low concentration of manufacturing employment in the highly sensitive motor vehicle in this area is partly responsible for the favorable performance of the manufacturing sector in this area. On the other hand, the service sector experienced the most severe employment decline by losing 7,384 jobs. Overall, the Grand Rapids SMSA experienced a net lost 2,063 job opportunities during the 1972-1982 decade. Ia..aumm.ary. the .9299911329133 SMSA had between 1516.13.99. 1972 a faverable competitive position that outweighed the 112 19§§§§HPQQduced_by_a_negative industry mix, as a result producing a net total employment gain of 2,245 jobs. Between 1972 and 1982, both the industry mix and the competitiveness position were unfavorable, resulting in a net total employment loss of 5,867 jobs,” 3.3 WWW During the 1962-1972 decade, this area had a favorable competitive share of employment. This suggests that the Ann Arbor SMSA gained an additional 7,873 jobs beyond the ones produced in the area by the effects of the national trend and its industrial mix component (see Table B.25 in Appendix B). This greater share of employment was the result of an above average performance of its economic activities compared to similar sectors nationwide. This area experienced a superior competitiveness over the rest of the nation in most of its economic sectors. Manufacturing activities exhibited the best performance, contributing 4,970 jobs. In fact, this sector produced 64 percent of all new jobs created in the Ann Arbor SMSA between 1962 and 1972. Within the non-manufacturing sector, we find that wholesale trade and service activities were highly competitive. The latter gained 1,316 jobs while the former exhibited an upward share of its employment with 2,115 new job opportunities. On the other hand, we find that the construction sector and transportation and public utilities sector exhibited a downward share of employment, in terms of competitiveness. The combined effect of the Ann Arbor SMSA 113 competitive position and industrial mix between 1962 and 1972 produced for the area a total net employment gain of 7,873, independent from national economic trends. During the 1972-1982 period, the Ann Arbor SMSA exhibited an overall upward shift in its sectoral competitiveness (see Table B.26 in Appendix B). All sectors combined produced 130 new job opportunities in the area. Though few in number, these jobs represent a significant contribution compared to the poor performance of the region and the state, as a whole. The economic instability of this decade had its toll on those sectors with high degree of cyclical sensitivity. Therefore, manufacturing and construction exhibited drastic downward shifts in their competitive positions, these sectors had a combined loss of 5,672 jobs. Despite the poor performance of manufacturing and construction, the service activities increased their share of employment by 4,544 jobs, due to a favorable competitive performance, compared to similar activities nationwide. In summary, during the”1962-l972 decade, the Ann Arbor H 44444 ova-“I'm SMSA enjoyed a net total employment gain due to a favorable competitive position that was able to outweigh the losses produced by an unfavorable industry mix. However, during the 1972-1982 period, the effects of the unfavorable industry mix outweighed the effect_of the favorable competitive position of the areas economy. Therefore, whil Wfi‘q‘- the region grew faster than the nation as a whole between 114 1962 and 1972, it fell behind_the nation between_l972 and 19.9.2,- (gggeggmgfy, the analysis of the sectoral competitiveness of the MIR during the 1962-1982 period showed that the area did not enjoy a favorable position. In the twenty year period the poor competitive performance of the region’s industrial body accelerated the area’s employment in a downward trend. At the SMSA level, the analysis showed a gloss link between industrial diversification and employment growth. In general, areas with a high concentration in auto-related manufacturing experienced a higher proportion of job losses compared to the other SMSA’s. The lack of competitiveness in the manufacturing industries is probably related to technological change (primarily automation) which is essential for the region, in order to keep pace with inereased industryfwide competition. --—-.—_ CHAPTER FIVE CQHQLUSIQNS The four major objectives of th's study we a.” w‘ll'r‘flhI-‘v .Ao omot- ‘10'pw--“-* _v... .‘ re: (1) What were the changes that occurred in employment and in the economic composition of Michigan and in its industrial region ? (2) What industrial sectors in the local economy of each subregion (SMSA) appeared to be the most sensitive to the swings in the national economy ? (3) Which subregions (SMSA) exhibited the greatest degree of cyclical sensitivity? ((4) How did the degree of concentration or industrial specialization of an area correlate with differences in performance in a cyclical economy 7 The majegfl£indin§g~are as follows: Fiigt, the study.has indicated that total WQSQ 399 salary employment in the Michigan Industrial Region (MIR) grew significantly slower than the nation between 1962uand, 1982. Breaking down the analysis by decades it was discovered that the region distanced itself from the national growth pace between 1972 and 1982. During this period, the region’s employment grew by less than 2 percent, while the nation increased its total employment share by 31 percent during the same period. This situation is not all / together surprising due to the high concentration of employment in the -- highly recession sensitive-- u.“- ’I/ ‘\manufacturing, particularly in the durable goods production. 115 116 manufacturing, particularly in the durablefgeodsuprednetion. ', .Hw. Over the study period, employment in the region has been ”at! “W? shifting towards the non-manufaeturing sector, while measfagturins eaployméaE haYe.besn.stsadi%¥ 99°¥¥9¥9§; However, the durable goods component of manufacturing have not changed significantly between 1962 and 1982. This situation increased the chances of the region and the state to see its employment suffer severely any time the nation experienced an economic slowdown. The unfavorable employment situation of the region during the period analyzed was largely a result of the drop in_demand for automobiles coupled with the unfavorable competitive position of n—u-h-ur—r-ya --«r4 4 ‘- "" ~— .— 1.0—4.“...— manufacturing as a whole , particularly during recession» years. Moreover, the competitive position that the region ehjoyed between 1962 and 1972 radically changed in the following decade, producing a loss of more than a half - million jobs. On the other hand, prefessignalwandflgelateg services (including mining) appeared the least sensitive to recessiens, in fact it was the only sector in the region, that increased its net total share of employment during the 1972-1982 period, besides the government sector. Second, the behavior of the durable goods manufacturing sector within the economic structure of M.I.R. during the period studied, reveals its highly cyclical sensitivity inducing relative large cyclical swings in that sector. This was also true at a subregional level, where these fluctuations contributed significantly to short-run swings ‘1 f 1 117 in each area’s jobless rate. The size and__ relative stability -_h—~—-. of the non- manufacturing sector helped minimize the m .p-v 51"” “Wu-d” v-5 . --—-'V‘ "m H...“ 7"“-‘1 'W 'm'1 rum“ \\emplitude of cyclical swings_ in total employment, overall empleyment behavior among Michigan SMSA’_usaquuite sensitive over the period examined. Within the non- manufacturing, construction employment exhibited a high degree of cyclical sensitivity, especially striking was the magnitude of contractions which were higher than declines experienced by total manufacturing employment during the three recessions that occurred in this period. The transportation and public utilities sector also experienced cyclical sensitivity during recession years but to a lesser degrse than construction and manufacturing. The evidence provided by the shift- share analysis indicated that ,as a whole, M. I. R. did not enjoy a favorable industry mix. The Majority of the area’ 5 employment was located in slow growing industries. The analysis revealed that the region did not keep pace with growth in the nation, particularly in the manufacturing sector. The drop in demand for automobiles and equipment brought a substantial decline in manufacturing employment compared to the rest of the nation. Industries w~'—Q that provided most of the new jobs created during them1962- Ms- «M —. ‘0' 1982 period were service & mining, wholesale trade_ and finance, however, the new employment opportunities produced by these sectors were not enough to outweigh the losses by \ --_. ""‘wu‘ manufacturing, construction and transportation. ——-' 118 The thi£Q_9hiflctive.was to determine which subregions exhibited the greatest degree of cyclical sensitivity. The analysis of the employment data for each subregion showed variations in response to unfavorable swings of the national economy. The results of the analysis also indicated that there are thiee_distinct groups among the state’s metropolitan areas, in terms of sensitivity to recessions. The first group is made up of those areas with heavy dependence on manufacturing activities, particularly the auteunelated industry. These areas experienced the highest degree of cyclical sensitivity and a severe drop in employment. In this category we find the Benton Harbor SMSA, Flint SMSA, Lansing-East Lansing SMSA, Detroit SMSA and the Jackson SMSA. Among these areas we find that the Benton Harbor SMSA experienced the most drastic decline in total employment (35 percent) during the 1972-1982 period and the weakest economic recuperation during expansion years, making it the metropolitan area of the state with the worst employment performance during the study period. In the second group we find metropolitan areas with an industrial cyclical sensitivity : the Ann Arbor SMSA, Saginaw, Battle Creek SMSA, and the Muskegon SMSA. The third grenp includes areas that experienced the least sensitivity to recessions and below average relative employment loss. The overall behavior of employment in manufacturing and local total wage and salary employment suggests that the Grand Rapids and the 119 Kalamazoo SMSA’s were the two most cyclically stable -WMm-n. sag... - a r metropolitan areas inthe state, over the period covered in this study. Such stability appears to be directly related to industrial diversification and a lower concentration of employment in the automobile industry. In addressing the final °§J§°FtY3-°f this study, the -ua-_-..-. — #ihl—sp.a - -- u u ‘ _. . I analysis indicated that the degree ofdependence of an FW-v I area’s eeenomy on motor vehicle related_industries, the higher are the chances of suffering above average 1 unemployment rates during national economieflrepessigns; Clear examples of this fact are the Flint and Grand Rapids SMSA’s. The former, experienced sharp declines in total wage and salary employment during the 1972-1982 decade, resulting from the fall off in activity, especially in the auto- related industry. The high dependency on the automobile industry, produced an overall economic crisis and instability in the Flint area with above average unemployment rates. In contrast, the more diversified structure of the Grand Rapids SMSA experienced growth in its manufacturing sector, during the 1972-1982 period. In addition, it had the highest increase in total wage and salary employment and the steeper gain in manufacturing employment among all 12 metropolitan areas of the state between 1962 and 1982. Moreover, this area registered the second strongest economic recuperation during post-recession years, coupled with one of the lowest unemployment rates among Michigan’s metropolitan areas. . v-‘Q‘ - r x” ; in manufacturing. However, the movement towards non- r w-‘-\ ‘- fl ‘ \- '\ \ :Reconomic growth. Declines inmanufacturing typically 120 The shift- share analysis suggests that areas guumv—m—I- ‘ ‘- speegalising in auto-related industries, experienQGd greater than average relative employment 1033’.99§?n5.993999§19f slow economic growth. The vigorous expansion of non- ‘u ##"’"i 4.4-.“ manufacturing employment (services, wholesale trade and finance) partially alleviated the effects of the slow growth manufacturing, e.g. services, does not guarantee continued dampened the local service sector’ s expansion as wage income declines. Reduced growth reduces capital goods production as does the overall shift from goods to services. This negative ripple effects from the slow growing manufacturing to the fast growing non-manufacturing could result in reduced. ‘\ demand for locally derived goods and services. Therefore, _ I \. continued growth of local non- manufacturing industries and .1,“ employment is dependent upon the continued vitality of M. I. R. to compete in national and international markets. .. Aw Overall, the region experienced a pattern of slow growth in ~_.--‘, .T.-._--—..1.._ V employment in non-manufacturing industries experienced a 1 _ —v—- —-—.—--- --—o— -———r. ---—-- .- ""flhfim -" ~— _...~ . ~——._ oHv—l-fl-m "' stronger pattern of economic growth and relative comparative w—w-u. .uu. ‘~'~l - .1 -='/ ’am”' 1... w M—u—mm —-- \ advantage. “Hue—q —.. g, -1. Throughout 1962-1982 the state of Michigan faced sever ‘h—n __ " economic difficulties in each of the recessions that ‘M~———_.. .... . .. — .1 121 occurred in thatmperigd, Typically the recessions have been deeper and more prolonged in this state than nationally as WM-M.. -o... output of automobile products fell much more sharply than total industrial product. Clearly, Michigan’s heavy reliance on the auto industry has been the principal factor responsible for the large amplitude of the fluctuations. \- Mighigan, perhaps more than any other state in the nation, must be concerned about the future of durable goods manufacturing, and more specifically motor vehicle ‘ manufacturing. The evidence provided in this study, demonstrates that variations in the state’s total wage and salary employment closely followed those of durable goods Mann-.4, - manufacturing. Motor vehicle employment dominates the Michigan economy to a degree that is unsurpassed by any other industry. About 45 percent of total durable goods manufacturing employment is accounted for by automobile and related manufacturing. The unstable characteristic of the motor vehicle, causes the residents of the state but more directly those employed in this industry, to lose grounds in terms of per capita income during recessions when compared tothe U.S. average, but to gain during periods of expansion. \7 In part, the cyclical nature of employment in the Michigan Industrial Region during the movement towards a more diversified industrial composition, results from a basic connection between manufacturing and non-manufacturing employment. Layoffs in durable goods industries, reduce the 122 personal income stream which impact negatively on the demand for non-manufacturing goods and services. Reductions in the region’s major durable goods industry such as automobiles, created negative ripple effects in a whole complex of related industries. Reductions in the demand for automobiles reduces the demand for steel, glass, plastic, rubber, machine tools, electric components, and general auto parts that further reduced the income stream and employment prospects not only for the region but also for supplier industries in other areas of the state. Therefere, it is not clear what would be required to reduce the cyclical vulnerability of the region other than a complete restructuring of the state’sindustrial base. A wider range of industrial activity is needed to- mitigate the swings_in production and employment in the auto industry and in certain other durable industries. Efforts should be directed toward increasing the rate of growth in the non- durable industries so that the share of all —H--_¥1“.—fi‘l HW'D- *m‘hfi— 4... ..‘_...... c— -H. -flfi-‘g-‘gdh manufacturing jobs accounted for by these more stable industries can increase and thus soften the effects of economic slowdowns in the state. The report on the shift-share analysis for M.I.R. and for each metropolitan area within the region, provides an excellent take-off point for identifying_industries in terms of competitiveness and growth. It pinpoints, in a general way, industries that are growing in the region or in specific areas faster than similar industries in the nation, 123 and those that have enjoyed a relatively competitive advantage compared to national standards. The analysis has also indicated particular industrial areas which have experienced growth, despite economic adversities. A more detailed study of these areas and their economic structure should be carried out with a higher disaggregation in order to provide useful guidelines in exploiting their locational advantages and promoting development of those industries that seem to hold promise for the state. Finally, a373919§ involved in economic development programs should initiate a full scale research effort at a three, possibly four digit SIC level to determine the industries for which M.I.R and state, as whole, are best suited. Analyze with special care the locational advantages of these firms by pinpointing promotional efforts towards expanding firms in these industries. Perhaps, one of the criteria of selection would be the choice of industries which serve to diversify the economy of the state. APPENDI CES Appendix A 124 TABLE A.1 Percent Distribution of total Wage and Salary Employment Benton Harbor SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ éé ..... 4% ..... 55 ............... -Durable Goods (76) (76) (76) -Non Durable (24) (24) (24) Non Manufacturing 38 42 51 Government 10 11 14 Source: Michigan Employment Security Commission. 1984 TABLE A.2 Percent Distribution of total Wage and Salary Employment Flint SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................... 5% ..... 45 ..... éé ............ -Durable Goods (94) (94) (95) -Non Durable (06) (06) (05) Non Manufacturing 33 41 52 Government 10 14 16 Source: Michigan Employment Security Commission. 1984 125 TABLE A.3 Percent Distribution of total Wage and Salary Employment Lansing-East lansing SNSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 31 ..... éé ..... 26 ............... -Durable Goods (89) (89) (88) -Non Durable (ll) (11) (12) Non Manufacturing 37 42 45 Government 32 33 35 Sourcey Michigan Employment Security Commission. 1984 . 4' .-a .( .v-fi TABLE A.4 Percent Distribution of total Wage and Salary Employment Detroit SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 41 ..... éé ..... 27 ............... -Durable Goods (83) (83) (83) -Non Durable (17) (17) (17) Non Manufacturing 47 49 58 Government 12 15 15 Source: Michigan Employment Security Commission. 1984 126 TABLE A.5 Percent Distribution of total Wage and Salary Employment Jackson SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 figgeéeetfiéifig ................ 42 ..... 30 ..... éé ............... -Durable Goods (81) (81) (78) -Non Durable (19) (19) (22) Non Manufacturing 43 54 58 Government 15 16 17 ,afi ________________________________________________________ Source: Michigan Employment Security Commission. 1984 Table A.6 Percent Distribution of Total Wage and Salary Employment Ann Arbor SMSA Percent Distribution Item 1962 1972 1982 Total wage and salary employment 100% 100% 100% Manufacturing 40 34 24 Non-Manufacturing 25 31 42 4 Government 36 35 34 Source: Michigan Employment Security Commission (MESC), 1984. 127 TABLE A.7 Percent Distribution of total Wage and Salary Employment Saginaw SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 4; ..... 42 ..... éé ............... -Durable Goods (88) (92) (90) -Non Durable (12) (08) (10) Non Manufacturing 45 46 54 Government 11 12 14 Source: Michigan Employment Security Commission. 1984 TABLE A.8 Percent Distribution of total Wage and Salary Employment Battle Creek SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing 46 41 30 -Durable Goods (56) (61) (51) -Non Durable (44) (39) (50) Non Manufacturing 40 42 50 Government 14 17 20 Source: Michigan Employment Security Commission. 1984 128 TABLE A.9 Percent Distribution of total Wage and Salary Employment Muskegon SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 54 ..... 42 ..... éé ............... -Durable Goods (85) (86) (84) -Non Durable (15) (14) (16) Non Manufacturing 36 43 51 Government 10 15 17 Source: Michigan Employment Security Commission. 1984 Table A.10 Manufacturing Employment Growth Rates Michigan SMSA’s 1962-1982 Area Ann Arbor 17.6 Grand Rapids 29.8 Battle Creek -24.6 Jackson -25.0 Bay City' -4.5 Kalamazoo -3.4 Benton Harbor -18.4 Lansing-E.L. 9.8 Detroit -14.7 Muskegon -30.0 Flint -17.8 Saginaw -.4 State Rate=-7.9 Source: Michigan Employment Security Commission, 1984. 129 TABLE A.11 Percent Distribution of total Wage and Salary Employment Bay City SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................. éé ..... 31 ..... éé .............. -Durable Goods (79) (80) (72) -Non Durable (21) (20) (28) Non Manufacturing 54 53 59 Government 10 16 15 Source: Michigan Employment Security Commission. 1984 TABLE A.12 Percent Distribution of total Wage and Salary Employment Grand Rapids SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 44 ..... éé ..... éé ............... -Durable Goods (76) (75) (71) -Non Durable (24) (25) (29) Non Manufacturing 47 51 57 Government 09 11 11 Source: Michigan Employment Security Commission. 1984 130 TABLE A.13 Employment Distribution of Durable Goods Manufacturing Grand Rapids SMSA and Michigan Sector Grand Rapids Michigan Lumber and Wood Prod.(SIC 24) 2.0 1.4 Furniture and Fixtures(SIC 25) 25.1 3.1 Primary Metals (SIC 33) 6.0 7.6 Fabricated Metals (SIC 34) 22.0 14.8 Machinery (SIC 35) 20.0 19.2 Electrical & Electron. (SIC 36) 6.0 4.4 Transportation (SIC 37) 6.0 44.2 Source: Michigan Employment Security Commission, 1984. TABLE A.14 Percent Distribution of total Wage and Salary Employment Kalamazoo SMSA 1962-1982 Percent Distribution Sector 1962 1972 1982 Manufacturing ................ 46 ..... éé ..... éé ............... -Durable Goods (42) (48) (45) -Non Durable (58) (52) (55) Non Manufacturing 37 42 53 Government 17 20 18 Source: Michigan Employment Security Commission. 1984 Appendix B 131 .Swmmw-HOU ucwlmomnrw Soar—ow: "wand $0 @0158 088m D89“... ~ Dommm u 8m n w DDQNV n 8mm — DON — N ~ Sham wwzrfu gamma $89 $8? mflve- 9va .52. :83 Emmm mien umemm 22338 Home one: Home See 383mm Ream .8me IS mmeew 82.12: 682 mvmwz BmB ~87 HEN: mdmud! enmmm enmmwu a: T mmmm? 5:533:15 828 R187 memes? owmmT mam—55E; ummem mo: 89 oz: zeiBEmzoo :1. 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JI—ahmznzm m5~hmbwatoo mohumm NmmfiINNmu Ith hzudm mum>dcz¢ mflcimlhunzm v~.m wdmch 145 .commmwlioo acoecogaiw cacwfiowt "mumc mo woLjom coco *mmo two—I mvvl -m~I AchOh cch moo mc- cNN Rho hzmtamcoc ocm~ nod“ mun moo VMNI mwoubawm coN mhu ~N «v cNI wozczum con— muNN m~mI mum omNI uocmh chmchxz cot th NN—I NcuI owl zcnhohacamzcah com vaam tnNNI mNh~I mchI ozuachocuczmt cod com vaI . he ~VMI zomhocahmzoo wozcrc hcwuuw hunzm xmz IIIIdeIm Aczcnowa Jozo—hcz Johch hm: Acmmhmcczm ubuhmhmatoc achcmm th~INcm~ Cth rhno >oc m~m>4cz¢ wacIthuuzm m~.c wqcch 146 .commmmlcoo acolmouniu commcowz "mumc mo moLaom ‘II|“"'II.""'||'|I' com~ chm cNMNI cc—I vamI Amhch coo cmm~ omNI cmcI ov—I hzwzamboc ocHN HNV— one Nch~ mocul mwoubawm con cHN wot cm ch wozcznu com mmvm mmmnl hood cNmmI mocah wqcmmdozz cowl mam mac—I quI NNNI zcnhchmcamzmmh ccmuI mmmN chVI nmmNI vmm~I cz—achcmuczmt cch ~hm anal mh—I NGVI zcmhccmbmzoo II mczozw Iwmwmmw humxm X“: wacxm Jozcmomm szcmhcz Jakob hm: Joumhmcczm monk—hmatcc mohcwm Ncmfilthu mmtm rhmc >¢c mum>qczm waczthmmzm c—.m maccb 147 ocoom comm— coco— covm oooo~ oc~ coho coo— chIIo Aczcmcwa .commmmiioo acmemo~aiw cmchowt Nhoom cNNcN~ cvm NVNNu coco h—um VNNV ammo umom ooN— N—HN moN Hmmc mNcm mNo VNm— tNN—I NMNI hNoNu NNmmI chch cmm— to? hc~ hummuw hmmxm xut III Amzonhmz Johch but Acumhmcczn "wuwc mo WULJOm oom- Amhch ava hzwzaMDoo mNmm mwombamm mac“ mozmzmu oocm mood» udcmmcczz homI zcmhchmcamzcmh Hmm— czumchcmmczct th zcuhocahmzcc uaozm III wc—huhwazoc achcmm NNmHINcm— cmtm clumzod hmchczumzon m~m>4¢z¢ waCIMIhu—Im m—.m chch 148 .cowmmdlcoo ucwamo_nem comwzowz "mumc mo moLnom ccocN cmva mmVNNI cmomI mmNmMI Jchoh co~m~ mHNc— m~HMI ocmhl cowhmI hzwzamcoc comm o—mm Now comm ommNI mwombawm ccmN Ho—N mmm mmm cNNI wozmzmu DDMN mcmc ch—I ~mom cNNcI wccah wdcmwdozz com" MN~_ mNm NWVI woo Zothhmcamzmmh DDVMI QVVNu mvcm_I moMNcI mvmmI czmmchccuczcz comnl comm cchI cmmI cchI zcnhccmhmzoc mczozc hommmw huHIm xuz wmczm gotcmcma AIzcnhcz Johch hwz JC—mhmcczm wD—hnhwatcc achcwm Nomalem— CMIm oz—mzog hmowIczumZEJ mum>4¢z¢ macxmlhunxm c~.c meoh 149 .CmemmICOU acwem0~aiw cmcwsowt "wuwc no 00L30m mNoc~ mNmoI comm Nmuml mono! 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Johoh cooo oo—v N—ou ooc— ovo hzmzamboo coho ohtN oon *oh— ovvu mwoubmwm coca mvo mom ov— ooN uozozmu ccvv oonv NuN my? ~cNI wooah odomMJOIZ oco moo mmNI vo—I moul zcmhohacamzoab ccou cov- coooI coooI c—oml ozumchcomczo! coo ovnm ovol hm— mohl zombocahmzoc mozozc boommw hmmzm xut macro Aozcmoma Jozonhoz Johch but Joumhmcczn wbuh—hmazoo achcmm NhouINoou omtm chozoJon m~m>4ozo wmoIMIhuHIm “N.o odooh 152 .COMMWME6OU acmemodafiw cmocnoqt "wamc mo mOLjom cho~ ohth ohm—“I oooVI okhol JohOH coo~ movm mommI NNoNI omol hzmzmmbco coNo “mom ocmm oNov mov mooubawm ooN" moo mom MNN N- wozoZHu comm Nmov oNo ovov ~N~mI mcomh odomwdoiz coc— oNo vm quI omv zcmhohacamzoah cooNI ohmc— ohoN_I thcuI o~mNI ozmmchcouczoz oovI m¢__ mvouI NmoI dool zcmhocahmzoo II oozoio hcwumw humom KHz II macro 4ozomowm 4ozcuhoz thoh hmz Joumhmcczm mbuhmhwatco achcwm NoouINhou omtm ocNotoJoy m~m>4ozo maozmlhm—Im NN.o mqooh 153 .cogmmwlcoo acmloo~aiu cnomzoqx "Memo 40 moLaom ccvoo moumo oVNN oooml vnoh Johoh cooo hmov moat ohud hcco hzwtmmboo ocflofi Hcoo ooNo m—ov oomv moo—Dmmm covm mmo— not ovv on mczozHu ocmo— thcn NNNW v—cu m~Nv moomh odomwaczz ocoI omvm ochI ouol HNva zcnhohmcamzoah ccm- mommw mocN~I ommNuI omo oz—achcouczot coo“ NoNN NooI tom oNN—I zcmhocahmzcc mozooc howmmm humzm XHZ uaozm 4ozomowa dozcmhoz thch hm! Aoumhmcozm ubmhnhwatco mohcmm NhoaINoo— omzm mcuaoa czomo m~m>4ozo uaoIthm—Im mN.o odooh 154 .cowmmwcioo ucmeoocufiu cnoczowz "muwc mo woLaoo wozccc chcmomc hooNo Noool tcoml mocNI Jchoh Homo ooo mm—oI thm hzwzcocoo omoc~ nooo ovtmu vomml owcmbmoo oDVN don NNo oou oozczmc coomn covo ouuuu oooVI wocah macom4c23 ohNN oth moo—I vom zcnhchcccozcch moomN movonl MNomNI coon ozmcchccuczct oooN oova hvvdI ovoNl zcmhocchozoc homccm hunco xnt macro Aczc—hcz Jchch but Jc—choDDZH ocuhmhoctco cohomo Noo_INNo~ coco ocumcc czcco o~o>4c2c occcolhu—co YN.o oJoch 155 «Summation ucoloognr-o cmomzowt ugmc mo woLJOo chmm comoN cNoo moc— I mkom Hobo... ccv~ — memo NocN oNoN ~NMI Catawba cho ooNN ovoN oNo~ o — m— ooo — Dawo com — oNv no 8— dhk H127. Boo oooN a 9N ooN o~ — N Hun—ch min-ow; DDNI mNo mNo — I mv— I omol 5 — hchnccogh ocmo ommo oMVI avoI chow oz a shock; ocno ooo o No“ Noul Suhghog Magoo hooccw kc a co x H I go .135 H com cho ~ .52 Into... but In”: chocn’: mom .P a hog Shcwo NhogINoou Ioto coon-u. .65“. oHo>I_c9-.._ uncroIhuzco oN.o Wag: 156 .cowmmmlloo AcoeoOAQEo cwomfiowt "memo mo mOLaoo IIII cooMN o—oom maNoI mwool om“ Jchoh cooo ooo—H coooI v—vol vmm hzwszDco ccoN~ goom ovoo oovv vvov ooo—Damo Doom mun NNo oo— oNo wozczmm ccum om—v NooN chmm ooVI occah udcomdccz cog" ovo Hot moNI tom zouhchacaozcah ccoVI NhN—_ Nnnoui mv—nuI oNoVI ozucchccuczcz cooI coon coofii wool mvodI zouhocahozoo omzczc homcco hunco Ix”: macro chcuooa Aczc—hcz Achch but douchocczm ocuhmhmatco cohcmo NooHINho~ coto ccocc zzc o~o>4czc occcolhumco oN.o wJoch BIBLIOGRAPHY BIBLIOGRAPHY Abler, Ronald, John S Adams, and Peter Gould,Spatia1 Qrzanization.(London: Prentice-Hall, 1972). 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