Lethargic labor force recovery suggests Michigan economy has a long way to go before declaring recovery from COVID-19 pandemic
East Lansing, MI– An analysis of newly released labor market data by experts at Anderson Economic Group (AEG) shows that the Michigan labor market is still struggling to recover in the wake of the COIVD-19 pandemic. As of May 2021, the state had 217,000 fewer workers and job seekers relative to its pre-pandemic peak in February 2020.
“While other states have been recovering lost jobs and job seekers, the Michigan labor market has been stagnant,” said Brian Peterson, the firm’s director of public policy and economic analysis. Since February of 2020, Michigan’s labor force – the count of people who have a job or are actively looking for one – has shrunk by 4.4%. Over the same period, the U.S. labor force as a whole declined by 2.1%. Meanwhile, labor forces in peer states like Wisconsin and Indiana have nearly recovered or fully recovered to their pre-pandemic levels.
Michigan and Peer State Labor Force Size, February 2020 to May 2021
Size, Feb 2020
Size, May 2021
Source: Anderson Economic Group analysis of data from Bureau of Labor Statistics.
Every state across the U.S. saw steep declines in their labor forces in early 2020 as governors issued emergency stay-at-home orders and consumers avoided social settings like restaurants, theaters, bars, and gyms. But Michigan saw a second sharp decline that began in late 2020 and coincided with one of the nation’s worst surges in COVID-19 cases. The size of Michigan’s labor force has since stabilized, but at a level far short of its pre-COVID peak.
Michigan and Peer State Labor Force Size, Percent of February 2020 Total
Peterson noted that a large part of the labor force decline in Michigan can be attributed to job losses in the leisure and hospitality sector, and to supply chain issues plaguing the state’s automotive industry. He also cited federal supplemental unemployment insurance benefits as a potential reason why some workers may have dropped out of the workforce. “It can be difficult for some industries to provide competitive wages going up against regular unemployment benefits plus a $300 weekly supplement,” Peterson said.
Looking forward, AEG experts expect Michigan’s labor market could be in for a boost by the end of the summer as COVID-19 transmissions slow and policymakers take steps to reopen the economy. In May, the Department of Labor and Economic Opportunity restored work-search requirements for unemployment benefit recipients. And, earlier this week, Governor Gretchen Whitmer rescinded several COVID-related emergency orders, including orders that limited indoor dining capacity. Federal unemployment benefits are scheduled to sunset in September. An increasing number of Michigan residents have been vaccinated against COVID-19, which could decrease apprehension among those who did not participate in the labor force during the pandemic. State lawmakers have also discussed the prospect of providing Michigan workers $300 per week to some employees who return to their previous job.
“The pandemic has had an unprecedented negative impact on Michigan’s economy. We have reached a point where many states have begun to move forward again, and that begins with workers and job seekers reentering the workforce.”