Changing Gears is a public media project about the future of the industrial Midwest. Each week, reporters Dan Bobkoff in Cleveland, Niala Boodhoo in Chicago and Kate Davidson in Ann Arbor cover issues of interest to the Great Lakes region. Changing Gears also sponsors public events and conversations.
Patricia Idema is a small town girl from northern Michigan. In early 2011, she was working as a cashier in a gas station in Spruce, Michigan. After graduating two years earlier from Albion college with a biology degree, she says she was beginning to feel hopeless that she would ever find the kind of work she dreamed about. “I was pretty dejected after two years of minimum wage.”The 25 year old Idema said.
Michigan’s unemployment rate just fell below 10 percent in November, it’s now at 9.8 percent. It is still higher than most states in the country. Unemployment numbers don’t capture how many people are working, like Idema did, at jobs that don’t quite meet their financial needs or their dreams of what kind of work they would like to do.
Three stories making news across the Midwest today:
1. Detroit’s finances a long-term problem. In the past 45 years, the city of Detroit has recorded 19 budget surpluses and 26 budget deficits, according to the Detroit Free Press. Experts tell the newspaper the city’s debt is now so high that the city could default on unpaid bonds soon, a prelude to bankruptcy. State officials will begin a formal review of Detroit’s finances in January, which could lead to the appointment of an emergency manager. Gov. Rick Snyder said the city faces both a short-term cash-flow shortage and a longer-term structural deficit. “We can’t continue this process because Detroit has been in a financial crisis of some fashion for decades,” he tells the newspaper. “We need a long-term solution.”
2. 2011’s dubious housing distinction. The year 2011 will likely be the worst in history for new home sales. The Commerce Department said it expects the adjusted annual number to reach 315,000 by the close of this month, fewer than the 323,000 sold last year, the worst year on record dating to 1963. That’s less than half the 700,000 new homes economists tell the Associated Press are necessary to sustain a healthy market. The projection comes even as new-home sales rose 1.6 percent in November. December would need to mark its best monthly sales total in four years to avert the dubious finish.
3. Unemployment up in Chicago area. Chicago’s unemployment rate rose in November to 9.8 percent, according to the Chicago Sun-Times. The rate ticked upward one-tenth of a percentage point from 9.7 percent in October, and was up 0.9 percent year over year. The unemployment rate dropped in nine of Illinois’ 12 metro areas in November compared to 2010. Chicago’s rate remains slightly lower than the state’s overall 10.0 percent unemployment rate, which has remained nearly flat for three consecutive months. The state’s lowest unemployment rate was found in the Bloomington/Normal area, at 6.8 percent, according to the newspaper.
How much do employees in the U.S. manufacturing industry make compared to their counterparts in other countries?
A new study released by the U.S. Labor Department says Americans receive an average of $34.74 per hour, the 14th highest hourly compensation among countries measured. Norway topped the chart at $57.53 per hour, followed by Switzerland and Belgium.
Canada ranked one spot ahead of the United States, averaging $35.67 per hour. Mexico ranked 33rd among the 34 countries measured at $6.23.
China and India were notably absent from the list. The Bureau of Labor Statistics said there were data gaps and deviations from international standards that made it difficult to forge accurate measures of manufacturing wages and overall compensation.
Michigan residents have long lamented the “brain drain” that takes place when students educated inside the state leave for opportunities elsewhere.
On Wednesday, Gov. Rick Snyder fought back.
Chicago has been a popular landing site for those fleeing Michigan, and Snyder challenged those residents to stay put. “Do you want to be another yuppie in Chicago, or do you want to make a difference in Detroit?” he told the Detroit Free Press.
Snyder urged Michiganders to stay and help revitalize the city.
“No disrespect to Chicago, but they’ve got lots of young people, and you’re just going to blend in and be another person there,” he told the newspaper.
How could Snyder be so certain? He graduated from the University of Michigan Law School in 1982. He worked in Detroit for seven years before accepting a job with Coopers & Lybrand out of state. Guess where? Chicago.
Three stories making news across the Midwest today:
1. Contenders seek spurned transit funding. The city of Troy, Michigan rejected federal funds to build a mass-transit center. Now other suburban Detroit municipalities are lining up in hopes of claiming part of the $8.5 million. A U.S. Congressman pledged to have the money allocated to Royal Oak and Pontiac. The Detroit Free Press reports today a high-speed “turnaround area” for buses could be built in Pontiac while a rail facility could be built in Royal Oak. Meanwhile, Troy has faced a backlash for its decision. Gov. Rick Snyder wrote a letter saying he was “disappointed” in the decision, and Magna International, which employs more than 1,000 in Troy, said it will no longer seek expansion or job creation in the city.
2. Wisconsin fight not over yet? The Wisconsin Supreme Court could be asked to reopen a controversial case about collective bargaining legislation because a justice who presided in the original hearing received free legal service from an attorney involved in the case. The Milwaukee Journal Sentinel reports Dane County district attorney Ismael Ozanne is “taking a hard look” at asking the Supreme Court to reopen the case. Supreme Court Justice Michael Gableman cast the deciding vote in a ruling that said state legislators had not violated the open meetings law when mulling the controversial legislation, which allowed a decision to limit collective bargaining for public workers to stand.
3. EPA mandates could cost Ohio. Many utilities in Ohio and elsewhere must cut 90 percent of the mercury emitted from their power plants under toughened air pollution limits announced Wednesday by the U.S. Environmental Protection Agency. “This is a great victory for public health, especially the health of our children,” said an EPA spokesperson. Industry representatives say the new rules mean more expensive electricity for customers and job losses because older plants may shut down rather than overhaul. The Columbus Dispatch says Ohio typically ranks No. 1 in the nation for the amount of toxic pollutants emitted by industry, largely because of power plants that burn coal.
Natural gas extracted from shale rock, some say, is the most positive development in the nation’s energy outlook in 50 years. Ohio sits atop some of the largest deposits.
Big name oil and gas companies are flocking to the Buckeye State in a frenzy of preparation for “fracking” – that’s the innovative and controversial technology used to drill through and “fracture” the shale. It un-traps natural gas that lies within large layers of rock.
Ohio John Kasich is one of the industry’s biggest cheerleaders, saying it could be a real “game changer” for the state’s economy. This week he also said tough, new regulations are needed to make sure “fracking” doesn’t harm the environment. From our Changing Gears project, Mhari Saito and Dan Bobkoff have this overview on the new “natural gas economy.”
Three stories making news across the Midwest today:
1. Pontiac selling off properties. The financially troubled city of Pontiac, Michigan, is selling most of its assets. An emergency manager appointed in 2009 says the sales are necessary to help close a $12 million budget deficit. A three-page list of property available includes five fire stations, two cemeteries, two landfills, 11 water-pumping stations, two community centers, the public library and a police station, according to the Detroit Free Press. The city’s budget has already been cut by $20 million since the emergency manager took over.
2. Art scene in Columbus barren? The streets of Columbus aren’t devoid of eye-catching artwork, writes Robert Vitale of the Columbus Dispatch, but recent attempts to add art downtown have highlighted the fact the central Ohio city’s public landscape is “relatively barren.” Vitale notes that Columbus is the nation’s 15th-largest city, but the largest without a public-art program. In examining the state of public art in the city, he writes a 2007 economic development report called for better funding of public art, but Mayor Michael B. Coleman has made “no progress” over the past two years in making that a priority.
3. Study: Residents still flee Midwest. Illinois and New Jersey sat atop a list of states with the largest outbound migration this year, according to an annual study of interstate moving trends authored by United Van Lines. Although specific numbers were not available, a synopsis of the study said Americans continue to leave the Northeast and Midwest and migrate toward the South and West. Based in St. Louis, the company has tracked interstate moves since 1977 and says its study has reflected migration trends accurately enough that financial firms and real estate companies use the data. Despite the trend for Illinois, U.S. Census estimates say the state gained 38,625 residents over the past 15 months.
The Midwest is growing at a slower pace than any region in the United States, according to new population estimates released by the Census Bureau.
The region’s population measured 67,517,954 according to numbers from the 2010 U.S. Census. Fifteen months later, estimates put the region’s population at 67,669,140.
The increase for the nine-state region of 151,186 was smaller than individual increases for California, Texas and Florida, and only slightly higher than individual increases for Georgia (128,000) and North Carolina (121,000). No Midwestern states ranked among the Top 10 fastest-growing ones.
Michigan was one of three states across the country to lose population.
The national unemployment rate fell 0.4 percent in November to 8.6 percent. Michigan led the downward charge.
No state in the nation experienced a bigger drop. Michigan’s unemployment rate fell 0.8 percent in the month to 9.8 percent. It’s the first time in three years the state’s unemployment rate was less than 10 percent. Overall, 43 states reported unemployment declines in November.
The Midwest’s monthly unemployment rate edged downward 0.3 percent in November to 8.2 percent, the second-lowest of the nation’s four regions. Every state in the region experienced a decline in unemployment rate except Indiana, which saw its rate hold steady at 9.0 percent.
The West North Central sub-region, defined by the U.S. Labor Department as North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas and Missouri, held the nation’s lowest sub-regional unemployment rate, at 6.3 percent.
Here’s a state-by-state look at the November unemployment numbers for each Midwest state:
Given the rise of ATMs and online banking, it’s probably not a surprise that the number of brick-and-mortar bank branches has been declining nationwide. But a recent analysis from SNL Financial finds they’ve been closing faster in poor neighborhoods than rich ones. And, when they close, not only does it mean less access to credit, but higher default rates too. That’s one more setback for our region’s struggling neighborhoods as they try to rebound.
A former branch of Ohio Savings Bank on Cleveland’s east side is quickly becoming an eyesore in Lynne Alfred’s neighborhood.
“There’s litter and trash around. And, the paint is peeling,” said Alfred, who runs a shop down the street.
The branch closed a year ago — a rent dispute the bank said. Its $23 million in deposits were transferred miles away to other locations.
With its red brick and white columns, the branch served as a kind of local landmark.
“It was a magnificent gateway to the Larchmere neighborhood,” Alfred said.
Alfred and her husband have lived in the area for years. She remembers when they needed a loan, they used to just walk to the branch.
“We’d sit down and talk about it and we’d fill out the paper work and that was it,” she said. “It was very easy, very friendly. We knew them and they knew us.”
Emre Ergungor is a senior research economist with the Federal Reserve Bank of Cleveland. He said this kind of relationship reminds him of a movie shown a lot this time of year: It’s a Wonderful Life, with George Bailey and his Building and Loan Association.
Conventional wisdom these days is that online banking and credit scores make this kind of George Bailey-style relationship obsolete. But in research he’s done looking at branch closures in the Cleveland area, Ergungor finds that’s not always the case.
“Those kinds of relationships still matter in a small corner of the lending world and that’s where the low income individuals live,” Ergungor said.
Ergungor was surprised to learn how much losing a bank branch affects a lower income neighborhood like Larchmere, where half of all residents make less than $50,000 a year. Not only do locals find it harder to get loans, but loan defaults go up too.
“It’s a no-win situation,” he said.
Ergungor thinks this is because credit scores are no substitute for the judgment of a local banker. A banker may know so-called soft information: like how a loan applicant’s employer is doing? Or, how they’ve handled unexpected expenses like emergency medical bills. That helps the bank make a better decision about who should get a loan. People can have the same credit score but completely different approaches to repaying their debts.
But here’s the thing. Even though it can be riskier for a bank to rely on credit scores alone, they often lose less money on defaults than it costs to keep a branch open.
“The only thing that goes through bank management’s mind is: can we make money on that branch?” said Bill Mahnic, who teaches banking and finance at Case Western Reserve University.
Many in the Cleveland’s Larchmere neighborhood believe their business should have been enough to keep their bank open.
As their Ohio Savings branch was closing last year, one man collected 300 signatures protesting the move. That led to this group of fifteen or so community members who meet regularly in churches or libraries to figure out ways to bring a brick-and-mortar bank back to their neighborhood.
Some like Alanna Ferguson worry not just about access to credit, but about the elderly and disabled who can’t get to other branches. And, worse, she worries the shuttered bank signals that the community is on the decline.
“Perception is everything,” Ferguson said. “And, if people perceive that there’s no money in the community, or no real concern about home improvement or maintaining property, or doing financial transactions, then certainly it can give that kind of perception.”