Michigan feels economic chill
When Ronald Griggs was looking for his family’s dream home in Michigan about a decade ago, he focused his search on this affluent suburb of Detroit, where the Motor City’s middle class was migrating.
After a decade of grim economic news, and with the state government poised to shut down as legislators face an estimated $800-million deficit, Griggs and his wife, Shirley, want out -- out of West Bloomfield, and out of Michigan.
“It just got to the point where I said, ‘What am I? Am I stupid living here?’ ” said Griggs, 65. “I need to get out of here as fast as I can.”
Michigan has long been the poster child for lost manufacturing jobs and dwindling industrial base, but legislators say the state’s financial situation hasn’t been this bad in decades.
It is suffering through the longest stretch of job losses since the Great Depression, driven by the downward spiral of the auto industry.
The Big Three automakers -- Ford Motor Co., General Motors Corp. and DaimlerChrysler -- are laying off tens of thousands of workers, and the outlook is expected to remain grim.
Last week, DaimlerChrysler said it planned to sell its troubled U.S. auto division to a New York private equity firm. Chrysler, which had already announced plans to cut 13,000 jobs, or 16% of its workforce, is expected to seek steep concessions from the United Auto Workers when talks on a new contract begin this summer.
The state’s economic news is no better. Michigan lost 53,000 jobs last year -- nearly 28% in manufacturing -- and will probably lose at least 46,000 more this year, according to findings by the University of Michigan’s Research Seminar in Quantitative Economics.
The state’s unemployment rate, estimated to average 6.9% this year, is expected to reach 7.5% in 2008.
Add to that weaker tax revenue -- particularly in business, personal income and sales -- and a growing welfare, Medicaid and prison population, and “our economy is the most challenged in the nation,” Gov. Jennifer Granholm, a Democrat, said in an interview.
The fallout of the budget crisis and the state’s broader economic woes is being felt acutely in the housing market.
Residents of greater Detroit are feeling the pinch. From the neoclassical mansions of Bloomfield Hills to the modest suburban tract homes in Warren, people at nearly every economic level are having trouble making their house payments.
Houses often sit on the market for a year without an offer.
Last week, Griggs and his wife put their 7,000-square-foot home on the market for $1.4 million, or about 15% less than it could have sold for two years ago. But even listing it at that price may not be enough.
They’re not alone.
Jean Nielsen, owner of Hayes Self Storage in Shelby, a suburb north of Detroit, said about 240 of her 383 storage units are rented, nearly a 20% increase from the same time last year.
To the east of Shelby, where sprawling farmland is dotted with red barns and dirt roads, entire swaths of upscale new subdivisions stand empty.
“Lots of people are downsizing,” Nielsen said. “Lots of people are moving to other states.”
That kind of sentiment chills state leaders, who say losing population would only worsen Michigan’s problems.
For weeks, the issue of how to bridge the budget gap has divided legislators along party lines. They are racing to find a solution before June 1, when cuts to Medicaid and schools are poised to take effect.
Granholm and fellow Democrats are pressing for tax increases and budget cuts, including as much as $122 per pupil in school funds. Republicans, who control the state Senate, insist the shortfall can be overcome by cuts alone.
“The idea that tax cuts alone is going to propel a state to greatness has been proved untrue” all across the country, Granholm said. “No state in this country is going to be a lower-cost place to do business than China.”
Senate Majority Leader Michael Bishop, a Republican, disagrees.
“If you ask citizens about what needs to be done, the last thing out of their mouth is that they should pay more to live in Michigan,” Bishop said.
One morning last week, Griggs stood tentatively in his study as a procession of real estate agents rushed through his home.
They politely noted the 12-foot ceilings, the stainless steel kitchen appliances, the arched windows, the four fireplaces, the exercise room, the master bathroom’s Jacuzzi tub.
It’s all luxurious. But the same is true in other homes, whose owners are equally desperate to sell.
“Lovely house,” one agent said. “But gotta go!”
“I know,” said Griggs’ real estate agent, Anu Gandhi. “Too many houses.”
Griggs’ next-door neighbors left in the middle of the night when their home was foreclosed. Griggs, who headed a supply chain management company until he sold the business in 2003, watched them leave and tried not to worry.
“That’s the market,” Griggs said. But if his own home doesn’t sell, he wondered, “What can I do?”