General Motors announced last week that it had notified 1,130 of its “underperforming” dealers—representing nearly one in five (18 percent) of GM’s dealers nationwide—that their franchise agreements would not be renewed in October 2010. GM’s news came three weeks after the company revealed that 13 of its 20 North American plants would go idle for up to nine weeks this summer, and one day after Chrysler announced that 789 of its dealerships—representing nearly a quarter of Chrysler’s dealers nationwide—would be closed by June 9. New data released today by the Bureau of Labor Statistics suggests that the states who will likely suffer the most from these cuts already have some of the nation’s highest unemployment rates.
The map below shows which states and regions are experiencing the worst job losses and highest unemployment rates in the country following 16 straight months of declines in payroll employment.
In an economy that has been hemorrhaging jobs for the last 16 months, GM and Chrysler’s announcements pour salt into an open wound. The National Automobile Dealers Association, or NADA, estimates that the dealer reductions will affect more than 103,000 payroll employees, not to mention devastate the state and local communities whose economic livelihood depends on the businesses of and activity surrounding auto dealers.
A collapse of the Big Three—GM, Ford, and Chrysler—not only affects their employees, but employees all along the supply chain. The Center for Automotive Research, or CAR, estimates that the total effect of direct, indirect, and expenditure-induced effects of a contraction in U.S. automobile manufacturing will be considerable. For example, a 50-percent reduction in operations would lead to nearly 2.5 million jobs lost and more than $125 billion lost in personal income in the first year. This, coupled with reports that hundreds of thousands of auto part suppliers and other related manufacturers are floundering in the wake of the domestic automakers’ decline reveal the full extent of the potential damage to our nation’s economy.
The challenges of the U.S. auto industry are, unfortunately, not unique. The recession has accelerated the long-run trend of the disappearance of manufacturing jobs nationwide. At the beginning of the recession, in December 2007, manufacturing accounted for 10.0 percent all payroll jobs, down from its peak of 38.8 percent in 1943. Nearly one third—28.3 percent—of the total job losses during this recession have been in manufacturing, which is more than any other industry.
States hardest hit by job losses in manufacturing
These losses are taking their toll on manufacturing-heavy states. Michigan, Ohio, Indiana, and California are the four states that have seen the worst cumulative losses in manufacturing jobs since the start of the recession. Three of these states—Michigan, Ohio, and Indiana—are in the Midwest, a region that was once a manufacturing stronghold and engine for U.S. economic growth. They are also among the 10 states with the highest shares of manufacturing jobs. All four states featured this week have unemployment rates above 9.8 percent.
Michigan’s economy never recovered to peak employment levels following the 2000s recession. The state’s unemployment rate—12.9 percent—is the highest in the country, and has been for the last 32 months. The state has lost 341,200 jobs since the start of the recession; nearly 4 in 10 of those losses (39.8 percent) have been in manufacturing.
Ohio’s economy also never recovered to the employment levels reached prior to the 2000s recession. The state has lost 285,200 jobs since December 2007, 43.5 percent of which have been in manufacturing. The state’s unemployment rate is now 10.2 percent, up 4.4 percentage points since the start of the current recession. The state has the eighth worst unemployment rate in the country.
Indiana’s economy is another that never recovered to its peak employment level reached prior to the 2000s recession. Employers in the state have shed 150,900 jobs since December 2007, 59.8 percent of which have been in manufacturing. Manufacturing jobs make up 16.0 percent of Indiana’s economy. The state’s unemployment rate is 9.9 percent—the ninth worst in the country.
California’s economy has shed 5.1 percent of its workforce since December 2007. Of the 777,900 employees that have been laid off in the current recession, 16.3 percent were in the manufacturing industry. The state’s unemployment rate is the fifth worst in the country, reaching 11.0 percent in April, up 5.1 percentage points since the start of the recession.