Michigan is going backwards. And that’s a problem for President Obama. . . and Governor Snyder.
Michigan’s unemployment rate jumped to 9 percent in July – nearly a half point higher than June’s 8.6 percent rate – and continuing a sudden reversal in the state’s recovery. It was the third straight month the jobless rate has risen.
The news comes despite the continued rebound of the Detroit automotive industry – belying President Obama’s claim that an auto bailout rescued the U.S. economy and focusing attention on Obama’s larger, anti-business regulatory, spending, and tax priorities that are choking national job growth.
“I am skeptical about the claim that because the auto industry was saved, that saved Michigan,” says James Hohman, chief economist for The Mackinac Center, a Michigan think tank. Hohman notes that Michigan’s unemployment rate is still lower than last July’s 10.6 percent rate, but Michigan’s stalled recovery mirrors the national economic slowdown in the second quarter.
“There is no decoupling Michigan’s economy from the nation,” says Hohman.
Granted, Michigan is not the obvious target of Obama’s War on Coal, for example, that is literally throwing people out of work in energy states like Ohio and West Virginia. But Michigan businesses are suffering from the same federal policies that are strangling all commerce: The cost of federal regulation, the uncertainty of Obamacare costs to new hires, increased health costs driven by Obamacare, and the looming tax cliff on January where – if re-elected- Obama threatens to increase the costs of capital (capital gains and dividend tax rates) by a staggering 50 percent.
Business skittishness at the prospect of second term may explain what Hohman calls “a strange, midyear slowdown” in a national recovery that is already the worst since WW2.
“Job creation has slowed down but job destruction has not,” adds Hohman of the business cycle. The rise in unemployed workers comes almost entirely from lost jobs – not workers leaving the labor force - reports the state Department of Technology, Management & Budget. In Detroit – a city whose residents voted overwhelmingly for Obama – the situation is much worse, with official unemployment at 19 percent.
Michigan’s plight is significant given Obama’s focus on its core industry as a cornerstone of his national economic policy. A key swing state, Michigan’s swoon imperils Obama’s re-election chances – but the unemployment number is hardly good news for Michigan’s pro-business governor either.
While Snyder’s first term has seen welcome stability in the state’s fiscal situation after the chaotic years of Jennifer Granholm, 9 percent unemployment also raises questions about whether he has done enough to spur growth. Yes, he has simplified the tax code and regulations, but he neglected a chance to cut individual rates (paid by many small businesses) below that if his predecessor, he has ignored he right-to-work labor movement, and he has embraced Obama’s health care exchanges for the state.
With two years still left in his term, Snyder lacks an aggressive growth plan other than hoping that Mitt Romney gets elected. But given the evidence that Michigan’s star is tied to the nation’s, that is the hope for the other 49 states as well.