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Posted on Thu, Aug 5, 2010 : 5:59 a.m.

Manufacturing spearheading economic recovery, with Michigan playing key role

By AnnArbor.com Freelance Journalist

Remember when critics of Gov. Jennifer Granholm's economic policies liked to spout off about how she led Michigan into a "one-state recession"? Bet you haven't heard that one lately. For one thing, the rest of the country finally joined us in what became the most severe national recession since the Great Depression. And now Michigan is playing an important role in leading the country out of a deep economic abyss, although there's a long, long way to go.

The story of the recovery so far has been the resurgence of manufacturing. As in past recessions, manufacturing appears to be spearheading the recovery as automakers and others rebuild depleted inventories.

Buzzing assembly lines aren't producing a lot of new jobs yet. Only 4,300 new manufacturing jobs have been created in Michigan since January, according to the Bureau of Labor Statistics.

For a little perspective, that's fewer than 1 percent of the nearly 450,000 manufacturing jobs Michigan lost over the past decade.

And as I've said before, manufacturing isn't likely to be a major source of good-paying jobs in the future.

Automakers likely will hire thousands of new production workers to replace retiring workers over the next few years, but they'll start out earning just half of the approximate $28 an hour line workers make today.

Manufacturing employs only about 10 percent of the state's labor force, a percentage some experts say won't go much higher even in good times.

But the fact the Michigan even has an auto-dominated manufacturing base is something of a miracle.

A year ago, as General Motors Co. and Chrysler Group LLC slipped into bankruptcy, the future of the domestic industry looked dim.

Even relatively better-off Ford Motor Co. was at risk of failure had GM and Chrysler succumbed and taken the supply base down with them.

It seemed nearly impossible to think that President Barack Obama could come to Michigan, as he did Friday, and hail Detroit's automakers as bright spots in the U.S. economy.

Of course, he came to take some credit for that. A $60 billion bailout engineered by the federal government saved GM and Chrysler.

Nevertheless, Michigan and the recharged domestic automakers could help cement the recovery.

"If auto sales really get going in the next six months, up to say (an annual rate of) 12.5 million to 13 million units, then we will be 'leading' the recovery," University of Michigan economist Don Grimes told me in an e-mail.

Auto sales have been running at an annual rate of about 11 million vehicles, far below the 17 million vehicles sold annually a few years ago.

The bad news is the economy is still far too weak to generate booming car-and-truck sales.

One of every six American workers is unemployed or underemployed, and the average unemployed worker has been out of work for 35 weeks, Nobel Prize-winning economist Paul Krugman recently noted.

While Michigan employment has been growing modestly in recent months, the jobless rate is still an unacceptably high 13.2 percent.

And people are hurting. During the first three months of this year, 17.6 percent of Michigan residents were living in households receiving state food assistance, according to the Michigan League for Human Services.

Most economists say it won't feel like a recovery until millions more Americans find jobs and the housing market recovers.

Those are problems no one governor can fix. E-mail Rick Haglund at haglund.rick@gmail.com