The latest Michigan Future Business Index data show that 11 percent of statewide business leaders representing small- to mid-size businesses are satisfied with the overall economy in Michigan, a new record low for the index. Before the COVID-19 pandemic, more than 82 percent of December’s index respondents indicated satisfaction with the Michigan economy.
While 44 percent say they are pessimistic about getting back to normal, 39 percent are optimistic. About 65 percent say they expect their business to fully recover within one year. those who are optimistic pin their hopes on expectations of pent up demand, potential opportunities for growth, and trust in customer loyalty.
Those who are pessimistic cite the loss of customers as their top concern, followed by the uncertainty of when they will open and what is to come when they do. About 47 percent of respondents say customer retention has decreased since the start of the pandemic.
“The survey is showing that nearly the same percentage of businesses that were doing well to excellent before COVID-19 are now quite dissatisfied with the economy today,” says Chris Holman, CEO of the Michigan Business Network. “Although this reflects a complete turnaround from recent surveys, only 44 percent are pessimistic about business returning to where it was. Given what our statewide economy has been through over the past few months, I think this shows the indomitable spirit of small business owners in our great state.”
The index found that businesses’ motivation to reopen doesn’t reduce their prudence to act with caution. About 34 percent believe they can reopen at the end of the stay home order with protections and practices in place to keep employees safe.
About 30 percent believe the state should open slowly and thoughtfully, allowing only those regions with low spread rates to open first. About 48 percent also say they will open gradually while monitoring and analyzing data and experiences in their own communities.
More than 80 percent of small businesses have experienced significant decreases in sales, profits, and cash flow. About 52 percent have not laid off any employees, and 63 percent have not cut wages. Nearly 80 percent have applied for financial assistance to get through the pandemic, and 65 percent say they are enthusiastic to continue to do business.
More than half of respondents said doing business in Michigan will never be the same, and 59 percent believe their businesses will emerge from the crisis somewhat weaker. About 63 percent fear their voices are not being heard by lawmakers.
A summary of the index is available here. The semi-annual index has been commissioned by Accident Fund Insurance Co. of America and the Michigan Business Network since 2006. It was conducted by ROI Insight in Grosse Pointe and interviewed 1,285 executives from Michigan companies with 500 or fewer employees from April 24-May 11 over the web.
In related news, Michigan’s seasonally adjusted jobless rate rose to 22.7 percent in April, a monthly jump of 18.4 percentage points, according to the Michigan Department of Technology, Management, and Budget. Employment in the state fell by 1.13 million, while the number of unemployed grew by 839,000, resulting in a labor force drop of 291,000 over the month, dropping the state workforce in one month to 1991 levels.
Layoffs related to COVID-19 began in the second half of March and continued through April.
The national unemployment rate grew by 10.3 percentage points in April to 14.7 percent. Over the year, the national jobless rate advanced by 11.1 percentage points.
“April’s historic unemployment rate and job declines reflected the first full month of the COVID-19 pandemic’s impact on the state’s labor market,” says Jason Palmer, director of the Bureau of Labor Market Information and Strategic Initiatives. “Job losses were widespread across all industry sectors, with especially large employment reductions in leisure and hospitality and manufacturing.”
Michigan’s April 2020 unemployment rate of 22.7 percent is the highest rate since at least 1976, which is as far back as comparable estimates go, likely making it an all-time high. The previous high rate over this period was 16.5 percent in December 1982.
The number of unemployed in Michigan was 1.048 million, also an all-time high. The previous peak was 725,000 in June 2009.
The Detroit-Warren-Dearborn Metropolitan Statistical Area’s seasonally adjusted jobless rate rose to 21.6 percent in April, a monthly gain of 17 percentage points. Total employment fell by 539,000, while the number of unemployed jumped by 323,000. The Detroit MSA labor force was down by 216,000 in April.
Over the year, Detroit jobless rates rose by 17.1 percentage points. Employment plunged by 526,000, while unemployment moved up by 324,000, resulting in a net workforce reduction of 202,000 since April 2019.
The monthly establishment survey indicated Michigan seasonally adjusted jobs fell by 1.009 million in April to 3.414 million. The reductions were spread across all major sectors, with the greatest losses seen in industries deemed nonessential and those that required person-to-person contact. April job cuts were most pronounced in leisure and hospitality (down 237,000), manufacturing (down 174,000) and trade, transportation, and utilities (down 159,000).
Michigan payroll jobs dropped in April to the lowest level in the state since before 1990. Previously, Michigan’s largest monthly job cut since 1990 occurred in January 2009 with a seasonally adjusted reduction of 100,000 jobs. Accommodation and food services, one of the most impacted industries, accounted for two of every 10 jobs lost in April. Financial activities, natural resources and mining, government, and information recorded the most modest job reductions on a percentage basis over the year.
State employment estimates are produced on a monthly basis using employment information from the week of the 12th of each month. The information here covers labor market trends for the week of April 12-18.