Two new reports predict Detroit’s economy will keep improving, but Black and Hispanic residents will miss opportunities in the fastest-growing industries if changes aren’t made.
A five-year economic forecast by the University of Michigan suggests Detroit residents can look forward to more job opportunities and higher wages and the city can expect some protection from a “mild” national recession hitting near early 2024. But researchers at Detroit Future City in a separate, independent report released this week find Black and Hispanic Detroiters have less access to the fastest-growing jobs, which suggests Detroit’s economy is not improving equitably.
The University of Michigan released its five-year outlook for Detroit last week and details of the U-M findings were shared with city officials at a Monday revenue estimating conference. The Detroit Future City (DFC) report, a collaboration with Brookings Metro, was also released Monday. Researchers with the nonprofit spoke with BridgeDetroit about their takeaways last week.
‘Leaving the labor force’
The U-M study showed Detroit’s economy has nearly returned to pre-pandemic levels, and residents should expect jobs and wages to increase. However, the local economy is cooling down.
Detroit’s unemployment rate has bounced back significantly since hitting 40% at the height of the pandemic in May 2020. Unemployment averaged 9% in 2022 but dropped as low as 6.4% in November. U-M predicts the city’s unemployment rate will average 8% this year.
Gabriel Ehrlich, author of the U-M forecast, said last year’s unemployment numbers were caused by a drop in Detroit’s workforce. The number of residents with jobs, when seasonally adjusted, actually dropped by nearly 1,300 from December 2021 to October 2022.
“Detroit’s falling unemployment rate this year hasn’t come primarily from more residents finding work,” Ehrlich said. “Instead, it’s come from residents leaving the labor force.”
A declining labor force is cause for concern, according to the U-M report, because it suggests discouraged residents are giving up the job hunt. The city’s labor force participation rate dropped from 67% in 2019 to 64% in 2021, according to DFC researchers.
U-M’s report shows a major gap between the wages of jobs in Detroit and the amount of money earned by Detroit residents.
The average job in Detroit is expected to pay $90,700 by 2027, while the average Detroit resident will earn $47,500.
Detroiters have experienced a boost to their earnings since 2014. The average pay of a Detroit resident grew 47%, increasing from $26,600 to nearly $39,200. Wages are expected to keep rising, but Detroit residents, on average, will still make less than the average person in Wayne County and the state of Michigan.
High inflation in the last year reversed the impact of wage increases on average, according to the U-M study. Ehrlich said incomes grew by 5% last year, but residents experienced an income decline of 3% due to inflation.
Residents could expect to see minor increases in their wages over the next five years. The report shows Detroiters’ purchasing power will only rise by 4% through 2027.
Mass layoffs during the pandemic were followed by a short period of booming job growth, but that trend is slowing down. Employment is predicted to increase by 2,200 this year after growing by 8,000 last year.
U-M forecasters predict job growth will increase by 1% for the next five years. The rate is slower than last year’s rate of 3.6%, but forecasters predict Detroit would still add 15,530 new jobs by 2027.
‘Inequitable’ job access
The Detroit Future City report was focused on fast-growing occupations in metro Detroit. The report identified 107 jobs driving most of the area’s economic growth. These represent only 25% of jobs in the region, but are responsible for 62% of job growth, according to DFC.
Black and Hispanic Detroiters have a much smaller chance of being employed in these growth occupations, the report states. Inequitable access to well-paying jobs in growing sectors of the economy contributes to wealth divides in Detroit, said DFC Chief Executive Officer Anika Goss.
“Our region is growing economically, and that is good news for all of us,” Goss said. “Not everyone is benefitting from that growth, even when you hear about future investment and what’s on the horizon. The way the job system is organized right now, it’s highly unlikely that Detroiters will fully participate in the new economy.”
While 13% of Black and Hispanic workers who live in Detroit are employed in growth occupations, 26% of white Detroiters work in growth occupations. Goss said focus groups and interviews revealed Detroiters expressed concerns with bias in the hiring process.
DFC also narrowed down a smaller group of jobs responsible for a larger share of the growth in Detroit, including registered nurses, general and operations managers, software developers, accountants and auditors, elementary school teachers, sales representatives, business operations specialists, project management specialists, electricians and loan officers.
The DFC report studied peer cities and found Atlanta, Columbus, and Indianapolis metro areas had a larger share of Black workers in growth occupations. The report also identified several occupations with a higher percentage of Black workers in Detroit that are quickly growing in peer cities.
DFC recommended supporting growth in those occupations – which include management, business, finance, healthcare and technology jobs – to create a pipeline for Black and Hispanic Detroiters into the middle-class.
“When you look at other regions, they are not just focused on business attraction, they are really looking carefully as to how their regions are fueling the talent that’s already there and investing in that talent,” Goss said.
Earning a bachelor’s degree has a big impact on the likelihood of being employed in growth occupations, but it’s not enough to eliminate the racial gap. Black workers are significantly less likely than white workers to be employed in growth occupations at every level of educational attainment, the report found.
Only 16% of working-age Black Detroiters hold bachelor’s degrees.
The DFC report notes that students who attend Detroit Public School Community District have a lower chance of graduating high school and finishing college. The four-year high-school graduation rate in 2021 for DPSCD was 65% compared to 80% statewide. The six-year college graduation rate was 24% for DPSCD graduates compared to 40% statewide.
“There are disparities in access to growth occupations based off of race, geographic location and educational attainment and we haven’t been able to close those gaps,” said Ashley Williams Clark, vice president and director of DFC’s Center for Equity, Engagement and Research.
“Closing those gaps, especially for Black Detroiters, will go a long way towards remedying inequitable economic outcomes in the region.”
The DFC report included a series of recommendations for local employers, policy makers and community organizations. This includes increasing awareness of growth occupations and finding ways to allow Detroiters without a bachelor’s degree to enter growth occupations.
Employers should audit job requirements to see if any roles don’t require a bachelor’s degree and consider ways to train employees to take on higher-responsibility roles.
Increasing access to services like childcare, transportation and mental health is another recommendation. Goss said making investments in wraparound supports will help Detroiters overcome some of the obstacles preventing them from getting hired or advancing in their careers.
“In an equitable environment, all of these services are amenities that are available to make sure workers continue to work,” Goss said. “These are also services that most employers already provide. Henry Ford Health offers transportation services to get people to their plants. There’s a childcare facility adjacent to Henry Ford Hospital. There’s a grocery store inside the hospital. So oftentimes, employers are providing these services as amenities.”