Kinexus Group executives in Benton Harbor have sounded the alarm this morning over the deeply concerning recent trend in the size of the labor force in Southwest Michigan which they say has now reached the lowest level in the past 20 years since they began tracking the data.
Kinexus Vice President of Public Relations & Government Affairs Al Pscholka says that while the Tri-County area of Berrien, Cass and Van Buren Counties “held our own” over the first nine months of the pandemic, despite wildly swinging unemployment rates that ranged to more than 20-percent and under 5-percent, the most recent quarter has brought startling news of a loss of 4,200 people from the market’s labor force. That was in December alone. Overall, year-over-year, the labor market has lost 6,000 people and now stands at 125,000 workers. That’s the lowest labor market workforce in the region in 20 years and stands in sharp contrast to when it was as high as 138,000 workers.
While the manufacturing sector has actually managed to grow year over year, health care continues to slip, agribusiness is down about 5-percent, and the hospitality & leisure sector has experienced a pronounced 37-percent decline driven by extended state mandated shutdowns and other restrictions on indoor dining and the like.
Kinexus Chief Operating Officer Jake Gustafson says, “We use a lot of data and we collect and process that data as we try to be purposeful” in translating that data. While the current unemployment rate has bounced up about half a percent to 5.2-percent in December from November, Michigan stands at 7.3-percent and the national rate is at 6.7-percent. On the surface those numbers look okay, but its the huge drops in the labor force that are keeping the Kinexus Group execs up at night.
On a tactical level, the rapid decline in the labor force only exacerbates what Pscholka routinely refers to as The Big Three issues facing the region every day:
- We’re getting smaller, as population declines…
- We’re getting older, as the population continues to age…
- We’re being less educated, with fewer college degrees or technical training…
Gustafson says, “It’s not just pandemic-driven change, but a startling change that has sparked a demographic shift that is not good for the region on multiple fronts.”
Kinexus CEO Todd Gustafson, who is no relation to Jake, says that the trend of a declining workforce impacts all other economic and social arenas and the pronounced impact on the hospitality and leisure sector is most concerning.
Typically, the Kinexus team refers to our proximity to the state border with Indiana in a positive light, but with the recent extended shutdown on indoor dining all across Michigan leaving hungry patrons headed over the state line to restaurants with zero restrictions, that border has exacerbated not only the impact on restaurants and bars and their workers in our region, it also runs the risk of sacking the workforce who, when out of a job, can migrate to new opportunities in Northern Indiana.
With unprecedented unemployment benefits having been shared for the better part of a year, the market is also facing issues related to what Gustafson calls, “the long-term disengaged population” which has been sidelined for 52-weeks, making it more difficult to get them re-engaged.
The irony stems, too, from the fact that the Tri-County region currently has a record number of job postings in the regional job bank with 1,400 open jobs in search of workers to fill the gaps. On its face that sounds great, but Gustafson warns that “While that’s a record, you also have to step back and realize that 58-percent of those postings require little to no educational requirements, meaning they tend to be low-wage, entry-level positions,” adding, “The opportunities there are heavily skewed to the lower end of the labor spectrum.”
Conversely, Todd Gustafson says, “That makes this one of the best times to be entering the job market as a new worker, especially among the manufacturing jobs wherein the sector actually powered through the pandemic adding 1.5-percent to the manufacturing workforce at a time when the state as a whole actually lost manufacturing jobs.”
The fact that the healthcare sector has been “consistently down all year,” also concerns the Kinexus execs who worry that the sector could see a structural rather than temporary shift, creating a new normal where some of those jobs go away permanently to be reabsorbed in another region of the state or nation.
Jake Gustafson returned to the hospitality and leisure sector saying, “They have taken it on the chin all year long, and they are the ones we are most concerned about here in the first quarter of 2021, because we know the seasonality of the sector and watched the hit they took in the back half of the fourth quarter through state-ordered restrictions on indoor dining. The first quarter is traditionally a lean quarter anyway, but we’re concerned about those who exit the market completely,” and not survive to be around for when the seasonal boom returns.
Citing the Michigan Restaurant Association’s concerns about the situation this quarter and worries about surviving into the next quarter, Gustafson says, “The job numbers are abysmal, and while the normal seasonality is tough enough, the impact is being heavily compounded by the effects of the pandemic and related state orders.”
Despite all of that, the team at Kinexus points out, “We’re a strong region and we have a tendency to get back up again.” Gustafson points to the ‘Great Midwestern Road Trips’ that provided a robust summer season in 2020 following earlier months-long shutdowns. Plus, manufacturing has a sold backbone in the region. Yet, he warns, “We can’t overstate how concerned we are with the labor force data, especially when you combine it with the fact that 58-percent of the current open jobs require less-educated talent, because now is the time when those Big Three Concerns of a region that is getting smaller, older and less educated are being impacted even more than before.”
Todd Gustafson points out that as a result of the situation, and in light of the Michigan Reconnect program, GoPro training and more, “This is a good time to take advantage of those programs, and get engaged.”
The Kinexus team helped 55 local manufacturers and other businesses obtain some $2-milliion in GoPro training and re-training dollars in recent weeks to help bolster the local workforce going forward and aid in companies poised for growth and expansion in the region.
A major concern stemming from this area’s proximity to the state line and a more open economy in Indiana is that, as Pscholka suggests, “Michigan needs to ditch the one-size-fits-all mentality of state orders and look at the regions they themselves established,” to allow for a more customized approach to solutions. More importantly he suggests, “We need key things like a consistent plan and policy, we need to continue to remove barriers like transportation and child care issues, and return a focus on driving education and career and technical education to fill the skilled trades jobs gaps. Then we can move the needle on this.”
Pscholka warns, “Michigan is lacking in a consistency of messaging, and keeps moving the goalposts and metrics.” He suggests, “A 25-percent capacity for the restaurant industry barely pays the rent. We need consistent policy. We need to open things up again, but it’s like turning the Titanic around.”
Additionally, Team Kinexus says we need lawmakers to continue to bring all the tools together to help businesses get back on solid footing including such things as:
- Paycheck Protection Plan Programming
- Access to childcare
- Access to capital
Todd Gustafson reminds that “Kinexus cannot do it alone,” adding, “It takes collaboration and communication between the public sector, the private sector, and the non-profit sector all working together,” to right the ship.
