Tuesday, February 7, 2012

Don't Run Out of the Tunnel Yet...It's Still Halftime


Super Bowl Sunday is a holiday in America, and with that, comes tons of presents thrown our way: new commercials!  While many of the commercials were silly, or played off the most recent trends in pop culture to date, other commercials attempted a more serious edge.  The one that caught America’s and my own eyes in particular was the Chrysler “It’s Halftime America”, featuring Clint Eastwood.  The commercial is commentated by Eastwood to tell the same tale of Detroit’s struggles through the Great Recession, and how Detroit along with all of America is ready to push forward and “play the second half” (a.k.a. bring the economy back to what it should be).  Check it out:  


As I watched this commercial, I believed the greatness of the marketing that Chrysler has managed to capture in recent years during Super Bowls, but as a budding economist, I am skeptical of the tale Eastwood speaks.

Let’s first look applaud the tremendous decrease in the unemployment rate in the Detroit Region.  As you can see below, the unemployment rate once reached as high as 16.6% in July 2009, and now stands around 9.6% (Bloomberg).  The numbers are truly incredible, and for that, I will state I never imagined Detroit would return to a level hovering around the average national unemployment rate.
                            
All seems to be heading in the right direction, but could the drop in the unemployment rate in Detroit and surrounding areas be too good to be true?

But a bigger question needs to be asked: what caused the improvement in the Detroit economy?  Well, surely we can look at whom else but Chrysler, the company responsible for such a powerful ad at America’s largest sporting event.  What the commercial proclaims is that Detroit is now up and running thanks to the power of manufacturing in the Motor City.  After looking at the statistics over recent months, I was hardly impressed by the standards being set by the large corporation.

The manufacturing employment has certainly gone up in the past year, but the growth rate just doesn’t seem to reach the acclaimed values Chrysler holds for the Motor City.  

While we can see from FRED that the manufacturing employment in the Detroit area has increased since the plummet over the past decade, the growth level is nowhere near what it should be to see a significant effect that could turn Detroit into the once booming metropolis.  In fact, I would argue that Detroit will never get to this point again.   

What I mainly want to point out was the data found in the US Census Bureau last March.  Over the past decade, 25% of Detroit’s population left the Motor City.  At 713,777, the population was the lowest since the 1910 census (CNN).  As stated above, the peak of unemployment in Detroit occurred around July 2009.  Since then, there has been a consistent drop in the unemployment rate. 

After seeing the marginal growth in manufacturing employment, I believe the main cause for the drop in unemployment is heavily skewed by people moving away from Detroit, especially in the last couple years, and a high amount of people who dropped out of the unemployment rate candidacy. 

The city of Detroit has been in an uphill battle for over a decade.  Due to poor job growth, the dying manufacturing industry, and many poor policy decisions (that can be discussed on another day), Detroit is still beaten up and bruised far beyond a multi-million commercial can explain. 

Perhaps Clint Eastwood has me pinned.  I haven’t seen the Motor City that he knows and sees.  But the truth is that the growth just isn’t there for Detroit and the manufacturing industry in America.  The bounce back, while noticeable, isn’t showing signs to bring the once flourishing economy back to the Motor City. 

For those ready to see some touchdowns scored in the second half of the game this year, please don’t be too disappointed, Madonna and Cee-Lo are still lip-synching on stage.

References:
  1. “Chrysler Super Bowl Commercial”. http://www.youtube.com/watch?v=tFAiqxm1FDA
  2. “Detroit Loses a Staggering 25% of its Population in a Decade”. CNN. http://articles.cnn.com/2011-03-22/us/michigan.detroit.population_1_census-figures-mayor-dave-bing-undercounting?_s=PM:US
  3. “Eastwood Heralds Detroit’s Revival in Chrysler Super Bowl Ad”. Bloomberg. http://www.businessweek.com/news/2012-02-06/eastwood-heralds-detroit-s-revival-in-chrysler-super-bowl-ad.html
  4. Manufacturing Employment in Detoit-Warren-Livonia, MI. FRED. http://research.stlouisfed.org/fred2/series/DETR826MFGN
  5. Unemployment Rate in Detroit-Warren-Livonia, MI. FRED. http://research.stlouisfed.org/fred2/series/DETR826URN

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