2021 State of the Region: Reasons for Optimism but K-Shaped Recovery Exacerbates Challenges Ahead

There are some positive economic trends that should give Michigan optimism in recovering from the pandemic. However, the disproportionate K-shaped recovery exacerbates the challenges to robust and equitable economic growth, according to Detroit Regional Chamber President and Chief Executive Officer Sandy K. Baruah.

“There are important differences between the recessionary trends of 2020 that are notably different from what we witnessed during the Great Recession – and give us some hope that this downcycle will be different from the usual ‘when America gets a cold, Michigan gets the flu’ story,” said Baruah as he presented the seventh annual State of the Region report.

Those positive trends include:

• Unemployment levels have stabilized as has Michigan’s automotive industry after severe declines early in the state’s pandemic mitigation efforts last year.
• Consumer confidence and the housing market have also remained more resilient than anticipated.
• New business applications grew dramatically over the past year.
• The vaccine rollout is gaining momentum.

However, Baruah said that long-standing challenges to economic prosperity such as education attainment are greater because of the disproportionate impact the pandemic has had on certain segments of society. Minorities, minority-owned businesses, small businesses, and industries such as travel and hospitality have been hit particularly hard.

“This “K-shaped” economy refers to the divergence in economic outcomes based on sector or demographics. While many thrive, some only see increased challenges,” said Baruah.

The correlation of wages and likelihood of unemployment to educational level clearly tells the K-shape economy disparity story.

“Persons of color are disproportionately represented in service industry jobs, such as travel and leisure, and workers in this sector make among the lowest wages of any industry – about $18 per hour – making them both more vulnerable to the unemployment line and less able to be financially resilient if unemployed,” he added.

As the region looks to accelerate its recovery, the report provides a critical first step by identifying where the region stands economically.

“This dynamic of those with less formal education faring worse during an economic downturn is certainly not new – we see it every recession. To build a more resilient regional economy and more resilient citizens and families, we need to increase our level of education attainment,” Baruah said.