The automotive suppliers, manufacturers and shopping mall owners that Donald Kunz counts among his law clients seem more optimistic these days.
Unemployment is falling. Interest rates remain low. And with post-bankruptcy Detroit giving way to new downtown development and entrepreneurship, “my sense is everyone’s got more spring in their step,” said Kunz, chairman of Detroit-based law firm Honigman Miller Schwartz and Cohn LLP’s corporate law department.
Kunz and his corporate clients are part of a growing group of metro Detroit businesspeople who say they’re optimistic about the state of the economy, now in its sixth year of post-recession rebound.
But despite a sense that the state and national economies are improving, local business leaders are not in a hurry to vastly expand their payrolls. Some of that reluctance is due to the fact that job gains and wage growth have been on a “slow growth” mode in this recovery. Some companies also have been able to extract efficiencies out of new technology and getting by with fewer employees, Kunz said.
“Many of the businesses are doing better, but are doing so with productivity gains that don’t necessarily mean hiring more workers,” he said. “That’s typical of what’s going on around the country.”
A May poll of 300 local business owners and managers in metro Detroit by Crain’s Detroit Business and Honigman found some local company execs will add jobs and raise wages, but more are comfortable with their current workforce levels.
According to the poll, 36 percent plan to hire more employees over the next 12 months, while 58 percent plan to just maintain employment levels.
And besides the biggest economic development elephant in the room ‒ roads funding ‒ business leaders, including the survey respondents, say Lansing also needs to address the state’s worsening talent gap and help companies when they are ready to hire.
(On roads funding, as this story went to press, the state House and Senate conference panels had just moved spending bills to the Legislature for final passage next week. These bills, all part of a $55 billion state budget plan, would infuse more money into roads and give a modest bump to higher education funding.)
Many companies canvassed for opinions in the survey reported difficulties finding workers with specific skills for the jobs they are seeking to fill, and this is a common refrain during business networking events and topic of the Mackinac Policy Conference.
When asked whether the skills gap is worsening, 52 percent of Crain’s survey respondents said the issue is more severe than it has been in the past, compared with just 6 percent indicating it’s getting easier to fill middle-skilled jobs.
Other companies said they just aren’t comfortable yet with adding many full-time positions; the median number of near-term jobs to be added of those surveyed was four.
Take small-business owner Rex Tubbs. Before the recession, Tubbs’ Plymouth-based engraving business could make nearly $100,000 of its annual sales from award plaques for automakers and their suppliers.
By 2009, Tubbs said, the faucet had all but shut off to the stream of business coming from the troubled auto industry. His company, Engraving Connection, cut close to half its small workforce. Tubbs has held steady with three employees ever since.
He turned to Internet sales, seeking what he hopes are recession-proof markets — weddings, military plates, memorials. More than half of his business today is online. But even as business grows, Tubbs said he doesn’t have similar plans for his workforce. If he raises wages this year, he said, it’ll be small.
“I really see that the economy in Michigan is improving,” said Tubbs, “but I really am not for sure if it’s going to last.”
Upbeat about Detroit
Besides workforce issues, most Crain’s subscribers surveyed say they’ll pay attention to Detroit’s momentum post-bankruptcy, since they consider the city’s fiscal health very important ‒ if not essential ‒ to the economic well-being of the entire state. To that end, many are willing to pay for workforce training and public transit to help the city’s residents find and keep employment.
“If we start today, we’re not going to have this new contingency for several years down the road,” said Michael Mazzeo, dean of Oakland University’s School of Business Administration.
Mazzeo said his students have had more than 90 percent success finding jobs after graduation. The bigger workforce issue, he said, is finding enough workers in the middle, who have some college education and work in fields like the skilled trades that contracted during the recession.
Using state and local tax dollars to fund training is an alternative, he said, but public dollars come with their own restrictions.
“We’ve lost some momentum, and regaining it again is going to take us a little while,” he said. “The real question is: At what speed can people acquire those skills?”
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