The automobile industry impact on US economy sectors like steel and petroleum is well understood, but did you know that the motor vehicle industry can actually influence the economic health of the entire country?
Automobile Industry Impact on US Economy
As a major portion of the US economy, the automotive industry is integrally linked to the financial well-being of the country. For example, when an auto company lays off employees, those employees have less money to spend at local businesses. Area restaurants and stores will lay off workers to counteract this loss of business. Unemployed workers cannot afford vacations, so the tourism industry suffers. Even seemingly unrelated industries like health care, agriculture, and telecommunications can feel the economic pinch when the auto industry is in trouble.
Recent Decrease in Production
If you were paying attention to news headlines in 2008 and 2009, you probably know a bit about the ups and downs experienced by the auto industry. In 2006, a great year for the car industry, the United States produced almost 11.3 million vehicles. In 2008, at the height of the recent recession, production dropped to 8.7 million cars and trucks. This represents a decrease of about 23% over two years.
According to the Bureau of Labor Statistics Mass Layoffs Summary, 51,804 auto workers filed initial unemployment claims in 2008. In 2009, this number decreased slightly to 46,306. Trends in the automotive industry are indicating that automobile production is becoming more globalized, and laid off workers are seeking employment in other areas of the economy.
Population Exodus from Michigan
Once known as the car capital of the world, the State of Michigan had the worst unemployment rate in the nation throughout the recession of 2008 and 2009. While national unemployment hovered at a worrisome 10%, the unemployment rate in Michigan was a devastating 14% to 15%. This high unemployment rate was due to dramatic auto industry layoffs and the financial domino effect they produced in other sectors of the state economy.As unemployed auto workers searched for work and jobs dried up, highly educated workers began to flee the state in large numbers. Between 2001 and 2009, Michigan lost a resident every nine minutes, resulting in a loss of 465,000 people in eight years. These displaced workers followed work to other states, resulting in a glut of workers across the country and possibly contributing to nationwide economic woes.
Road to Recovery
Since the end of the recession, economic recovery has been a slow process. Health care and other economy sectors slowly began adding jobs at the end of 2009. Unemployed auto workers began getting retrained in new careers, which may spur growth in areas of the economy like education. In general, starting in 2010, the economic picture continued to improve in most areas of the country, despite continued production losses in the auto industry. However, the automobile industry impact on US economy sectors like mining, steel, tourism, and other areas may continue for some time into the future. Ultimately, just like the displaced auto workers, these economic sectors will find new roads to recovery.