Wages in Detroit have improved, but not yet fully recovered to their pre-recession levels. The PayScale Index, which tracks changes in the wages of full-time, private industry workers, shows wages in the Detroit metro are still 1.5 percent below their peak levels in Q4 of 2008.
The good news is, for the first time in almost 2.5 years, wages are over 2 percent higher than their 2006 levels (the base year of The PayScale Index). Therefore, even though the Motor City hasn't recovered from the Great Recession, it seems to be on the right path.
Manufacturing, a leading industry in Michigan, is experiencing rising wages as well. The Detroit economy is dominated by the manufacturing industry and thus wage trends in Detroit are heavily influenced by wage trends in manufacturing. Luckily for Detroit, wages have been on the rise in manufacturing. In fact, they have been steadily growing since Q1 of 2010 and are almost back to their peak levels from Q4 2008. See the chart below and online.
Phoenix wages are growing steadily. Similar to the Detroit metro area, the Phoenix metro area has wages that are about 1.5 percent below their peak levels in Q4 of 2008. The difference, however, is that their wages are significantly higher than their 2006 levels. In fact, wages have been consistently growing in the Phoenix metro since mid-2010 and finished 2011 almost 6 percent above wage levels in 2006.
This recovery in Phoenix is likely tied to the large presence of the healthcare industry. Unlike most other industries, wages in healthcare fell very little during the Great Recession (under 1 percent) and have been generally rising since early 2010. Healthcare is also one of only a few industries that is experiencing wages higher than the peak quarter of Q4 2008. See chart below and online.
Higher wages means more jobs. The PayScale Index is an application of the economic principle of the supply and demand of labor. Workers supply labor and employers demand it. When demand for labor increases (i.e., more jobs are created), then the price of labor (i.e., wages) increases. Therefore the growth of wages in these areas show their labor markets, and thus the job situations, are improving.
These improvements in the local economies of Michigan and Arizona may hurt the Republican presidential candidates as it weakens their arguments against Obama and his job-making policies. Therefore, instead of focusing on Obama's policies, they will need to focus on how they can improve the economy at a faster rate if they want to win the support of voters.
Further proof to the claims above about the improvement of the labor markets is the decreasing unemployment rates in both states.
Michigan has experienced slowly improving employment. The current unemployment rate in Michigan (according to the Bureau of Labor Statistics) is 9.3 percent -- a far cry from their unemployment rate of 14.1 percent just after the Great Recession ended in August of 2009.
Michigan's unemployment rate has been steadily dropping since August of last year, which could be caused by two things:
- Discouraged workers giving up their job search and dropping out of the labor pool. This is a pessimistic, although at least partially true statement.
- Workers finding new jobs due to the economy improving. The PayScale Index above indicates this is true, as well.
Arizona is also experiencing improved employment. Arizona is faring slightly better in the employment picture, as their unemployment rate is only 8.7 percent, which is down from the 10.4 percent unemployment rate they had in the months after the Great Recession. However, this isn't even near the average of 3.8 unemployment Arizona experienced in 2007.
Both states currently have worse unemployment than the U.S. overall (8.3 percent). Therefore, a key topic on which the candidates should focus their efforts is the current unemployment situation in each state and how they propose to improve it further.
Two of the leading Republican candidates, Mitt Romney and Rick Santorum, are heading into the Michigan primary neck-and-neck. If they want to win over voters tomorrow and get one step closer to being the name on the presidential ticket, then they should address how they will further improve the local economy of Michigan with their own policies, rather than focusing on the policies of the current president.
Similarly in Arizona, where Romney is projected to have a distinct lead, the candidates should set themselves apart by proposing ways to further increase wages and decrease unemployment.
Analytics Manager, PayScale, Inc.