Detroit’s 16% unemployment rate driven by labor force rebounders
Sixteen percent of Detroit residents in the labor force were unemployed as of March 2023, according to the latest survey from the University of Michigan’s Detroit Metro Area Communities Study.
The latest unemployment estimate essentially holds steady from the previous DMACS estimate in August 2022. Detroit’s unemployment peaked at 43% at the beginning of the COVID-19 pandemic and remains higher than the estimated pre-pandemic unemployment rate of 8%.
The 16% unemployment rate is higher than estimates from the Bureau of Labor Statistics, which announced in May that Detroit’s April unemployment rate was 4.2%, down from 5.8% in March. BLS uses a statistical model to estimate the unemployment rate based on national survey data, payroll data, and unemployment insurance claims. DMACS surveyed a representative sample of 1,911 Detroit residents to ask about their employment situation, and results are weighted to represent the city’s population as a whole.
One potential driver of the higher unemployment rate estimate is labor force rebounders—people who would typically be identified as out of the labor force because they are retired, disabled, students, have family or personal obligations, or otherwise chose not to work but who appear to be re-entering the labor force.
DMACS counts these residents as in the labor force based on their job seeking, but whether one identifies as actively searching for work can be fluid. The inclusion or exclusion of this group from the labor force impacts the unemployment estimate. Omitting this group from the labor force lowers Detroit’s unemployment rate to 10%.
“The unemployment rate is often treated as a simple indicator of economic health. However, in this day and age of remote work, myriad entrepreneurial opportunities, gig work, limited availability of child care and high demand for workers, understanding who is in and out of the labor force is a lot fuzzier than one might think,” said Lydia Wileden, research associate for DMACS who authored the new report.
“The DMACS survey asks Detroiters if they are working, why not, and if they are looking for work. What we find suggests a complicated picture.”
The report breaks Detroit’s labor market into four groups:
- Labor force nonparticipants (34% of adult Detroiters), who are out of the labor force because they are retired, disabled, students, have family or personal obligations, or otherwise chose not to work.
- Employed people (55%), who report they have worked for pay or profit in the past month.
- Unemployed people (6%), who have not worked for pay or profit in the past month because they were laid off, but they are actively searching for and available to work.
- Labor force rebounders (5%), who are retired, disabled, students, have family or personal obligations, or otherwise chose not to work but report actively searching for a job in the past month.
Among labor force rebounders, the most common reason for leaving the labor force was health issues or disabilities (46%).
“Labor force rebounders are more likely to be younger and less-advantaged residents. What is driving them back toward the labor market? Our findings suggest that despite leaving the labor force in the past, they are seeking work again as a result of their financial precarity,” Wileden said.
The survey found 70% of these residents say they would be unable to cover an emergency $400 expense, 43% have an unmanageable amount of household debt, and 70% pay more than 30% of their income for housing.
The report also sheds light on the scale of remote work two years after the COVID-19 emergency declaration. Among employed Detroiters, 68% are working in person. The flexibility to work remotely is unequally distributed, with white residents, people making more than $60,000 a year, and those with at least a college degree being significantly more likely to work remotely compared to other residents.