There’s been a steady increase of people coming to the St. Vincent de Paul Society’s food pantry in Marinette, Wis., a small city of about 10,000 just across the border from Michigan’s Upper Peninsula.
“We are a lifeline for folks facing a financial crisis, which happens more often than not when they are living paycheck to paycheck,” said Kalyani Grasso, executive director of the St. Vincent de Paul Society of Marinette, which runs a food bank, thrift store and other services. “We’ve had a spate of business closures.”
Nationally, the economy looks healthy, with solid growth, stocks at record highs and an unemployment rate of 3.6 percent, near historic lows. But unemployment isn’t falling for everybody. New data released last week by the Labor Department reveals just how many places are struggling.
In more than 1,000 counties, or about one in three, the unemployment rate is higher than it was a year ago. That includes all 72 counties in Wisconsin and all 10 in New Hampshire, as well as most in Michigan, Minnesota and North Carolina. The numbers can be volatile from month to month, but this trend remains even if you look at entire quarters or years.
Marinette County is a good example. At about 4 percent, its unemployment rate remains low by historical standards. But it has risen a full percentage point in the past year, and Grasso and her team have seen the fallout firsthand.
Unemployment is rising in parts of the country, particularly in a few states that are likely to be critical to the 2020 presidential election. Of the 10 closest states in the last election, four — Wisconsin, Michigan, Minnesota and North Carolina — have seen substantial rises in unemployment over the past year, according to the latest Labor Department data. Others have seen smaller rises, but it’s too early to read much into the often-revised numbers.
Economists say it’s telling that many of the places experiencing rising joblessness are in areas that still depend on manufacturing and agriculture. Those industries have been hit hard by President Trump’s trade war with China.
The global economic slowdown and dramatic shifts in retail are also playing a role in some job losses. Beleaguered retailers fear that the tariffs Trump wants to put in place at the end of the year would raise prices on popular items like laptops and phones, driving away still more customers.
Models forecasting the 2020 presidential election often incorporate unemployment. But it’s not the rate itself that matters, many economists say. It’s how it changes.
“Unemployment can be low, but if it’s rising, that will hurt the incumbent,” said Mark Zandi, chief economist of Moody’s Analytics. Moody’s has several models that it uses to predict the 2020 election outcome. “When unemployment is rising, people sense the implications of that: fewer jobs, smaller pay increases, no bonuses and maybe some layoffs. It’s palpable. People feel things are changing, and it makes them nervous.”
Zandi’s models currently predict an easy Trump victory in 2020, but if the stock market declines significantly or unemployment rises back above 4 percent, that could change the result.
“The key swing states are the ones that feel the most fragile right now. A lot of that is due to the trade war,” Zandi said. “If anything moves against Trump, especially rising unemployment or higher Democratic turnout, it’s going to be a lot closer.”
Michigan and Wisconsin are among the five most manufacturing-reliant states in the country, separate Labor Department data shows. Manufacturing, especially of durable consumer goods such as automobiles or recliners, is particularly sensitive to foreign trade — and to recessions.
“There’s a real disconnect between the manufacturing economy and the rest of the economy right now, and our Michigan economy is more manufacturing-heavy than the nation as a whole,” said Gabriel Ehrlich, associate director of the Research Seminar in Quantitative Economics at the University of Michigan.
In a 2017 analysis, Georgetown University economists modeled how swing-state county unemployment impacted the presidential vote, and found what Georgetown’s Dennis Quinn said in an email was “a significant penalty from rising unemployment, especially in swing states like Wisconsin.”
Why Wisconsin? As Quinn and his collaborators wrote in the journal International Organization, “exposure to trade is strongly associated with presidential voting.” The strongest effects, they find, are concentrated in places with the most low-skill manufacturing jobs and in swing states.
“It’s fair to assume that Mr. Trump’s prospects in Wisconsin, a state with a high manufacturing base with significant concentrations of low-skilled workers, are dimmed by this news,” Quinn said.
There is heavy debate about how much influence the economy is going to have on the 2020 election outcome or whether the election will become a referendum on Trump’s leadership style. Even on the economy, views have become more partisan over time, suggesting some might not shift their vote despite what’s happening in their region.
“I don’t think they will blame Trump for it. They are more likely to keep lashing out at immigrants and others," said John C. Austin, director of the Michigan Economic Center.
Many places where unemployment is above the national level have struggled for years.
“There is a bifurcated economy here in the Midwest, especially in Michigan,” Austin said. “There are knowledge and talent hubs in many metro areas that are growing. Whereas, small and mid-sized manufacturing places just haven’t found their new way yet.”
Unemployment is rising across the region, but in some places it may be a good sign. Unemployment typically rises for one of two reasons: Either more people are losing jobs or more people have been inspired (or compelled) to come off the sidelines and look for work. This doesn’t seem to be true in Wisconsin, where the number of people working or looking for work remains below 2017 levels.
There are early signs that hiring has cooled in Wisconsin and neighboring Minnesota. Companies typically pull back on hiring before they turn to layoffs. The average rate of layoffs and firings has risen more rapidly in North Carolina than in any other state over the past two years, according to Labor Department data. In the other states, data through June did not yet show a sharp rise in layoffs.
For now, Michigan’s economy has slowed and the labor market has stalled out, but this turn is just starting to take place. It can often take a while before people’s perceptions change, and there is hope that conditions could improve, especially if Trump de-escalates trade tensions with China.
“I don’t think we’re in a psychological crisis zone in Michigan," Ehrlich said, "but I think the key is to avoid letting it get much worse.”
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