The Long Lost City of Detroit: The Economic and Financial Pain of Motor City. How Detroit went from 1.8 Million to 912,000 Residents. 28.9 Percent Unemployment.

There is no other city in the United States that highlights the Achilles Heel of the current financial crisis like Detroit Michigan.  Detroit Michigan had a booming population from 1870 to 1950.  In 1870 Detroit had 79,577 residents and in 1950 Detroit had a stunning 1.8 million.  The massive boom came with the growth of the U.S. auto industry.  The nickname Motor City was aptly deserved as Detroit became a powerhouse of economic growth.  Yet all that has now changed.  Detroit now has 912,062 residents, a decline of 50 percent from the peak in 1950 and those leaving the city continue.  Detroit isn’t in a recession but an economic depression.

It is rare to see such a large out migration from the once powerful Detroit but visualizing this on a chart is simply amazing:

detroit-population

From the 1950s onward, Detroit has slowly lost residents.  However the metro area was still in growth mode up until 2008.  The city has seen the major pain of this economic crisis on every front.   Consumer demand has shifted to more fuel efficient cars.  Global competition has eaten into the competitive advantage of the big three automakers.  Michigan also has had a weak economy with housing prices in the doldrums for over a decade.  While much of the U.S. has dealt with the housing bubble bursting in recent years, Detroit has been dealing with its own depression for over a decade.  But even the recent bubble brought some growth to Motor City in the housing mania:

detroit-housing

What is fascinating with the data above is that Detroit housing values have been under inflationary trends for nearly two decades.  The recent bubble pushed index data over 100 for a brief interval but we are now back below the range.  Yet Detroit saw a housing decline based on real economic fundamentals of a weak economy.  That is, much of the drop came from employment or out migration instead of toxic sophisticated mortgages.

The unemployment rate however for Detroit is off the charts.  The current unemployment rate for the city is 28.9 percent.  It is amazing that such a big city is having unemployment surpassing the national average at the peak of the Great Depression.  Even the local MSA is seeing unemployment nearing 20 percent:

unemployment-detroit

If that is the headline number, we can only estimate that the actual unemployment and underemployment must be nearing 40 percent.  This kind of employment pain is simply a reflection of the real shifts in the economy.  The U.S. consumer in large part is changing their habits.  Detroit is a reflection of a past that is no longer here.  It is hard to spend more than you have and build cars that simply were not fuel efficient.  It has changed some of its ways but is it too late?  Most automakers got caught in this shift yet not to the point of the big three.  In fact, we need to remember that two of the big three are now government owned.

In many ways, it is painful to see a beloved American city with so much history being dismantled.  We would like to see it as this:

gm_headquarters_in_detroit

Yet the current reality is more like this:

detroit-station

Source:  Time

In many ways that photo above could be out of some futuristic dystopian movie where a city is left to atrophy over time.  Yet it is not.  It is the slow progression and reality of the new austerity in America.  People have spent and borrowed too much on credit.  As a nation the U.S. Treasury and Federal Reserve have done everything they can to keep this going but as you can see from the above, consumers are just not buying it.  And how could they?  We’ve gutted our manufacturing base.  One lesson Henry Ford knew even with his workers is that you must pay your employees enough to purchase the product they develop especially if it is mass produced.  The only way we got people to buy cars in the last few months was through cash for clunker gimmicks and not a focus on employment.  Will this last?

It is interesting that some of the new strategies to resurrect Detroit include bull dozing large portions of the city.  A city government that is in massive deficit, it may be cheaper to demolish certain areas instead of letting them sit and allowing crime to grow.  Plus, the city has lost tens of thousands of residents so some of the structure reflects a city that is no longer as big as it once was.  In many ways Detroit needs to downsize just like its line of autos.

I know it is hard to look at examples like this because it detracts from the Wall Street casino.  In amazing fashion the market keeps going up even though employers are not hiring and layoffs are still in the pipeline.  However Detroit is a real example of the pain currently faced in the trenches in America.  Wall Street is so disconnected from Detroit, it has forgotten it even exists.

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11 Comments on this post

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  1. Skeptical said:

    The reasons for Detroit’s decline are not exemplary of America in
    general. They are the result of a very specific set of economic and
    political choices. There are cities and states that are determined
    to avoid the trap that Detroit fell into, and Detroit’s citizens are
    simply voting with their feet.

    September 29th, 2009 at 8:36 am
  2. OBSERVER said:

    The issue is race.

    With the end of legal segregation, the white community knew they had to leave or there would be hell to pay. So they left.

    What you have left is the deindustrialization of the areas built by the white race. This has happened in every area of the world where the whites have left and the African has taken over……deindustrialization.

    If you study every city in America, you will find this same effect. Every one. The solution is segregation (don’t worry…it will not happen) with protection for the white community. Since this will not happen, Detroit will become a worse basket case.

    September 29th, 2009 at 6:34 pm
  3. Johnny said:

    Gosh,
    I-dunno.I-think-housing-prices-are-going-just-keep-going-up,up,up!
    Devaluing-a-currency-will-make-us-all-dirt-poor-and-lead-to-a
    development-for-a-taste-for-human-flesh-to-avoid-starvation,so
    we-got-that-going-for-us.I’m-basically-a-moron.I’m-an-American.

    September 29th, 2009 at 8:23 pm
  4. bob said:

    As a former Detroit resident all I can say to the rest of America is
    “What’s happening in Motown is coming to Yotown”

    September 29th, 2009 at 9:00 pm
  5. Roberto said:

    Detroit is not coming back, it is doomed. It crossed a line of no return some time ago…

    I grew up there and recently went back and was shocked at what I saw. Detroit has always been in bad shape, but it is by far the worst I have ever seen it.

    There are no functional neighborhoods left. For example, Lafayette Park is near downtown. It used to be a very diverse community about 10 to 20 years ago. Not anymore….There used to be a grocery store and butcher shop and restaurants in a shopping plaza. They have gone out of business. All that remains is a wig shop, pizza carryout and a day labor store. The plaza is 85% vacant. There is a large park in the neighborhood. The tennis courts are neglected, bums were sleeping on benches and in the bushes. There are also several “co-ops” surrounding the park. A couple looked to be in good condition, but several were in very poor condition. The value of a share of these coops in bad shape must be near zero. They are going to have to have MAJOR repairs done ASAP. I am going to guess they are not…who would pay the money. Thus these bad coops will completely drag down the remaining community.

    There were many foreclosed houses in Indian Village (used to be high end housing). Condiminiums along the river are being given away….The Ren Cen has been trashed by GM. There are very few shops left. You would not go to Ren Cen unless you had VERY specific business there…

    The east side neighborhoods are collapsing, with lots of burned out houses and boarded up houses. Jefferson Ave. going out to Grosse Pointe is a total mess, there is very little commerce going on. Even some of the gas stations and liquor stores are closed.

    I could go on and on and on and on…but the simple fact is that Detroit will never come back UNLESS:
    1). Jobs are available
    2). The population is able and willing to work
    3). The city leadership becomes somewhat intelligent & educated
    4). The urban blight is arrested & dealt with
    5). The schools become functional & can educate the young.

    Now what do you think the odds are of EVEN one of the above occurring?

    Oh yeah, almost forgot to mention, the blight is now spreading to the suburbs…

    Roberto

    October 3rd, 2009 at 12:45 pm
  6. Asif said:

    The thing about Detroit is that there is so much potential to prosper. Unfortunately, there is a lot of work to do to bring it back to the pre-economic downturn level, but what surprises me is the amount of optimism many of the citizens of Detroit have.

    There needs to be a complete reform of the political system in Detroit. The money that gets taken away from tax should make its way back into fixing the current problems (education, poverty, homelessness, etc.)

    At the national level, representatives are merely brushing over the fact that Detroit is still there. They believe that Detroit is a lost cause.

    Sure it would take a lot of time, effort, and money, but Detroit can be revamped into a much better city.

    December 16th, 2009 at 1:51 am
  7. Chief Lie Detector said:

    @ “The Observer”: Well, it’s like this, Sparky.

    I don’t have time to study “every city in America,” and neither do you, so that means your post is a bunch of horseshit topped with more horseshit.

    Take your cross and your white sheet and *shove them* up your racist ass.

    Redneck.

    January 19th, 2010 at 6:53 pm
  8. Wfive said:

    Socialism, union dominance, entitlement = Detroit today. Detroit is a demonstration of state before the people. Passing this off as the result of a housing and monetary collapse masks the real problem that dates back to the era of union dominance and federal experiments in state housing projects.

    February 14th, 2010 at 8:01 pm
  9. Dr. Mike said:

    “Chief Lie Detector”? More like “Chief Truth Denier”.

    What did The Observer say that is false?
    Racist, perhaps; but false? No.

    Show me a prosperous, predominantly “black” city.
    New Orleans?
    Detroit?
    Oakland?
    Baltimore?
    Philly?
    D.C.?

    Great and prosperous once? Yes. But since the ’60s, rising crime, declining population, and an increasing proportion (in most cases, a plurality or majority) of blacks. You’d have everybody ignore the strong correlations and chalk it all up to the boogeyman of “racism.”

    The “community” needs to get its act together.

    July 15th, 2010 at 11:29 am
  10. LenSplendid said:

    There is hope for any city especially detroit. Peoplejust have t o be more ingeniutitive and innovative. the city is going through transition – they just need funding (perhaps from bilionaires or philanthropist, congress if available) and set up concention halls for inventors to stir up thinking and incorporate wind mill energy from bicyling so Americans can lose weight and build farms as they aare doing and make mass eficiencies the size of lots til economic situations improve- avoid racism too.
    Oh and lastly no more scandals!

    December 12th, 2010 at 5:11 pm
  11. Denice Blanchard said:

    It’s such a loss. Detroit used to be so nice. We road the street cars all over then the buses when they started. All the theaters.There were so many beautiful things to see in DETROIT. Make it safe.

    August 25th, 2012 at 1:35 pm

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