This paper examines the relationship between Detroit's general unemployment rate and two independent variables: the revenues and direct employment levels of Ford, General Motors, and Chrysler. Using regression analysis on Bureau of Labor Statistics data spanning 2002–2012, the study tests whether auto industry employment and automaker profits significantly predict regional unemployment. The findings confirm a strong inverse relationship between direct automotive employment and Detroit's unemployment rate, while revealing only a moderate, statistically insignificant link between automaker revenues and unemployment — a pattern the author attributes to increased outsourcing by the Big Three.
Detroit was hit hard by the recent financial recession. Throughout the last generation or so, it has been devastated by trouble in the automotive industry and by jobs being shipped overseas. Detroit was once fueled by the auto industry, and the trouble that industry has faced has had subsequent consequences for the broader community. Detroit now faces a daunting unemployment rate. The hypothesis of this research is that there is a significant direct relationship between auto industry employment and general unemployment in the region, but only a moderate link between auto industry profits and unemployment in the Detroit region.
The first step is to gather data. The independent variables include the revenue of the three major automakers — Ford, General Motors, and Chrysler — that once employed a majority of the working class in Detroit, as well as general employment information regarding how many people are directly employed by those companies.
Data was gathered from the annual reports of the Big Three automakers. Annual revenues were taken from those reports for the period 2002–2011. The second independent variable explored in this analysis is the direct employment rate of workers currently employed by the three major automakers in the region. A narrower range of years, 2009–2011, is explored for this variable to show how the rate has changed and thus impacted the dependent variable. The general unemployment rate in Detroit is the dependent variable of this research, as it is the variable being influenced by the two independent variables.
The study utilizes regression analysis to show a correlative relationship between the two independent variables and the dependent variable. This type of testing allows the research to track how the variables interact with one another as they change over time. Regression analysis can also be used to help generate forecasting for the future if conditions remain similar to those observed in the past few years. Thus, the testing will not only expose a relationship but may also shed light on how that relationship will continue to evolve. Using Microsoft Excel, a regression test was administered for each individual independent variable as it related to the dependent variable of general unemployment in Detroit.
The table below presents monthly and annual automotive industry employment figures from the United States Bureau of Labor Statistics, covering the years 2002 through 2012.
Year: 2002 — Jan: 187.6 | Feb: 195.0 | Mar: 195.1 | Apr: 192.7 | May: 193.3 | Jun: 193.5 | Jul: 182.6 | Aug: 191.4 | Sep: 190.5 | Oct: 192.6 | Nov: 193.3 | Dec: 192.4 | Annual: 191.7
Year: 2003 — Jan: 183.5 | Feb: 182.4 | Mar: 181.9 | Apr: 179.5 | May: 180.0 | Jun: 180.5 | Jul: 157.7 | Aug: 177.7 | Sep: 178.0 | Oct: 176.4 | Nov: 177.9 | Dec: 178.1 | Annual: 177.8
Year: 2004 — Jan: 174.6 | Feb: 175.3 | Mar: 176.2 | Apr: 175.8 | May: 175.3 | Jun: 173.3 | Jul: 144.9 | Aug: 169.1 | Sep: 169.9 | Oct: 167.6 | Nov: 168.5 | Dec: 167.5 | Annual: 169.8
Year: 2005 — Jan: 162.9 | Feb: 164.8 | Mar: 164.5 | Apr: 161.8 | May: 162.6 | Jun: 159.6 | Jul: 137.3 | Aug: 156.6 | Sep: 157.9 | Oct: 158.4 | Nov: 158.9 | Dec: 159.0 | Annual: 158.7
Year: 2006 — Jan: 155.1 | Feb: 153.2 | Mar: 152.0 | Apr: 153.4 | May: 150.2 | Jun: 150.1 | Jul: 123.9 | Aug: 146.1 | Sep: 143.3 | Oct: 140.6 | Nov: 145.0 | Dec: 143.9 | Annual: 146.4
Year: 2007 — Jan: 134.1 | Feb: 137.8 | Mar: 136.7 | Apr: 135.4 | May: 133.9 | Jun: 133.3 | Jul: 115.6 | Aug: 130.3 | Sep: 128.0 | Oct: 123.8 | Nov: 128.7 | Dec: 126.8 | Annual: 130.4
Year: 2008 — Jan: 119.6 | Feb: 122.2 | Mar: 115.5 | Apr: 111.7 | May: 112.1 | Jun: 117.6 | Jul: 96.9 | Aug: 108.0 | Sep: 107.2 | Oct: 104.4 | Nov: 103.7 | Dec: 102.7 | Annual: 110.1
Year: 2009 — Jan: 79.5 | Feb: 86.6 | Mar: 86.2 | Apr: 85.4 | May: 77.2 | Jun: 73.4 | Jul: 73.5 | Aug: 80.5 | Sep: 84.3 | Oct: 83.9 | Nov: 82.8 | Dec: 83.9 | Annual: 81.4
Year: 2010 — Jan: 82.7 | Feb: 82.6 | Mar: 83.3 | Apr: 83.8 | May: 85.0 | Jun: 81.2 | Jul: 83.3 | Aug: 87.6 | Sep: 89.4 | Oct: 89.8 | Nov: 90.2 | Dec: 85.1
Year: 2011 — Jan: 89.4 | Feb: 90.4 | Mar: 91.2 | Apr: 93.1 | May: 93.4 | Jun: 94.1 | Jul: 83.3 | Aug: 92.0 | Sep: 94.7 | Oct: 96.3 | Nov: 96.7 | Dec: 97.4 | Annual: 92.7
Year: 2012 — Jan: 97.6 | Feb: 98.2 | Mar: 99.3 | Apr: 97.4 | May: 98.5 | Jun: 99.5 | Jul: 95.8 | Aug: 96.8 | Sep: 97.7 | Oct: 97.7 (Preliminary)
Source: United States Bureau of Labor Statistics (2012)
The following table presents monthly labor force, employment, unemployment, and unemployment rate figures for the Detroit metropolitan area, 2002–2012.
2002: Jan — Labor force: 926,085 | Employment: 852,210 | Unemployment: 73,875 | Rate: 8.0%. Feb — 926,400 | 860,186 | 66,214 | 7.1%. Mar — 927,490 | 858,088 | 69,402 | 7.5%. Apr — 914,214 | 852,820 | 61,394 | 6.7%. May — 919,067 | 856,968 | 62,099 | 6.8%. Jun — 930,210 | 858,135 | 72,075 | 7.7%. Jul — 938,113 | 860,129 | 77,984 | 8.3%. Aug — 927,938 | 860,706 | 67,232 | 7.2%. Sep — 923,508 | 860,832 | 62,676 | 6.8%. Oct — 929,738 | 865,618 | 64,120 | 6.9%. Nov — 924,707 | 859,344 | 65,363 | 7.1%. Dec — 924,491 | 858,152 | 66,339 | 7.2%. Annual: 925,997 | 858,599 | 67,398 | 7.3%
2003: Jan — 918,808 | 838,251 | 80,557 | 8.8%. Feb — 920,660 | 841,348 | 79,312 | 8.6%. Mar — 921,478 | 839,802 | 81,676 | 8.9%. Apr — 911,795 | 837,165 | 74,630 | 8.2%. May — 914,557 | 838,966 | 75,591 | 8.3%. Jun — 931,703 | 842,942 | 88,761 | 9.5%. Jul — 924,734 | 836,385 | 88,349 | 9.6%. Aug — 921,941 | 841,261 | 80,680 | 8.8%. Sep — 914,473 | 836,484 | 77,989 | 8.5%. Oct — 920,837 | 844,115 | 76,722 | 8.3%. Nov — 916,233 | 845,151 | 71,082 | 7.8%. Dec — 911,508 | 843,476 | 68,032 | 7.5%. Annual: 919,061 | 840,446 | 78,615 | 8.6%
2004: Jan — 909,277 | 831,481 | 77,796 | 8.6%. Feb — 906,520 | 833,848 | 72,672 | 8.0%. Mar — 912,335 | 832,573 | 79,762 | 8.7%. Apr — 897,324 | 831,566 | 65,758 | 7.3%. May — 905,174 | 832,824 | 72,350 | 8.0%. Jun — 920,140 | 834,903 | 85,237 | 9.3%. Jul — 921,917 | 832,217 | 89,700 | 9.7%. Aug — 918,323 | 837,590 | 80,733 | 8.8%. Sep — 912,717 | 833,480 | 79,237 | 8.7%. Oct — 917,197 | 836,710 | 80,487 | 8.8%. Nov — 917,634 | 835,855 | 81,779 | 8.9%. Dec — 910,970 | 832,651 | 78,319 | 8.6%. Annual: 912,461 | 833,808 | 78,653 | 8.6%
2005: Jan — 898,893 | 814,980 | 83,913 | 9.3%. Feb — 902,707 | 820,127 | 82,580 | 9.1%. Mar — 903,674 | 819,770 | 83,904 | 9.3%. Apr — 896,583 | 822,069 | 74,514 | 8.3%. May — 900,469 | 826,108 | 74,361 | 8.3%. Jun — 908,439 | 827,190 | 81,249 | 8.9%. Jul — 910,511 | 823,486 | 87,025 | 9.6%. Aug — 910,122 | 832,397 | 77,725 | 8.5%. Sep — 902,183 | 827,360 | 74,823 | 8.3%. Oct — 906,099 | 834,213 | 71,886 | 7.9%. Nov — 905,282 | 830,231 | 75,051 | 8.3%. Dec — 901,772 | 830,274 | 71,498 | 7.9%. Annual: 903,895 | 825,684 | 78,211 | 8.7%
2006: Jan — 890,726 | 813,643 | 77,083 | 8.7%. Feb — 893,728 | 819,100 | 74,628 | 8.4%. Mar — 894,686 | 819,254 | 75,432 | 8.4%. Apr — 888,088 | 819,405 | 68,683 | 7.7%. May — 886,638 | 821,024 | 65,614 | 7.4%. Jun — 901,045 | 824,525 | 76,520 | 8.5%. Jul — 909,209 | 818,977 | 90,232 | 9.9%. Aug — 905,545 | 826,682 | 78,863 | 8.7%. Sep — 897,541 | 821,742 | 75,799 | 8.4%. Oct — 899,350 | 824,638 | 74,712 | 8.3%. Nov — 899,519 | 827,076 | 72,443 | 8.1%. Dec — 898,801 | 827,075 | 71,726 | 8.0%. Annual: 897,073 | 821,928 | 75,145 | 8.4%
2007: Jan — 888,763 | 807,576 | 81,187 | 9.1%. Feb — 882,629 | 811,305 | 71,324 | 8.1%. Mar — 884,479 | 812,176 | 72,303 | 8.2%. Apr — 872,861 | 804,873 | 67,988 | 7.8%. May — 877,593 | 807,462 | 70,131 | 8.0%. Jun — 889,271 | 808,286 | 80,985 | 9.1%. Jul — 893,487 | 802,661 | 90,826 | 10.2%. Aug — 888,679 | 807,814 | 80,865 | 9.1%. Sep — 883,821 | 807,076 | 76,745 | 8.7%. Oct — 885,860 | 807,181 | 78,679 | 8.9%. Nov — 882,281 | 809,795 | 72,486 | 8.2%. Dec — 879,805 | 805,632 | 74,173 | 8.4%. Annual: 884,127 | 807,653 | 76,474 | 8.6%
2008: Jan — 870,423 | 792,363 | 78,060 | 9.0%. Feb — 864,819 | 792,008 | 72,811 | 8.4%. Mar — 869,416 | 793,227 | 76,189 | 8.8%. Apr — 858,119 | 790,656 | 67,463 | 7.9%. May — 867,834 | 788,251 | 79,583 | 9.2%. Jun — 879,555 | 792,837 | 86,718 | 9.9%. Jul — 880,791 | 784,752 | 96,039 | 10.9%. Aug — 878,219 | 786,079 | 92,140 | 10.5%. Sep — 869,385 | 780,711 | 88,674 | 10.2%. Oct — 874,230 | 780,998 | 93,232 | 10.7%. Nov — 869,415 | 774,564 | 94,851 | 10.9%. Dec — 869,314 | 765,370 | 103,944 | 12.0%. Annual: 870,960 | 785,151 | 85,809 | 9.9%
2009: Jan — 864,259 | 738,550 | 125,709 | 14.5%. Feb — 868,500 | 739,186 | 129,314 | 14.9%. Mar — 867,558 | 735,809 | 131,749 | 15.2%. Apr — 861,201 | 733,856 | 127,345 | 14.8%. May — 867,615 | 728,411 | 139,204 | 16.0%. Jun — 881,412 | 724,778 | 156,634 | 17.8%. Jul — 884,119 | 723,235 | 160,884 | 18.2%. Aug — 877,140 | 727,137 | 150,003 | 17.1%. Sep — 866,254 | 722,036 | 144,218 | 16.6%. Oct — 869,539 | 725,722 | 143,817 | 16.5%. Nov — 859,345 | 723,651 | 135,694 | 15.8%. Dec — 851,157 | 719,252 | 131,905 | 15.5%. Annual: 868,175 | 728,469 | 139,706 | 16.1%
2010: Jan — 847,291 | 707,897 | 139,394 | 16.5%. Feb — 847,625 | 711,292 | 136,333 | 16.1%. Mar — 849,981 | 712,795 | 137,186 | 16.1%. Apr — 845,572 | 719,147 | 126,425 | 15.0%. May — 842,324 | 720,685 | 121,639 | 14.4%. Jun — 849,687 | 722,092 | 127,595 | 15.0%. Jul — 858,310 | 720,757 | 137,553 | 16.0%. Aug — 848,640 | 722,263 | 126,377 | 14.9%. Sep — 842,523 | 725,409 | 117,114 | 13.9%. Oct — 840,807 | 726,346 | 114,461 | 13.6%. Nov — 832,411 | 723,380 | 109,031 | 13.1%. Dec — 825,032 | 720,614 | 104,418 | 12.7%. Annual: 844,184 | 719,390 | 124,794 | 14.8%
2011: Jan — 819,255 | 708,589 | 110,666 | 13.5%. Feb — 820,845 | 713,928 | 106,917 | 13.0%. Mar — 824,175 | 717,282 | 106,893 | 13.0%. Apr — 813,966 | 716,507 | 97,459 | 12.0%. May — 820,087 | 718,841 | 101,246 | 12.3%. Jun — 830,406 | 717,708 | 112,698 | 13.6%. Jul — 839,617 | 716,815 | 122,802 | 14.6%. Aug — 831,611 | 722,238 | 109,373 | 13.2%. Sep — 823,821 | 721,869 | 101,952 | 12.4%. Oct — 822,244 | 726,067 | 96,177 | 11.7%. Nov — 813,454 | 726,562 | 86,892 | 10.7%. Dec — 810,795 | 723,697 | 87,098 | 10.7%. Annual: 822,523 | 719,175 | 103,348 | 12.6%
2012 (partial): Jan — 808,241 | 712,769 | 95,472 | 11.8%. Feb — 810,928 | 720,798 | 90,130 | 11.1%. Mar — 806,088 | 721,393 | 84,695 | 10.5%. Apr — 787,999 | 711,006 | 76,993 | 9.8%. May — 800,113 | 711,898 | 88,215 | 11.0%. Jun — 811,451 | 718,553 | 92,898 | 11.4%. Jul — 823,537 | 712,977 | 110,560 | 13.4%. Aug — 820,871 | 719,538 | 101,333 | 12.3%. Sep — 816,378 (P) | 724,006 (P) | 92,372 (P) | 11.3% (P)
"Regression output for employment and revenue models"
It is clear that there are significant factors affecting the unemployment rate. As predicted, the direct employment levels at the three major automakers have the greatest role in influencing unemployment. As the direct employment rate decreases, the unemployment rate increases. However, the analysis also shows that there is not a significant correlation between rising automaker profits and declining unemployment rates in the region. This is most likely explained by the major outsourcing undertaken by the three companies, which continues to cost Detroit communities in the form of rising unemployment even as corporate revenues recover.
United States Bureau of Labor Statistics. (2012). Local area unemployment statistics: Detroit–Livonia–Dearborn. Databases, Tables, & Calculators by Subject. United States Department of Labor. http://data.bls.gov/timeseries/LAUDV26198003?datatool=XGtable
United States Bureau of Labor Statistics. (2012). Motor vehicle parts manufacturing. Databases, Tables, & Calculators by Subject: State and Area Employment, Hours, and Earnings. United States Department of Labor. http://data.bls.gov/timeseries/SMU26000003133630001?datatool=XGtable
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