Hi, I'm Jeff Rea, your host for Economic Outlook.

Welcome to our show, where each week we take a deep dive into the regional economy and the people, the companies, the communities and the projects that are helping our region grow.

The global health crisis caused by COVID-19 has had a devastating impact on the regional economy and around the world.

This week, we'll take a close up look at that impact and talk about what we can expect as the pandemic comes to an end, as well as a look at the outlook for southwest Michigan coming up on Economic Outlook.

As vaccines roll out to the entire population, there's great hope that we're nearing the end of the global pandemic and that there soon will be some return to normalcy.

But what will the new normal look like, how quick will our economy recover, and what can we expect that recovery to look like are just some of the questions we'll tackle today.

We hope to give you those answers.

Have invited three great guests to join me for a conversation about the pandemic economy and beyond.

Please join me in welcoming Dr. Paul Isely, Associate Dean and Professor of Economics at the Seidman College of Business at Grand Valley State University, Rob Cleveland, the President, CEO, the Cornerstone Alliance, and Jim Hettinger, the President and CEO of Jim Hettinger Urban Development Services.

Just one other note before we get started here at WNIT.

We're respecting social distancing and as such at both our hosts and our guests joining us today virtually instead of in person.

Gentlemen, thank you for joining me today.

Appreciate the chance to have some conversation with you.

Thank you for being here, Jeff.

So obviously, the--the health crisis that the pandemic has caused is--obviously gotten a lot of attention.

It's had impact on communities all over.

But--but equally, the economic crisis that has created.

So we're going to focus a little bit on the--the economy and kind of its impacts on that.

Paul, could I come your way first and maybe walk us back in time a little bit before maybe even pre-pandemic and think about what was happening in the economy before it kind of ground to a halt as a result of the health crisis.

Yes.

If you go back to the beginning of 2020 west and southwest Michigan, we're just coming out of a light manufacturing recession.

We had had a slight slowdown in manufacturing and were just starting to see some light of day as we were coming into the early part of 2020.

Then is as COVID started to expand across Asia, it started to cause supply-side problems all across the types of industries that we do here in west Michigan, where we're nearly a quarter exposed to manufacturing, that supply-side problems started to bite.

And then as we got into March and we started to have stay-at-home orders and things like that, it resulted in April just being devastating.

It was--you know, people use the word unprecedent.

We don't have anything in the history to compare to what happened in April.

It was--it's a very heavy shutdown and it was heavier here in Michigan than it was across the rest of the United States because of the issues that we had going on in Detroit and some other things.

Most of the economic studies are now showing that Michigan's economic shutdown was the harshest shutdown in the United States.

But it came back pretty quickly and it came back pretty quickly because manufacturing was able to come back quickly and because of just a torrent of--of aid that was coming in.

So in reality, people's incomes all summer long last year on average, were higher than they were before the start of the pandemic if you add in all of that government aid.

And as a result, people were able to buy things, they couldn't do services, they couldn't go out on vacations, they couldn't do those types of things.

So they were able to buy some things.

And so our manufacturers came back very, very quickly.

And as we reached the end of summer, we had that beautiful summer view.

We all remember that last summer had the most beautiful weather and a lot of our restaurants and things were able to take advantage of that.

As we got into the last part of the year and we had to close down again to an extent that was a harsher shutdown than the first shutdown for--for small businesses.

But manufacturing didn't feel that second shutdown in reality because the rest of the economy was cooking along.

So where we sit today, about a third of local--local small businesses across Michigan that were in retail and leisure and hospitality and food service that existed before the pandemic began are no longer taking transactions today.

And that has some very deep problems for that service side of the economy.

Rob I want to come your way.

So you're kind of boots on the ground, we've had you on several times, you know, kind of highlighting the communities you serve and some of the great projects that are happening there.

What--what Paul talked a little bit about was the gush, a third of businesses, for example, maybe not taking transactions right now.

Tell us a little bit about just sort of how the pandemic impacted those communities you serve.

Well, listen, I found nobody who's been able to explain it better than - -than Paul.

It's quoted numerous times in the British magazine.

And he's exactly right.

It seemed to hit Michigan harder than anywhere else.

And the best word I've been able to find, Jeff, to--to describe what's happened is uneven.

It has been a completely uneven recovery.

And as Dr. Paul mentioned, unprecedented decline and then also an unprecedented return.

And there are a number of different local studies or a CFO study that's done and people remain optimistic about the future.

But again, that's still pretty uneven.

So white-collar jobs that came back to manufacturing, the businesses that did well did really well, and then the businesses that did not continue to struggle.

And a lot of that continues to be based on policy.

And the folks at Niles can--can literally look out their front door and see different policies.

And some of us up here 20 miles away still feel the effects of that.

And the restaurant industry, the bars and wineries and breweries have certainly felt that.

One of the things that I find interesting, there was a recent study done that showed the--the retail spending in restaurants in 2020 and in 2020 restaurants spending in the state of Indiana was up 15 percent.

So people did not stop going to restaurants.

In fact, they spent more money in restaurants.

That number in Michigan is 11 percent down.

So at 26 percent difference between the state of Indiana and the state of Michigan.

And what it shows you is that the folks in Michigan didn't stop.

They didn't stop going to restaurants.

They went to other states to do it.

And so that's what has really hurt our economy, is that the complete uncertainty, not only the--the people going to restaurants, but also the employees had no certainty that the restaurants are going to be open.

And so it certainly had a huge impact negatively towards these businesses.

And the last thing I'll add then is, is now they can't find workers, many of our hospitality workers, that that needed jobs that wanted to show up every day, took jobs in Indiana because they knew they could--they were open.

And so now that we're trying to ramp up for the tourist season, our hotels, our restaurants cannot find anybody to work.

So--So, Jim, both Paul and Rob talked a little bit about the unevenness of this and the economy, especially related industries and some of the geography.

You've worked across southwest Michigan and a lot of different geographies.

Your perspective on--on how this is impacting those communities.

Well, I think that the--of particular interest to me the past couple of weeks, as you can well imagine, has been the economic interface between the small towns and southern Berrien County and the medium-sized towns in northern Indiana.

These are economic relationships that defy political boundaries.

People don't care about political boundaries when they want to go to a Target store and they want it to be a convenient and complete experience.

So many Southern Berrien County residents shop in northern Indiana because it's convenient for them and it's really a part of their lives, and they see advertising from predominantly northern Indiana businesses to which they will respond.

So you layer upon that, the most severe lockdown in the country.

And Rob is absolutely on target, the drain of money out of Michigan.

Not that this would break your heart, Jeff, but I know you've got a difficult management situation yourself here.

But economic developers tend to think boundaries and we tend to think about community cash flow.

Does more money come into our community than goes out.

And we think that probably in this case, which is highly unusual, I think for this part of the country, it's a healthy relationship because people get basically what they want to satisfy their--their daily living needs.

But, is bad policy resulting in maybe an intensification or acceleration of the outmigration of money from Michiana?

And then maybe the second point to be made and Rob's input here would be kind of interesting, but I think the political boundary curse is also alive and well along the Lake Michigan shoreline.

And it seems to me that the econometrics of the lakeshore run north and south as opposed to east and west.

So we can say St. Joseph, Michigan, has more in common with South Haven, Michigan, than, say, St. Joe has with Watervale.

Saugatuck, Douglas, have more in common with South Haven than they have with Otsego and Plainwell.

So we kind of try and do economic development east-west, when in fact we may be swimming against the north-south river.

Finally, and a bit of a compliment to Rob here.

Every region needs leadership, particularly in times like ours.

And coming to mind is the work done by Birgit Klohs at the Right Place program and how she organized her businesses very quickly to respond to the crisis.

And also, Dave Hackle in McComb County, Michigan, down in the Detroit area, did a pretty outstanding job of organizing and providing a lot of business opportunities to manufacturers who otherwise-- otherwise would have had to shut down.

So I see--I see west Michigan and northern Indiana with some interesting boundary opportunities, and I--I wonder about the direction of our efforts as a region.

Great, thank you, Jim.

Paul, let me come back to your way just--for just--as we think about this.

I think first of the year, people were encouraged.

Vaccines were beginning to roll out.

Three new vaccines hit the marketplace, but at the same time, cases had begun to spike.

So I'm sensing here, and as we're taping in April that--that the sense of optimism that existed in January and February is fleeting just a little bit.

And even this last week, we saw the governor suggest different limitations or just recommendations this time.

But--and so I--so talk a little bit about, you know, kind of where businesses are now in this--this mindset.

Are they--are they--are we still hopeful that we're coming to the end of this pandemic and recovery is soon?

Or is there widespread concern that--that another spike is going to put severe limitations and kind of limit that recovery?

Well, I mean, if you listen to the people who are advising businesses over the last few months, they really have been advising businesses that things are going to be very rocky until we get to the middle of summer, that--that it really is a function of the fact that we won't have these hot spots that happen around the United States.

And unfortunately, Michigan is now a hot spot again until we start getting towards the middle of summer.

And then we'll have the weather, we'll have outdoors and we'll have vaccines and we'll have time to help us get ahead of some of this stuff.

So--so that's where a lot of the focus is.

I think as spring started, we were very hopeful that maybe we could jumpstart that and get a few months ahead.

And we're finding that that's not true.

But surprisingly, if you look at the southwest Michigan MSA and you look at the fact that they're down about five to four thousand to five thousand workers compared to last February.

So February to February.

Hours worked is flat, so the people who are working are working more hours, they're earning more money, and the money going into southwest Michigan hasn't dropped off very much because of that, and it's because of that strength of the manufacturing side.

So we're starting to see that dichotomy that--that--that service sector side, health care side weakened, but it hasn't affected people's spending power much yet because the average person's unemployment benefits in that sector equates to their income potential that they were earning before.

And we expect to see that through this summer.

So their spending potential is the same.

Convincing people to work is going to be the problem this summer.

You have competition from Indiana, you also have competition from unemployment benefits through the course of this summer.

And--and so, yes, I think the optimism is still there.

People were just starting to think maybe we can get ahead of it.

You know, Jeff, I'd add to that as well.

I do think there's a bit of a disconnect between the public and the messaging and the folks who are operating businesses, whether it be manufacturing restaurants.

I couldn't tell you what the daily case count is in Berrien County or the state of Michigan.

And I couldn't tell you what it was six months ago.

And that's what I get from most of the employers we talk to.

Their argument is we're following CDC and my OSHA guidelines, just like we have been for a year and we've been doing it safely.

So regardless of what the case found is, all of these employers and--and restaurants are saying the same thing.

Look, we're following the protocols.

You can see based on the Michigan statistics that the state released on their own, five percent of the outbreak are related to restaurants and bars and wineries, and less than one percent are actually related directly to have--have impacted patrons of restaurants.

So the argument that these companies are making is regardless of the case, regardless of what it is, we're following social distancing.

We're following the guidelines that are being mandated.

We just want the certainty that we're going to be allowed to stay open.

Great point, thank you, Rob, for--for weighing in there, Rob, I want to stay with you, just maybe even to follow up and--because you commented earlier about workforce and people and--and this challenge and this is sort of an age-old problem, I'll just mention it as well.

But it's--but it's maybe worse than--than what we've seen in the past.

And so so as you're talking to an employer, an employer saying, man, I--I'd love to ramp those hours back up.

I'd love to open another day.

What advice to them to find those employees in this world where--where unemployment benefits and other things are competing against it.

Any encouragement you can give to employers who are wrestling with that?

Yeah, you know, Jeff, you and I have talked about this numerous times, or as an economic developer, I think you inherently have to be an optimist because if not, the problems seem insurmountable.

So we do come at it from an optimistic perspective.

And I'll tell you from a boots on the ground standpoint, it's made us work even more closely with groups like Michigan Works.

With the Chamber of Commerce, with the Tourist Council.

We have kind of an all hands on deck meeting here locally with that group of people recently, again, to try and help with the hospitality worker shortage.

And Dr. Eiseley is exactly right.

Just some rough numbers around the beginning of the year.

2,000 there.

We're about 82,000 Berrien County residents in the workforce.

82,000.

And just yesterday, the number that was released is a little more than 70,000.

So we've lost 15 percent of our workforce.

And--and he's exactly right.

We've lost 5,000 people from the workforce in the last 18 months.

The number that was released yesterday is the lowest Berrien County labor participation rate in history.

So it is extremely difficult to try and find those workers.

But we have to go out and we have to improve the training opportunities.

We have to find different ways to make people aware that there are jobs available.

So--so we're working on that as well.

But you just have to work closer with your workforce development office, with the chamber and understand what the business needs are and--and try to get people to work.

Jim, I'm interested in your perspective here as well, too, especially as you mentioned, some of these smaller communities, you--I often think of, you know, sometimes people think the bigger, more urban communities don't have this issue as well as smaller ones as people have left or so.

Talk about that balance in the smaller communities and how they what efforts they should undertake to kind of help--help drive more people there to fill those open jobs.

A lot of small communities will tell you that they really can't afford an economic development operation, and in response, I usually tell them that it's most likely the county has some sort of an operation or there's a nonprofit that covers the county and you can tune in to them as much as possible.

But more importantly, train your city administration, however large or small, training them in customer service principles and apply those principles.

When one of your existing taxpayers and employers comes to you and asks for assistance, you can take an awful lot of headaches out of everybody's process by being customer responsive here.

And that may mean assistance with permitting, land acquisition, building acquisition, all the things that Rob does with boots on the ground.

But if smaller communities can--can train this ethic into their administrations as large or small as they may be, they can be very viable.

And companies are still seeking rural locations for a variety of reasons, some of which have been birthed by the COVID crisis and people density issues.

So there's a lot that can be done.

But I think the most important thing is to orient yourself toward your employers and meet their needs and orient yourself toward your taxpayers.

Great, Paul, I want to come back your way in our last four minutes or so here and talk about the--the future, what the future looks like, what lessons we might have learned that will help us be prepared better long term.

How will work change?

Just give a--give us a look at going forward how things might be different.

I mean, as we start looking out into that one, two, three year range, what we're looking at now is--is we've set ourselves up for four prices going up a little faster than they would have before.

We're looking at higher interest rates than we would have before.

We're looking at wages going up faster than we're used to them going up as businesses.

And we're looking for a really, really great end to this year.

I mean, the numbers that the numbers are hard to calculate because they're so big.

And so we're really looking at a lot of power there as we come out of--out of the year.

What's going to happen is this is all going to lead to even more automation than we see today and even more automation going into the service sector than we've seen to date.

So we now have taught everybody to use one of these to do all their banking transactions.

Do we need as many tellers?

Now, when I order my fast food, I do it on this and I just pick it up on my way through.

Do we need as many workers at the fast food restaurant?

All of those places now are going to be looking for ways to shave off workers because those worker's wages are going to be going up faster.

So that's going to be especially true as we look along the Lake Shore here going forward for the next two years.

Great, Rob, I want to come your way.

About two and a half minutes here left.

So 8,000 communities or whatever across the United States are trying to do the same, having the same conversation a little bit, right?.

Talk about economic recovery and how do we catalyze it.

For somebody who's unfamiliar with southwest Michigan, give us the--the pitch.

Why is it that--that if I was locating my business, if I was a worker looking for an opportunity, why is it that Southwest Michigan should be on my radar?

So everything today is about people.

We've talked a lot about the labor force and participation rates in southwest Michigan.

What makes us unique is we're a community that has the amenities in place that allows us to recruit workers.

That's what it's about right now.

It's about immigration, trying to recruit people from other parts of the country.

Southwest Michigan is a beautiful, beautiful place to live.

We've invested millions of dollars in amenities and walking trails and--and the many amenities that people enjoy, not to mention the lake.

Beautiful Lake Michigan.

Right.

And so you have that piece, the piece of people need to to have a great family and--and have a great place to live.

And we have world-class employers here.

So they know that maybe they're moving for a job.

But if that job changes, they can stay here and have access to global companies who offer many different new opportunities for them.

So Southwest Michigan is a community where you can attract people, and that's what companies need to know.

They need to have certainty, as you know, economic developments about mitigating risk and being able to tell a company that we have solid infrastructure, solid leadership in a place where you can recruit people.

That's what you need.

Great.

Thank you.

And Jim, I'll give you the last word.

I got about 30 seconds here or so for any--any final words of advice as we're wrapping up today?

Well, I think that we discussed workforce enough today, but I've always held the belief that the area, the region of this country that figures out how to build a resilient workforce development system that meets business needs, it's going to take a lead on other communities that are seeking to retain and attract capital.

And I'm not sure the problems immediately fixable, but we have an awful lot of tools that we can throw at the problem.

Ubiquitous education over the Internet, skill development opportunities, better dissemination of job opportunities by companies and by labor agencies.

But this is a huge, huge problem and it behooves all of us, northern Indiana, southern Michigan, to look at ways in which we can make this area attractive for workers from other parts of the country.

And Rob's already articulated many of the living advantages.

I've been doing interviews in Berrien County, and this is a theme that I hear over and over.

This is a great place to live and work.

Great.

Thank you.

Thank you all for joining me today.

A great, great conversation.

Appreciate the good work you're doing to try to help jumpstart the economy.

That's it for our show today.

Thank you for watching on WNIT or listening to our podcast.

To watch this episode again or any of our past episodes, you can find Economic Outlook at WNIT or find our podcast on most major podcast platforms.

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I'm Jeff Rea.

I'll see you next week.

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