There’s a phenomenon that happens sometimes after a major stock market crash which is known by the ghastly name, “Dead Cat Bounce.” We saw a lot of that back in the fall of 2008.
The Dow Jones averages would plunge 500 one day. The next day, they’d recover, say, 50 points, before falling even further later in the week. What was that brief rally all about? Well, it wasn’t about any real improvement in the market.
During a prolonged downturn, the averages sometimes rise briefly for a number of reasons; profit-takers who move in because they think a particular stock has fallen too far, for example.
They hold it a day or two, then sell it again. These brief deceptive rallies are called “dead cat bounces,” on the theory that even a dead cat will bounce if you drop it from high enough.
But that bounce doesn’t mean the cat came back to life. Now maybe I’m weird, but the dead cat bounce idea popped into my head yesterday when Michigan got some rare good news from the manufacturing sector. Suddenly, the decades-long shift of manufacturing jobs to the South seems to have come to a halt.
Not only that, manufacturing jobs are on the increase again in Metropolitan Detroit. According to a new report by the Brookings Institution, the Detroit area had the second highest percentage gain for these jobs of any region. Only Charleston, South Carolina did better. By any measure, that’s good news.
But just how good? Before you break out the really expensive champagne, consider this. During the first decade of the twenty-first century, more than half of all the manufacturing jobs in the state disappeared. Four hundred and twenty three thousand were wiped out, and took an equal number of other jobs with them.
During the last two years, an estimated 23,000 manufacturing jobs were created in Metro Detroit. Good news? Sure. But that only amounts to about five percent of the jobs that were lost. At that rate, it would take Michigan some 40 years just to get back to where it was a dozen years ago. And you also have to remember that some of these new jobs, especially in the auto industry, don’t pay anything like what they once did.
So, is this just an economic ‘dead cat bounce’? Well, not quite. Interestingly, the Brookings study found that the Southern strategy of offering huge tax subsidies to lure companies doesn’t seem to be as effective as it was. Employers also used to be able to get away with paying far lower wages in the south. Now, lower wages are common here, too. Which isn’t especially good for workers, but may bring more industry and jobs to this state.
But a modest increase in relatively low-paying manufacturing jobs is not the magic bullet that will spark a new era of prosperity. Any job is better than no job. But nobody is going to buy a house and a new car on a second-tier assembly line salary of $30,000 a year. Michigan needs a better educated workforce, and people and infrastructure that can attract the new technology jobs of the twenty-first century.
Otherwise, eventually, our dead cat of an economy won’t even twitch.
Jack Lessenberry is Michigan Radio’s Political Analyst. Views expressed in the essays by Jack Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.