How economic growth has harmed some auto industry businesses

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An automotive windshield.

Despite slow economic growth, auto glass repair is a business that has slipped backward. (Photo Credit: Public Domain/NHTSA/Wikipedia)

If you believe economic expert Peter Schiff, the U.S. economy is going to collapse again on Aug. 1, an economic collapse “worse than 2008,” reports Money Morning. There are numerous signs of economic growth that would seem to contradict Schiff’s prophecy, but tell that to some businesses related to the auto industry who are seeing nothing but layoffs.

Unemployment looms large, despite growth

The Detroit Free Press reported Tuesday that 400 Michigan state workers who process unemployment paperwork will suffer layoffs. This suggests there is a dark underbelly to economic growth, but the Unemployment Insurance Agency isn’t the only employer dealing with layoffs as the U.S. economy begins to breathe again. The repo business, a less prestigious but ultimately necessary part of auto industry-related business, has seen its share of trouble, as have other less controversial businesses like auto glass repair. More people are paying off their loans and keeping their vehicles in shape.

“Three years ago, I had four crews with five guys each — I employed 20 people,” said Mike Wade, president and CEO of the commercial and private repo business Wade Enterprises in Brighton, Mich. “Now, it’s just me. I had to lay everybody off.”

The problems of the ‘sizable minority’

While U.S. business as a whole appears to be turning the corner on brighter days, the less glamorous businesses within the nation’s automotive industry suffer through “counter-cyclical” losses, notes John Sase of John Sase Economics Consulting & Research in Royal Oak, Mich. Auto glass repair businesses, which are part of the “sizable minority” within the industry, are hurting because more consumers replace their cars before warranties expire in good economic times. Broken windshields go right back to the dealership. Vehicle owners are more likely in down economic times that are rife with higher unemployment to hold on to vehicles and seek repairs.

Bad news for Michigan employees

The dark side of escaping the recession will become a reality for 177 temporary Michigan Unemployment Insurance Agency workers on Aug. 31. By Sept. 28, 225 more regular employees will reportedly be laid off, according to Mario Morrow, a spokesman for Michigan’s Department of Licensing and Regulatory Affairs.

“It’s a good news, bad news story,” Morrow said. “The reason these folks are losing their jobs is the economy is getting better.”

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Detroit Free Press

Money Morning

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