Economist agrees Michigan economy is strong, but inflation fears persist

FLINT, Michigan (WJRT) – Governor Gretchen Whitmer announced Friday that Michigan’s credit rating outlook has changed from negative to stable.

Whitmer called this a sign of growing confidence in the state’s communities and small businesses. A University of Michigan-Flint economist shares this confidence, but with a caveat about inflation.

“The economy reopens, the economy improves,” said Chris Douglas, professor of economics at M-Flint University. “A Decent Jobs report today shows 850,000 new jobs created in the United States. Probably new jobs have also been created in Michigan.”

He said the improved economic outlook for the state means increased tax revenue, making it easier for the state to repay what it has borrowed. This naturally translates into the improved credit rating announced on Friday.

“We haven’t seen cuts like we did years ago with the Great Recession,” Douglas said. “If you remember in 2009 we saw big cuts in K-12 education, cuts in public services, time off. I believe state patrols were cut back at the time to save money. And you didn’t see that with the last recession or this recession just because the federal dollars were so generous.

He is not at all surprised at the health of the state’s economy and how quickly it is rebounding.

“People have been locked up for 16 months since the coronavirus hit, and I think with the vaccines being widely deployed, people are eager to get their lives back on track, to start traveling and eating out again,” Douglas said. .

But he shares a particular concern with inflation.

“These dollars have kept state and local governments afloat, keeping individuals afloat with improved unemployment benefits. But it was all borrowed, and a lot of that money was funded by printing money, ”Douglas said. “So the concern is – will it cause inflation in the long run, so that we go back to the 1970s in the next few years?” “

He pointed out that the Federal Reserve has indicated that inflation is expected to remain relatively low in the coming years.

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