Economists wary despite Michigan economy recovering

Michigan’s overall economic performance was up at the end of 2020, according to the latest economic activity index released Wednesday by Comerica Bank.

The index, released monthly by the Dallas-based bank, hit 108.6 in December, 25 percentage points higher than the all-time low the index fell to in June. Nevertheless, economists say that all is not well in the economy.

Nine different variables are included in the bank’s economic index: non-farm payroll employment, continuing unemployment insurance claims, housing starts, house price index, industrial electricity sales, automotive assemblies, total trade, hotel occupancy and sales tax revenue. All data is seasonally adjusted.

For the month of December, six of these sub-indexes – non-farm unemployment insurance claims (reversed), housing starts, housing prices, industrial demand for electricity, production of light vehicles and sales tax receipts of the State – were positive.

The bank’s economists, Robert Dye and Daniel Sanabria, write, however, that three factors lead them to “temper” any meaningful optimism:

  • “First, we use a three-month moving average to smooth out the volatility that typically accompanies regional economic data. This may therefore underweight any drag from a tougher year-end social mitigation policy.”
  • “With respect to social policy, we are seeing a bifurcation between manufacturing-related economics, which is generally strengthening, and services-related economics, which may not be strengthening, at the regional, U.S. and international. So a positive headline reading for any state this winter doesn’t necessarily mean conditions are improving for all industries in that state.”
  • “Finally, timing issues around the year-end fiscal stimulus package may have artificially boosted some data related to unemployment insurance claims.”

The economists also wrote that a continued shortage of computer chips around the world is likely to create challenges for the state’s auto sector.