Michigan economy faces headwinds after 10 years of sustained growth

Over time, the share of manufacturing in the economy began to decline. (Manufacturing accounted for 21% of Michigan’s non-farm labor force in 1990; last year it was 14.3%, data shows.) Detroit’s three automakers began to lose market shares in favor of foreign brands. The increased automation of factories means that fewer workers are needed to build cars or other goods, resulting in lower demand for these skills.

“We kind of encountered the perfect storm,” Ballard said. “We had a lower level of education than the national average and we were heavily involved in a sector in relative decline. We had a great run, but we kind of got caught off guard when the economy started to move away from manufacturing and a lot more to higher tech, more skilled industries.

Grimes, of UM, said Michigan must increase its share of college graduate workers if it is to increase income in the state.

And, he said, the auto industry could be among the leaders in that load. Automakers are looking to build more electric cars and self-driving vehicles, who they hope will attract more tech talent to Michigan.

The success of the Big Three over the next 15 years will be shaped “by their ability to attract highly educated people to work in autonomous vehicles in Michigan,” said Grimes. “If this all ends up in California or some other tech hub – if Apple and Google somehow win this battle for dominance in the autonomous vehicle space – it won’t be good for Michigan.

“They have a very good chance of succeeding,” Grimes said of the Detroit automakers.

A major effort: the purchase by Dearborn-based Ford Motor Co. of the ramshackle Michigan Central Station depot in Detroit, with plans to renovate the building as part of a $ 740 million project to create a hub for electric and autonomous vehicle technology in the revitalized Corktown district.

Rural Michigan is slow to recover

While all of Michigan’s 83 counties have unemployment rates significantly lower than 10 years ago, a majority – 49 counties – still have unemployment rates above the state average of 3.9%. in May, according to the data.

Of the 10 counties with the highest unemployment rates, six are in the Upper Peninsula, while three others are in the rural northeast of the Lower Peninsula. Algiers County in the UP had the highest unemployment rate in May, at 7.8%.

Rural Michigan has struggled to attract the kind of job growth that has been concentrated in urban areas since 2009, economists say, a trend hardly unique to Michigan. Rural counties tend to have fewer residents, and those that remain are older, in poorer health, and more likely to be retired. And they lack widespread access to high-speed internet, making it more difficult to attract businesses to locate there.

Helping rural areas compete in today’s economy is “a key political issue,” said Dye, of Comerica, “and I think it’s an issue that will affect just about every state. from the country.

In addition to the rural-urban divide, the gap between high incomes and low incomes has also been pronounced. Economists said people earning at the top of the income bracket experienced better income growth in this recovery, although wage growth begins to hit low-income workers, who were hit hardest by the recession.

For example, the share of Michigan households with incomes below $ 45,000 has declined since the recession, while the percentage of households earning between $ 45,000 and $ 100,000 has increased, according to data from the University of the Michigan.

“A tight job market really helps, especially at the lower end of the scale,” said Gabriel Ehrlich, director of the University of Michigan’s Quantitative Economics Research Seminar.

“It’s important not to… give up on the idea that economic expansion can help everyone,” Ehrlich said. “It could take a lot longer than we would like. It may be slow. But my point is that if you have an economic expansion that lasts long enough … ultimately it helps the people at the bottom. “

Warning signs are emerging

Economists do not predict another recession in the next few years, saying there is still room for growth, albeit slower. However, cracks are starting to appear which they consider worrying.

Foremost among them is the threat of federal tariffs.

The uncertainty these threats have created cannot be accurately measured in a statistical model, said UM’s Ehrlich, who said his team’s forecasts show current trade tensions are unlikely to tip over. the national economy in recession.

That said, Michigan is particularly exposed to business risk due to its reliance on the global auto industry, he said.

Americans are also buying fewer new cars, which contributes to forecasts of slower economic growth in Michigan over the next several years.

Large purchases like cars can be postponed when the economy goes south, making Michigan more susceptible to downturn cycles, Grimes said.

The transformation of the auto industry is also worth watching, Dye said. He said he thinks Competing announcements of plant closures and new plant investments “Will continue here for a while. “

By the time it takes hold, there will likely be a net reduction in manufacturing jobs, he said, although new technologies for electric and autonomous vehicles are creating new types of jobs.

“They’re just going to be different jobs,” Dye said. “You have to be agile to take advantage of it. “