Rick Haglund: Michigan’s economy is strengthening as the state tackles population decline

June 4, 2023 4:52 am

Gov. Gretchen Whitmer delivers a keynote address at the Mackinac Policy Conference on June 1, 2023. (Andrew Roth/Michigan Advance)

After struggling for more than three years with a deadly COVID pandemic that broke supply chains and made workers fearful of returning to work, Michigan’s economy has shifted to a higher gear.

“Michigan’s economy is moving,” Gov. Gretchen Whitmer said in a statement about the state’s near-record-low 3.8% April unemployment rate. That matched the state’s jobless rate in February 2020, the month before COVID struck in Michigan.

Whitmer said the strong job numbers mean “working people are finding good-paying jobs, companies are investing and expanding in Michigan, and families have more money to buy food, get gas, and save for their children’s futures.”

Meanwhile, Detroit Mayor Mike Duggan boasted at the Mackinac Policy Conference that his city, which has been plagued for decades with double-digit unemployment, posted a 4.2% jobless rate in April. Duggan said that’s Detroit’s lowest unemployment rate in the 33 years that the Bureau of Labor Statistics has been tracking municipal unemployment. 

Detroit Mayor Mike Duggan on Nov. 8, 2022. (Andrew Roth/Michigan Advance)

“We have not seen this level of opportunity in our city since the late 1940s or early 1950s where anyone who wanted to work could find a job,” Duggan said.

And a promising new forecast by the University of Michigan says if the average pace of job growth over the past six months continues, Michigan will regain all of the 1,056,000 payroll jobs it lost in the pandemic by September. That’s about nine months earlier than the full jobs recovery U of M economists predicted in February.

Here’s the surprising part: Should the U.S. fall into recession later this year or next, U of M economists say Michigan’s auto industry could cushion the blow. Anyone who has lived here through a couple of business cycles knows that Michigan’s auto-dominant economy typically gets clobbered in a recession.

But U of M economists say this time the auto industry could buoy the state’s economy in a downturn. That’s because automakers are still trying to meet the pent-up demand for new cars and trucks they couldn’t produce during the pandemic. The average age of a vehicle on the road is a record 12.5 years.

U.S. auto sales are expected to rise from 13.8 million cars and trucks last year to 15.4 million this year, 15.7 million in 2024 and 16.4 million in 2025, according to U of M.

Michigan’s economic strength was reflected in last month’s state revenue estimating conference, even though officials lowered revenue estimates by $883 million this year and $1.8 billion in 2024 from January’s forecast.

That doesn’t mean the state is taking in less tax revenue from a souring economy. Rather, the downgrade is a result of various tax cuts and economic development spending already baked into budget assumptions.

Among them are a big boost in the earned income tax credit, elimination of the “retirement tax,” a one-year personal income tax rate cut and a $600 million redirection of corporate income tax revenue into the state’s economic development fund.

Despite those actions, Michigan should have plenty of money left to fund roads, education, community development and other efforts to make the state a more vibrant place for residents and newcomers.

“The large downward revision in general fund revenue should pose little challenge to the legislative appropriators in wrapping up their work on the fiscal year 2024 budget,” said Bob Schneider, senior research associate at the Citizens Research Council of Michigan.

All this good news doesn’t mean Michigan is a sort of Shangri-La. While low unemployment is generally considered a good thing, Michigan’s falling jobless rate also is a warning sign that the state is running out of workers.

As I explained in my last column, Michigan’s stagnant population is growing older and sicker with a shrinking population of children and young working-age adults.

Policymakers have largely ignored this ticking time bomb for decades. But the Whitmer administration, prodded by business and public policy groups, appears to be getting serious about tackling Michigan’s population and talent crisis.

The Whitmer administration, prodded by business and public policy groups, appears to be getting serious about tackling Michigan’s population and talent crisis.

At the Mackinac Policy Conference, Whitmer announced she’s appointing a bipartisan commission that will make recommendations to grow Michigan’s population. She also named Hillary Doe as the state’s first chief growth officer, charged with addressing Michigan’s talent, placemaking and prosperity issues.

Those moves could prove crucial in attracting talent from places like Chicago, Denver and Nashville that are magnets for knowledge workers.

And while Michiganders have experienced steadily rising incomes over the past several decades, our incomes are lagging far beyond the nation’s. 

Michigan’s per capita income of $30,344 in 2000 was slightly above the national average. But by 2025, state per capita income of $56,494 is expected to be more than $10,000 below the national average of $66,555, according to Business Leaders for Michigan.

U of M economists say there are factors beyond state government’s control that could derail Michigan’s economic growth. Inflation is likely to erase real, after-tax income gains over the next two years. 

Affordability of new cars and trucks is a growing worry and could trim auto sales below forecasted levels. The average price of a new vehicle is more than $48,000.

And a potential strike this fall by the United Auto Workers union as it negotiates a new four-year contract with Detroit’s automakers could at least temporarily spike unemployment throughout the state’s economy.

But overall, U of M economists think the state’s economy will remain resilient over the next several years. And perhaps more importantly, the state is finally coming to grips with population and prosperity issues that threaten its economic future.


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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.