Wednesday, January 15, 2020

Experts split on state of Michigan economy

Posted By on Wed, Jan 15, 2020 at 4:29 PM

click to enlarge Stephen M. Ross School of Business on the University of Michigan campus in Ann Arbor, Mich. - WICHAI CHEVA PHOTOGRAPHY / SHUTTERSTOCK.COM
  • Wichai Cheva Photography / Shutterstock.com
  • Stephen M. Ross School of Business on the University of Michigan campus in Ann Arbor, Mich.

When it comes to the financial well-being of Michigan residents in 2019, economists seemingly agree on only one thing; namely, the state was hardest hit by the previous decade’s recession.

Beyond that, economists are divided on how well the state progressed over the past 10 years and where it’s headed into 2020 and beyond.

For example, the nonprofit Mighty Michigan declared the state’s 2.3% average annual growth over the past 10 years places it above all its Midwest neighbors and near the highest producing states in the nation.



“Minnesota and Ohio are the only other nearby states to make it past 2%, with Indiana and Wisconsin close behind,” the group’s news release states. “Michigan’s GDP is expanding nearly 65% faster than its neighbor to the southwest, Illinois.”

The group credits the good news to what it labels “pro-growth initiatives” such as passing right-to-work and repealing prevailing wage laws. Both, Mighty Michigan said, enhanced workforce participation and increased wages, linking passage of right-to-work in late 2012, for example, with the subsequent addition of 430,000 jobs.

The Michigan legislature repealed the prevailing wage law in 2018. The law had required public construction projects to pay union scale wages throughout the state.

“Certainly, right-to-work was a catalyst for positive results in Michigan,” Michigan Freedom Fund Executive Director Tony Daunt told The Center Square.

“Allowing employees the ability to make their own decisions whether to spend a portion of their paycheck on union dues or on other priorities has proven beneficial to the state’s growing economy,” Daunt said.

“The state should also give credit to [former] Gov. [Rick] Snyder and Republican legislators for reducing impediments and taxes,” he said.

Referring to current Gov. Gretchen Whitmer, a Democrat, Daunt said: “This governor with the check of the Republican-majority legislature will continue down this path.”

Mackinac Center for Public Policy Director of Fiscal Policy James Hohman is more skeptical of the Mighty Michigan claims the state’s gross domestic product is outpacing its neighbors.

“Michigan’s been in the bottom 10 on this measure for the past four quarters, and subpar since 2017,” Hohman told The Center Square. “But Mighty Michigan mentions that the numbers they’re looking at are for the longer recovery.”

“Policy is important and can influence economic performance and I think the policies [Mighty Michigan] listed increase the state’s prosperity,” Hohman continued. “Exactly how much they are responsible for the state’s performance is a different question. There needs to be more evidence to justify the view.”

University of Michigan economists noted last November that the state’s 2019 growth was the slowest since the Great Recession, dropping from 2.5% in 2018 to 0.4% in 2019 due to a massive United Auto Workers strike against General Motors, tariff wars between the U.S. and several major trading partners, and struggles within the manufacturing sector.

UM economists estimate growth to rise by 1.3% in 2020 and 0.9% in 2021.

Michigan State University economists Layne Cameron, Steve Miller and Trey Malone are more optimistic than their UM counterparts. The MSU economists estimate 2020 growth at 2.3%, which they say would be the lowest growth in five years.

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