Michigan will soon have a major economic summit to discuss both business conditions and prospects for future growth. Encouragingly, Michigan has been experiencing its best economic performance since 2000, both on an absolute basis and when measured in comparison to the national average.
As of the fourth quarter of 2012, prosperity, simply defined as job growth plus personal income growth, has meaningfully rebounded from levels three years ago, and has now matched or exceeded the same measure for the US for eleven consecutive quarters. Michigan has not exceeded the US growth average for job and income growth for this long since early 2000. In the period since then, we have seen one normal recession (2001), and one “Great Recession” (2008/2009).
Concurrent with Michigan’s improved economic performance, has been a much discussed manufacturing rebirth in many parts of the country, notably in the Midwest. To be fair, Michigan has not resolved the cyclical ups-and-downs of its pro-cyclical economy yet, but the state’s potential for longer-lasting secular growth will likely be enhanced due to the following:
- The tax climate has made steady improvements as supported by Michigan’s significant improvement in the Tax Foundation’s State Business Climate ranking, which most recently ranked Michigan 12th among the 50 states.
- The improved prospects for lower energy costs and greater efficiency of energy consumption, which naturally benefits Michigan.
- A more competitive motor vehicle industry, which includes improved profitability and usage of cash to enhance shareholder value, when compared with the previous15 to 20 years.
- The prospects that both inflation and interest rates should remain lower for a longer time period, benefiting Michigan’s capital sensitive industries.
- The improved geographic balance in Michigan between not only the east and west Michigan economies, but also the tourism related areas of northern Michigan.
- The corporate profit performance for Michigan’s non-auto business sector has also been witnessing stronger earnings, cash flow, and stock price performance in early 2013. For example, year-to-date through early February 2013, the average Michigan publicly traded, headquartered company is up over 7 percent, outpacing the Standard & Poor’s 500.
To be sure, there is more Michigan can and must do to improve its long-term ability to compete and enhance prosperity. Encouragingly, the economic performance of Michigan over the last three years, and our prospects for continued growth in 2013, has a stronger foundation than anytime in the last 15 years.
David Sowerby, Crain’s Detroit Business.