As I discussed in my January column, the U.S. economy was strong in 2019, with solid economic and job growth, and low inflation. Unfortunately, indicators suggest that Michigan’s economy was not as strong.
Data on economic growth for Michigan in 2019 will not be known for several months, though data that is available indicate that Michigan’s economy underperformed the national economy. While the national economy grew by 3.1 percent in the first quarter of 2019, Michigan’s economy only grew by 2.6 percent, which was a lower growth rate than surrounding states including Wisconsin, Illinois, Indiana, Ohio and Pennsylvania.
The UAW-GM strike was the economic event that dominated Michigan’s economic news in 2019. However, this had only a minimal impact on Michigan’s economy in the short-run. The strike caused 24,000 job losses in October, though all of these jobs returned in November. The larger, less reported concern is that job creation was anemic in Michigan even without the strike. Michigan only saw about 1,500 new jobs created per month in 2019 even after accounting for the strike. This is less than half of the rate that jobs were created in 2018, where 4,000 new jobs were created in Michigan per month. However, even 2018 job creation was down from previous years. Michigan saw an average of 6,000 new jobs created per month during the 2012-2016 time period. Thus, it appears that Michigan’s economy has slowed.
The reasons for this slowdown are unclear, though it is likely that the auto sector is playing a key role. Car manufacturing is eight percent of Michigan’s economy, despite being less than one percent of the U.S. economy. Thus, Michigan remains dependent on the auto industry. Auto sales were strong nationwide in 2019, with 17 million vehicles sold; however, GM was not as strong. The company sold about 50,000 fewer vehicles in 2018 than in 2017, which itself was down from 2016 and 2015 levels. GM has steadily lost market share even after emerging from bankruptcy. GM was selling 20 percent of all vehicles in the U.S. when they went bankrupt in 2009. Now, they sell less than 17 percent. In contrast, during the late 1990s, GM sold one out of every three vehicles in the U.S. With 17 million cars sold in the U.S. each year, a one-point loss of market share translates into 170,000 fewer vehicles sold. Losing three points of market share since 2009 means that GM loses 450,000 sales each year. Since Michigan remains dependent on the auto industry, this decline significantly impacts the state’s economy.
The impact has been significant over the last 20 years. Michigan has approximately 300,000 fewer jobs today than in the year 2000. This makes Michigan unique in the upper-Midwest as surrounding states are all enjoying record-high employment. Michigan has never regained the jobs lost during the 2001 recession, the 2005-07 “one-state recession,” or the Great Recession. If the slowdown continues, Michigan will never regain all the jobs that have been lost.
