Recap of the Automotive Insights Conference sponsored by the Federal Reserve Bank of Chicago–Detroit Branch, Detroit Association of Business Economists, and WardsAuto

By Martin Lavelle

On January 12, 2017, the Federal Reserve Bank of Chicago’s Detroit Branch, the Detroit Association of Business Economists (DABE), and WardsAuto hosted the inaugural Automotive Insights Conference. The conference was an expansion of the DABE’s annual Bob Fish Memorial Automotive Luncheon. As did the luncheon, the conference provided an opportunity for auto industry analysts to share their insights and forecasts for the coming year. The expanded conference format allowed for additional presentations that covered powertrain production schedules and upcoming regulatory requirements for new vehicles.

Sales Outlook

Haig Stoddard (WardsAuto) said that new light vehicle sales reached 17.5 million units in 2016, eclipsing the previous record of 17.4 million units set in 2015. The surge in new light vehicle sales seen in the fourth quarter of 2016 was correlated with the aggressive incentives offered by auto companies. New auto sales have now increased for seven consecutive years—the longest such streak since before the Great Depression. Against this backdrop, Stoddard forecasted a slight step back in sales to 17.3 million units in 2017.

Consumers are in a better position to enter the market for new vehicles, contended Paul Traub (Federal Reserve Bank of Chicago–Detroit Branch). He showed that consumer sentiment has been improving, indicating the people are becoming more open to buying new vehicles. In addition to the aggressive incentives offered by auto dealers, loans with longer terms than normal (typically lowering the monthly payments), falling household debt, and fairly easy access to auto credit are facilitating new car purchases. Stoddard and Traub argued the pent-up demand for new vehicles stemming from the Great Recession has been satisfied.

Stoddard’s long-term sales outlook called for a further slide in light vehicle sales in 2018 followed by a rebound. While Stoddard’s outlook did not include a recession, he indicated that if a mild recession were to occur, new light vehicle sales would be 1.5 million to 2.0 million units lower four years from now. Stoddard said the long-run trend for new light vehicles sales would reach 17.0 million units by 2025. That sales level would then become the new standard for whether or not it was a good year for new light vehicle sales. New light vehicle sales will exceed long-run expectations if consumer demand for the latest vehicle technology accelerates. In contrast, new light vehicle sales will fall short of long-run expectations if consumers are enticed by deals for used vehicles, young people continue to delay household formation (on account of student debt and other reasons), and telecommuting becomes even more popular than it is today, among other factors.

Future Direction of Vehicle Production

Little to no growth in new light vehicle production is expected for the U.S. over the next few years, with gains made elsewhere, according to Stoddard and John Sousanis (WardsAuto). Stoddard predicted that North American production will rise over 500,000 units over the next seven years because of increased production of small cars and crossover utility vehicles in Mexico and lower production in Canada. Sousanis also said he projected the light vehicle production share of cars and trucks to stay the same globally over the coming years, but these shares are anticipated to vary more by region. Turning to his forecasts for auto parts manufacturing, he said that more than 50% of the growth in powertrain production over the next seven years will occur in China. Moreover, internal combustion engine displacement and the average number of cylinders in a vehicle should continue to move downward, but remain relatively higher among vehicles sold in the North American market. Slightly more diversification among transmission types is expected among future vehicles, stated Sousanis.

The diversity in transmission production will partially result from manufacturers employing different technologies to comply with the federal government’s corporate fuel economy (and emissions) requirements by model year 2025. (1) Brett Smith (Center for Automotive Research) outlined how the auto industry is trying to meet these standards. By utilizing different technologies, the auto industry is innovating faster than originally anticipated by regulators. For instance, battery cell producers have lowered their cost structures earlier than anticipated—with much less capital and smaller economies of scale than thought necessary. (2) Yet, the current pace of innovation is not sufficient, according to Smith, as the auto industry is still “nowhere near” on track to achieve the 2025 fuel economy goals.

To help manufacturers meet the fuel economy standards, Smith contended that regulators need to provide more incentives and infrastructure that support consumer demand for battery electric and hybrid vehicles. Additionally, the federal government should offer more “emissions credits” for introducing electric or hybrid technologies, off-cycle technologies, (3) and similar innovations in their vehicles than at present. In general, Smith said further discussions about the timetable for achieving the 2025 fuel economy targets should be held between industry representatives and federal regulators. In response to some of Smith’s points, Sousanis said perhaps the federal government might consider differentiating fuel economy standards by vehicle class (e.g., subcompact, mid-size and standard sport utility vehicle).

Concluding the conference was a conversation between Dave Andrea (Center for Automotive Research) and Joe Anderson (TAG Holdings). The conversation centered on the leadership style of Anderson, who serves as TAG Holdings’ chairman and CEO, and his 30-plus years of experience in the auto industry. Anderson said he always learned a lot about each business he purchased before setting expectations for his staff. Those expectations focused on the following aspects of the business: product quality, cost, technology, and delivery.

Focusing on the first item on his list, Anderson said he believes quality control systems should be installed before the production process begins. This way the quality control process won’t be perceived as just a corrective experience. According to Anderson, quality control processes, while costly in the short run, will have long-term positive impacts on throughput and financial performance. In closing, Anderson advised those in the audience to design and engineer their products to fit their consumers’ preferences.

Conclusion

Consumers are in a more favorable position to buy vehicles today than they were shortly after the Great Recession. This has boosted analysts’ short-term forecasts for automotive sales. However, the long-term sales outlook is less certain. While there’s proven demand for the latest vehicle technology, especially among young consumers, they may delay their new vehicle purchases because many of them have yet to form their own households. On the production side, growth is expected in Mexico and China. But not much production growth is expected for the U.S. Vehicle producers are striving to hit federally mandated fuel economy (and emissions) standards by model year 2025, but this goal currently seems unattainable. Despite producers’ ability to innovate more quickly than expected, they remain “nowhere near” on track to hit the 2025 fuel economy targets. More dialogue between auto producers and regulators is needed to ensure that the fuel economy standards are met in a timely and reasonable fashion. Finally, greater dialogue between management and workers, as well as between automakers and consumers, can help improve product quality and customer satisfaction.

Comparing the City of Brotherly Love with Motown: Reflections on How to Effectively Transform Urban Economies

By Martin Lavelle

When I think of Philadelphia, the following subjects come to my mind: Benjamin Franklin, Betsy Ross, the Liberty Bell, Independence Hall, the Declaration of Independence, and the Constitution. Also, being a sports fan, I think of what a great sports city it is: There’s quite a passionate fan base for its professional teams, as well as Big 5 college basketball at the Palestra. Admittedly, as someone who works in and studies Detroit, it doesn’t naturally occur to me to compare Detroit and Philadelphia like I would Detroit and Pennsylvania’s other major city, Pittsburgh, with its historical reliance on one manufacturing sector, steel. However, as I looked more deeply into Philadelphia’s history, I found myself drawing multiple parallels between the Motor City and the City of Brotherly Love.

On September 21–23, 2016, the Federal Reserve Bank of Philadelphia, other Federal Reserve Banks, and additional sponsors and supporters convened the Seventh Biennial Reinventing Our Communities Conference. The theme of this year’s conference was how to transform our economies. The conference’s sessions covered topics such as how to increase access to capital, how to supply a greater stock of affordable housing and address workforce needs, and how to make philanthropic foundations play a more effective role in communities’ economic transformations. This conference provided an opportunity for me to learn about initiatives in other communities and compare them with developments in Detroit. This will be the first of two blog entries in which I discuss the conference and some of my own analysis inspired by it. Here I will draw some historical and current comparisons between Detroit and Philadelphia. In my follow-up blog post, I will recap the conference and compare Detroit’s efforts to transform its economy with ongoing efforts occurring across the country.

Background

As part of my usual preparation for a conference (especially when a city tour is included), I did a statistical comparison of Detroit and Philadelphia. The table below shows the statistical similarities and differences I found most interesting between the two cities.

portland-chart-1

Note: MSA means metropolitan statistical area.
Source: QuickFacts Beta, U.S. Census Bureau.

The population figures stand out for many reasons. First, it’s easy to forget that back in 1950, when their populations peaked, Detroit and Philadelphia were similarly sized cities. Nowadays, just six and a half decades later, Philadelphia has almost two and a half times as many people as Detroit. Back in the middle of the twentieth century, the population of each city made up around 57% of its respective metropolitan area. But as of last year, Philadelphia’s population share of its metropolitan area (26%) was noticeably larger than Detroit’s population share (16%) of its metropolitan area. The fact that Philadelphia’s population increased over the past 15 years boosted the divergence in population trends. Over the period 2000–15, Philadelphia added almost 50,000 people, while Detroit lost 274,154 people. In terms of demographics, Philadelphia is much more diverse. Also, a higher percentage of Philadelphia’s population has attained a bachelor’s degree or higher—thanks in part to the University City neighborhood, anchored by the University of Pennsylvania and Drexel University, and the presence of many other institutions of higher learning within the city’s limits. Given the divergence in demographics, the difference in home values isn’t surprising, but it still jumps off the page.

Philadelphia’s Financial Challenges

Like Detroit, Philadelphia has encountered fiscal challenges. And like Detroit, Philadelphia’s financial problems simmered for many years before boiling over in the early 1990s. The City of Brotherly Love became the first U.S. city to impose an income tax when it did so in 1939. (1) Philadelphia’s income tax remained in a range of 1.0% to 1.5% until the 1960s, when it started to increase, eventually reaching 3.0% in 1970 and almost 5% in 1985. (2) The increase in the city’s income tax rate was one of the leading factors in city residents deciding to leave for suburban communities. Philadelphia’s fiscal crisis peaked in 1990–91 when a structural budget deficit of $154 million was revealed, with expectations of deeper budget deficits in future years. (3) The city received financial assistance in the form of the Pennsylvania Intergovernmental Cooperation Authority (PICA). PICA sold bonds on Philadelphia’s behalf. It also required the city to adopt a five-year financial plan that had to be approved in order to gain access to capital markets and state funding. (4) Led by Mayor Ed Rendell, the city followed its five-year plan while privatizing selected services, introducing more competitive bidding for city projects, and freezing wages for city employees, all of which helped lead to Philadelphia’s recovery in the late-1990s. (5) Philadelphia also began lowering its commuter tax in 1995, converging city and suburban residents’ respective tax burdens. (6) It has been estimated that increases in Philadelphia’s city wage tax cost the city 207,000 jobs from 1973 to 2003. (7) Two separate tax commissions created in the 2000s concluded Philadelphia’s tax system was outdated and needed to be reformed. (8) In 2014, the Greater Philadelphia Chamber of Commerce released a public/private collaborative plan with the aim of organizing growth-based activity in and around Philadelphia. The chamber’s plan called for improving the city’s competitiveness, producing a well-educated workforce, creating an environment for business growth, and enhancing Philadelphia’s infrastructure. Such efforts will have a familiar ring to Detroiters too.

West Mount Airy: A Gift to Philadelphia from Detroit

The conference began with a tour of Philadelphia’s West Mount Airy neighborhood, one of the nation’s first intentionally racially integrated neighborhoods. The effort to preserve racial diversity within West Mount Airy was led by West Mount Airy Neighbors (WMAN). WMAN was founded in 1959 to deal specifically with the issue of racial integration. (9) One of the founders of WMAN was George Schermer, who tried to organize a similar effort in Detroit before coming to Philadelphia.

After Detroit’s 1943 Belle Isle uprising, Mayor Edward Jeffries formed an Interracial Commission and appointed Schermer as its director. (10) In the early 1950s, Schermer lobbied for an integrated housing development in Detroit’s west side. The development was to be called Schoolcraft Gardens. The Schoolcraft Gardens development attracted private funding and the United Auto Workers (UAW) as a partner. (11) Unfortunately, multiple forces prevented the integrated development from taking shape. First, the neighboring, all-white Tel-Craft homeowners association opposed the Schoolcraft Gardens development. Also, later on, a different Detroit mayor, Mayor Alfred Cobo, vetoed the approval of the development project. Soon afterward, the Interracial Commission was dissolved and replaced by the Commission on Community Relations, whose members would be appointed and could be removed without cause by the mayor. (12) Not surprisingly, when the City of Philadelphia offered Schermer the opportunity to head its newly created Commission on Human Relations, Schermer left Detroit. (13)

Under Schermer’s leadership, WMAN fought housing and education policies that advocated for segregation. WMAN and the neighborhood itself consisted of high-achieving, well-educated, progressively minded people, who were the demographic they looked to attract to the neighborhood. One might argue this allowed integration to work, whereas Detroit saw comparatively less educated groups across different races compete for similar jobs and economic standing, putting the groups at odds with each other.

Impressively, the commitment to diversity in West Mount Airy remains strong. Since 1980, at least 40% of West Mount Airy’s residents have been African Americans. (14) According to Sarah Zelner, who presented background information about West Mount Airy during the conference tour, the neighborhood has a strong LGBTQ presence, in addition to being diverse in terms of race and education. Efforts to maintain the neighborhood’s diversity and affirm its commitment to open dialogue include the long-running Mt. Airy youth baseball league and, more recently, monthly conversations about racial issues. In the evening of the day of the tour, the neighborhood’s main thoroughfare shut down and turned into a street fair that showcased West Mount Airy’s diverse restaurant community.

All that said, the neighborhood isn’t without its challenges. Between 1950 and 2010, West Mount Airy lost around half of its population. This loss in population has impacted the dynamics of the neighborhood in many ways, especially in terms of its educational offerings. The high school located in West Mount Airy closed in 2013—a direct result of the population loss, as well as more-affluent students enrolling in private schools in other neighborhoods. In addition, while the overall racial diversity of West Mount Airy has been maintained, African Americans have been clustering closer to the East Mount Airy and East Germantown neighborhoods, which are both predominantly black. (15) While traveling through the area, I noticed a contrast between West Mount Airy with its homes constructed of stone native to the area and East Mount Airy with housing stock of relatively poorer quality. To combat population loss and preserve the neighborhood’s identity, West Mount Airy is trying to attract more immigrants, highlighting the neighborhood’s cultural history and mixed small business community as selling points.

Gifts in Return from Philadelphia? Possible Lessons for Detroit

The background material I read on Philadelphia’s West Mount Airy neighborhood discussed housing density (as measured, for example, by homes per city block) and its correlation with racial integration. The material cited multiple studies that suggested lower housing density is more amenable to achieving greater racial diversity. (16) This might be one lesson from Philadelphia’s experiences that Detroit might want to apply as it remakes itself. The Motor City is seeking to create dense and diverse population centers within its borders, as it once had decades ago. Part of this goal is being achieved by removing blight. But as neighborhoods are reorganized, city officials may want to keep in mind how racial integration was achieved in Philadelphia and not make the housing density of newly configured neighborhoods too high. Striking the right balance between population and housing density to achieve better racial integration and higher-level services for all citizens than at present will be a challenge, but Detroit can look to some of Philadelphia’s neighborhoods for some examples to follow.

Widening the focus back to the entire city, I think the topic of city residents’ tax burdens should be explored in greater depth. As mentioned previously during my review of background material on Philadelphia and as discussed somewhat during the conference, Philadelphia has reformed its tax system in order to have the tax burden of its citizens be more similar to that of residents in the surrounding suburbs. This is yet another lesson Detroit officials might learn from Philadelphia in order to draw more people to reside within its borders. Indeed, Detroit may want to look to reform its tax system as well. When studying the tax burdens of the largest city in each state and Washington, DC, (17) the total tax payments expected from Detroiters as a percentage of their income rank in the top five. (18) When breaking down tax payments by category, Detroiters’ income tax burden ranks near the top for families making $50,000 or more, and their property tax burden is the highest among the states’ largest cities and Washington, DC. (19) While Detroiters’ sales, use, and gasoline tax burdens rank relatively low, significantly high auto insurance premiums more than make up for it. Detroiters pay more than twice as much as the next city (New Orleans) and over three and a half times more than Philadelphia, which ranks tenth. (20) Current Detroit Mayor Mike Duggan has proposed legislation that would create an auto insurance product specific to Detroit, though this proposal has its critics. (21)

Following what initiatives are and aren’t working in other cities and informing city officials and stakeholders about the results of those different initiatives is important to Detroit’s rebound. This is one of the main reasons why I attended this year’s Reinventing Our Communities Conference. The Detroit Branch of the Federal Reserve Bank of Chicago serves the function as information gatherer for the mayor’s Post-Bankruptcy Working Group, as well as the city’s group that works on affordable housing efforts. Efforts to strengthen communities in Detroit and elsewhere through philanthropic, private, and public partnerships have become more widespread in recent years. The Federal Reserve—especially the Detroit Branch of the Federal Reserve Bank of Chicago—has played a major role in bringing different types of organizations together generate solutions that will benefit those communities for years to come.

Read my next blog entry to get more details on the conference panels that I participated in.

References
(1) See p. 3 of http://economyleague.org/uploads/files/783716581668902685-the-sterling-act-a-brief-history.pdf
(2) Ibid.
(3) See p. 5 of https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/1992/brso92rl.pdf?la=en.
(4) See p. 1 of http://www.picapa.org/docs/SRFYP/SRFYP_FY16FY20.pdf.
(5) See http://www.nytimes.com/1994/05/22/magazine/mayor-on-a-roll-ed-rendell.html.
(6) See p. 31 of http://www.philadelphiafed.org/research-and-data/publications/business-review/2003/q2/brq203ri.pdf.
(7) See p. 27 of http://www.philadelphiafed.org/research-and-data/publications/business-review/2003/q2/brq203ri.pdf.
(8) See p. 15 of http://www.centercityphila.org/docs/CCR14_employment.pdf.
(9) See p. 42 of Barbara Ferma, Theresa Singleton, and Don DeMarco, 1998, “Chapter 3: West Mount Airy,” Cityscape: A Journal of Policy Development and Research, Vol. 4, No. 2, pp. 29–59, https://www.huduser.gov/Periodicals/CITYSCPE/VOL4NUM2/ch3.pdf
(10) See p. 1 of https://libdigital.temple.edu/pdfa1/Oral%20Histories/AOHWMPJZ2015030001Q01.pdf.
(11) See p. 76 of Lloyd D. Buss, 2008, “Chapter 2: City Influences Religion’s Response,” The Church and The City: Detroit’s Open Housing Movement, University of Michigan, PhD dissertation, https://deepblue.lib.umich.edu/bitstream/handle/2027.42/61748/ldbuss_1.pdf?sequence=1&isAllowed=y.
(12) See Buss (2008, p. 77).
(13) See Ferma, Singleton, and DeMarco (1998, p. 42).
(14) The share of African Americans residing in West Mount Airy was 41% as of the 2010 U.S. Census.
(15) See http://philadelphiaencyclopedia.org/archive/mount-airy-west/.
(16) See Ferma, Singleton, and DeMarco (1998, p. 41).
(17) See pp. 12-21, 24 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(18) This ranking does not apply when examining families making less than $50,000 per year. A family is assumed to be made up of two income earners and one school-age child. See p. 13 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(19) See pp. 16, 31 of http://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/attachments/2014%2051City%20Study.final_.pdf.
(20) See https://www.nerdwallet.com/blog/studies/expensive-cities-car-insurance/.
(21) See http://www.detroitnews.com/story/opinion/2016/03/23/detroit-insurance-cut-rate-policy/82194396/.

How Tight is Michigan’s Labor Market?

By Martin Lavelle

Michigan’s labor market continues to recover from the Great Recession that ran from December 2007 through June 2009 and its own recession that started four years prior to that. Michigan’s unemployment rate peaked at 14.9% in June 2009, coinciding with the end of the Great Recession. Since that time, Michigan’s unemployment rate has dropped steadily, reaching 4.5% in August 2016. The last time Michigan’s unemployment rate was this low was in January 2001, just before the much shorter and milder 2001 recession. (1)

While Michigan’s current labor market expansion isn’t the longest in its history, (2) the fact that the state’s unemployment rate is now lower than that of the nation makes one wonder how much longer it can last. The superior performance of Michigan’s Southeast and Western Michigan Purchasing Managers indexes relative to the U.S. measures and recent indications that auto sales may have plateaued also imply that Michigan’s labor market expansion may be near a turning point. This blog examines some of Michigan’s labor market indicators to assess whether Michigan’s labor market is at or near “full employment.”

Chart: Unemployment Rates, Annual Averages: U.S., Michigan
Analysis
1011-chart-1
Source: Author’s calculations using data from the Bureau of Labor Statistics.

The chart above shows the annual averages of the U.S. and Michigan unemployment rates, respectively. Since 1976, Michigan’s unemployment rate has generally been higher than that of the U.S., especially during the Great Recession and the severe 1981–82 recession. The two instances in which Michigan’s unemployment rate fell below that of the U.S. came during the mid to late 1990s and in recent months. The fluctuation in Michigan’s unemployment rate helps to show the cyclical nature of the state’s economy, driven by the manufacturing sector, specifically the automotive industry. The lows in Michigan’s unemployment rate came during boom times for the automotive industry and the highs came during rough times. Light vehicle sales volumes hit all-time highs last year and are just below those levels year-to-date in 2016. The majority of auto analysts feel that light vehicle sales will continue to slightly fall off of their 2015 highs in the next couple of years. With the automotive industry having peaked, does that mean Michigan’s labor market has peaked as well?

Historically, another sign of a tightening labor market are increasing wages and salaries. The chart below plots the unemployment rate versus workers’ total wage and salary income in the state.

Chart: Annual Wage & Salary Growth vs. Annual Average Unemployment Rate: Michigan
1011-chart-2
Sources: Author’s calculations using data from the Bureau of Economic Analysis and Bureau of Labor Statistics.

Over the past 40 years, changes in wage and salary income have led changes in the unemployment rate. Michigan’s unemployment rate reached its previous low in 2000, a few years after the rate of growth in wage and salary income peaked. Wage and salary income growth in Michigan bottomed out in 2008, the year before Michigan’s unemployment rate peaked. As Michigan’s unemployment rate decreased after the Great Recession, wage and salary income consistently increased, accelerating in the last two years following some slowing in 2012–13. The pace of wage and salary growth edged higher in 2015 versus 2014, signaling further tightening in Michigan’s labor market. Despite the increase in wages and salaries, however, data from the Bureau of Economic Analysis show that per capita income in Michigan remains about 12% below the national average. Since 1980, per capita income in Michigan has typically been lower than in the U.S. as a whole.

When looking at wage pressures by sector, the story becomes more muddled. The chart below examines the year-over-year percentage change in wage pressures in select employment sectors in Michigan.

Chart: Average Hourly Earnings of Michigan Production Employees by Employment Sector, Year/Year Percentage Change, Not Seasonally Adjusted
1011-chart-3
Source: Author’s calculations using data from the Bureau of Labor Statistics.

Michigan’s manufacturing sector, especially the automotive sector, led the state into the recovery it currently enjoys. However, after increasing in 2010, wages started to fall during 2011 and into 2012 as the new labor contract with the United Auto Workers (UAW) that created a lower, 2nd tier of wage ranges took effect. (3) After rebounding in 2013–15, wages are lower thus far in 2016 than in 2015, possibly because of the 2015 UAW contract that created a lower starting point for entry-level full-time workers. (4) Plateauing production volumes as light vehicle sales level off may also be a reason for lower wages in 2016.

Some sectors do support the full employment argument with their accelerations in recent months. Since the latter half of 2015, wages have moved higher in the construction and professional and business sectors, respectively. Labor shortages in building construction and within the engineering and information technology fields of the professional and business services sector have helped to create conditions for higher, more competitive wages. Wage increases have persisted in the retail trade sector since 2013. Competitive pressures from McDonalds and Walmart, as well as legislatively mandated increases in Michigan’s minimum wage, have contributed to higher wages in the retail sector. (5)

When a labor market tightens, it also means workers are increasingly hard to find. One unique characteristic of the current labor market recovery is the elevated level of those working part-time for economic reasons or involuntary part-time workers. The chart below shows what percentage of the labor force is comprised of involuntary part-time workers.

Chart: Part-Time Employment as a Percentage of Labor Force, 4-quarter moving average: U.S., Michigan
1011-chart-4
Sources: Author’s calculations using data from the Bureau of Labor Statistics.

As labor markets expand, the percentage of the labor force that is working part-time falls. In Michigan and the U.S., the percentage of the labor force that is working part-time continues to be higher than during the previous labor market expansion. Interestingly, the difference between the part-time segments of the labor force in Michigan and the U.S. has shrunk after widening in the months leading up to and the year after the conclusion of the Great Recession. Another interesting point is that the gap between Michigan’s current percentage of the labor force that is working part-time and the percentage working part-time in the 2000s is narrower relative to the U.S. This could mean one of two things. One possibility is part-time workers in Michigan are finding increasing success in gaining full-time employment. An alternative possibility is part-time employment was elevated during the 2000s and Michigan’s one-state recession. Therefore, part-time employment as a percentage of the labor force would have been expected to fall since the mid-2000s.

In a tightening labor market, those who found themselves unemployed for a long period of time should find their way back into the workforce. The chart below looks at the percentage of the labor force that was unemployed longer than 15 weeks.

Chart: Unemployed Civilians for longer than 15 weeks as a Percentage of Labor Force, 4-quarter moving average: U.S., Michigan
1011-chart-5
Sources: Author’s calculations using data from the Bureau of Labor Statistics.

Mirroring the previous chart, Michigan had a greater percentage of its labor force unemployed for more than 15 weeks than the U.S., most likely a result of Michigan’s recession in the previous decade. After peaking in the 2nd quarter of 2010, the percentage of Michigan’s labor force unemployed for more than 15 weeks fell and now equals that of the U.S. Are more previously long-term unemployed workers finding work or are they dropping out of the labor force altogether? Looking at the next chart, which shows the labor force participation rates of the U.S. and Michigan, respectively, we see that Michigan has seen a higher net increase off its lows than the U.S.

Chart: Labor Force Participation Rates: U.S., Michigan
1011-chart-6
Source: Haver Analytics/Bureau of Labor Statistics.

Finally, what about discouraged workers? If a labor market is tightening, the number of discouraged workers should be decreasing. The chart below shows discouraged workers as a percentage of the labor force in the U.S. and Michigan, respectively.

Chart: Discouraged Workers as a Percentage of Labor Force, 4-quarter moving average: U.S., Michigan
1011-chart-7
Source: Author’s calculations using data from the Bureau of Labor Statistics.

Again, the same dynamics are in play from 2003 through the end of the Great Recession, with Michigan’s labor market relatively worse off because of its one-state recession. As shown in the previous chart, the gap between Michigan and the U.S. converged and is now all but eliminated. The current percentage of Michigan’s labor force that consists of discouraged workers equals that seen during the mid-2000s, whereas the U.S. hasn’t reached mid-2000s levels yet.

Conclusion
A strong argument can be made that Michigan’s labor market is at full employment. The unemployment rate is currently below that of the U.S. and nearing historical lows. Also, wage and salary growth is at its highest in almost 20 years, labor force participation is off its post-recession lows, and data focused on the marginally attached to the labor force in different ways indicate those numbers are near or at trend. Some anecdotal reports support the argument as well. Multiple firms have instituted significant wage and salary increases in order to keep their most talented employees, while others are giving prospective employees a second look after rejecting their original job inquiry. Finally, with the auto industry operating at peak production levels and historically high sales levels and the state still significantly dependent on the auto industry, Michigan’s robust labor demand growth may be coming to an end.

Footnotes
(1) We are addressing labor market tightness here, not growth rates, not restoration of past levels of labor force size. Out-sized outmigration of working age population in response to the state’s prolonged downturn in the last decade is being held in the background.
(2) Based on BLS data going back to 1976.
(3) See https://www.chicagofed.org/~/media/others/region/midwest-economy/dziczek-dabe-january-2012-pdf.pdf.
(4) See http://www.freep.com/story/money/cars/chrysler/2015/10/22/done-deal-uaw-confirms-ratification-fca-contract/74380230/.
(5) See http://www.mlive.com/lansing-news/index.ssf/2015/12/michigan_minimum_wage_to_incre.html.

Are Businesses Returning to Detroit?

by Martin Lavelle, business economist

Introduction

Detroit’s population fell by almost 50% from its peak of 1.85 million in 1950 (1) to around 950,000 in 2000. Since 2000 (2), Detroit’s population has declined at a faster rate. The U.S. Census Bureau reports that Detroit’s population stood at 680,250 as of 2014 (3). As Detroit’s population migrated elsewhere, so did many of its businesses. How many businesses have left the Motor City since around the turn of the twenty-first century? And are new businesses replacing them in the aftermath of the Great Recession (which ended in mid-2009)?

In this blog entry, I will address these questions by using the County Business Patterns (CBP) data series from the U.S. Census Bureau. The CBP data series provide the number of business establishments (4) by county and zip code. The business establishments reported in the data are sorted by employment size classes. In addition, CBP data sets provide employment and payroll data. CBP data are collected on an annual basis, but with a two-year lag. Here I will analyze business patterns by geography and industry among Detroit zip codes (and elsewhere) between 1998 and 2013.

Analysis

Figure 1 shows a map of Detroit by zip code. The zip codes shown below were used to analyze the change in the number of business establishments in Detroit over the period 1998–2013 (5).

2016 0208 figure 1

Figure 1. Map of Detroit zip codes
Source: Lowell Boileau, available at http://www.atdetroit.net/forum/messages/107211/106465.jpg.

Table 1. Percent change in number of Detroit business establishments, by zip code, 1998–2013
2016 0208 table 1

Source: Author’s calculations based on data from the U.S. Census Bureau, County Business Patterns.

For each Detroit zip code area listed in table 1, I include the prominent neighborhoods and/or landmarks found within it.

Overall, the number of Detroit business establishments decreased 22.3% over the period 1998–2013, according to my calculations using CBP data. As of 2013, the city of Detroit was home to 8,817 business establishments. Approximately one-eighth of these establishments can be found in Downtown Detroit—which saw a similar share of its businesses depart as the city as a whole did over the sample period. Zip code areas that fared relatively better than the city in terms of business retention between 1998 and 2013 contain the Midtown/New Center area along Woodward Avenue, Eastern Market, some areas along East Jefferson Avenue parallel to the Detroit River, and southwest Detroit (including Corktown). These centers of commercial activity are now leading Detroit’s turnaround. Zip code areas that saw a larger percentage of their businesses leave relative to what the city as a whole experienced contain some of Detroit’s struggling neighborhoods—which include East English Village adjacent to Harper Woods and the Grosse Pointes, as well as areas near and around the old Packard plant in Detroit’s eastern industrial corridor (6).

Anyone familiar with Detroit’s narrative will likely be able to give several reasons why its business activity has declined over the past few decades. Besides the outward migration of the residential population, the downsizing and suburbanization of the local manufacturing industry, the deterioration of the city’s talent base as a result of the struggles of the Detroit Public Schools (DPS), government corruption, and the worsening condition of the city’s infrastructure are just some of the contributors to Detroit’s downward trend in business activity.

Given the narrative about Detroit, it is natural to wonder how its recent business losses compare with those of its surrounding areas. Table 2 shows the change in the number of establishments by selected areas in 1998 versus 2013. The national numbers are also given to provide another basis of comparison.

Table 2. Number of business establishments, 1998 versus 2013, and percent change in the number of business establishments, 1998–2013, by selected areas

2016 0208 table 2

Note: MSA stands for metropolitan statistical area; for further details on the Detroit MSA, see http://www.census.gov/population/estimates/metro-city/0312msa.txt.
Source: Author’s calculations based on data from the U.S. Census Bureau, County Business Patterns.

Table 2 shows that despite the 2001 and 2007–09 recessions, the number of business establishments in the nation as a whole increased over the period 1998–2013. However, the number of business establishments declined throughout most of Michigan during this time. Wayne County (including Detroit) and the Detroit metropolitan statistical area (MSA)—encompassing Macomb, Oakland, and Wayne counties—experienced less severe business losses than the city of Detroit. Nearby Washtenaw County, whose county seat is Ann Arbor (7), still saw a slight drop in the number of business establishments over the sample period, but fared much better relative to the city of Detroit.

When examining industry business patterns in the city of Detroit, it is not surprising to find that in percentage terms, manufacturing experienced the greatest loss of businesses over the period 1998–2013. Table 3 shows the change in the number of business establishments by industry during the sample period.

Table 3. Number of business establishments, 1998 versus 2013, and percent change in the number of business establishments, 1998–2013, in the city of Detroit, by industry

2016 0208 table 3

Source: Author’s calculations based on data from the U.S. Census Bureau, County Business Patterns.

One may be somewhat surprised by which subsectors of manufacturing experienced the greatest losses of business establishments (not shown). When analyzing the business pattern data by NAICS (8) code, I found that transportation equipment manufacturing—which includes motor vehicle and parts manufacturing—experienced a sizable drop in the number of establishments (41.5%); but this decline wasn’t the largest one. The manufacturing subsector that experienced the largest decline in establishments in percentage terms was printing and related support activities (–75.3%), followed by machinery manufacturing (–69.9%) (9). When just looking at the raw numbers of business losses among the manufacturing subsectors, I found that fabricated metal product manufacturing experienced the greatest losses: this subsector lost 86 establishments from 1998 through 2013 (almost a 50% contraction). Of the 26 zip codes I analyzed, 17 of them saw greater-than-50-percent declines in the number of manufacturing establishments.

Conclusion

During the 1998–2013 period, the city of Detroit lost business establishments every year. Detroit lost a higher percentage of establishments than its surrounding areas, the state of Michigan, and the United States. The most significant sectorial losses of businesses were from the goods-based side of the economy—most notably, from manufacturing. While the most severe manufacturing losses weren’t from direct transportation equipment manufacturing, they were in complementary industries, such as fabricated metal manufacturing, machinery manufacturing, and printing activities. Geographically speaking, establishments close to Detroit’s border with the Grosse Pointes and those around the former Packard automobile assembly plant shut down in greater proportions than those in other parts of the city.

Because the most recent data available are 2013 data, I am unable to provide any definitive insight into any possible changes in the trend of establishments leaving Detroit since the city exited bankruptcy in late 2014. By many anecdotal accounts, numerous new establishments have settled in the Downtown, Midtown, Corktown, and other select neighborhoods where the most significant public and private investment has occurred of late. As we receive more and newer data, it will be interesting to see whether new business establishments are sprouting up elsewhere in Detroit. Will business (and public) investment in Detroit remain concentrated in its high-activity areas or begin to noticeably branch out to the city’s relatively less active neighborhoods?

(1) See http://www.nytimes.com/interactive/2013/08/17/us/detroit-decline.html
(2) See http://censusviewer.com/city/MI/Detroit
(3) See http://www.freep.com/story/news/local/michigan/2015/05/21/census-estimates-michigan/27661485/
(4) See https://ask.census.gov/faq.php?id=5000&faqId=487 for what is considered a business establishment versus a business firm. In this blog entry, businesses refer to business establishments.
(5)Please note, however, that the 48203 zip code area also includes the city of Highland Park and the 48212 zip code area also includes the city of Hamtramck. The 48239 zip code area lies predominantly outside the city of Detroit, so it wasn’t included in the analysis.
(6) See http://archive.freep.com/interactive/article/20121202/NEWS01/120823062/The-Packard-Plant-Then-now-interactive-comparison-photos.
(7) See http://www.annarborusa.org/live-here/facts-rankings
(8) NAICS stands for North American Industry Classification System. For more details, see http://www.census.gov/eos/www/naics/ and http://www.bls.gov/bls/naics.htm.
(9) I only considered manufacturing subsectors with more than 50 establishments in 1998.

The impact of the changing structure of employment on wages in Michigan

By Paul Traub

As of June 2014, total nonfarm employment for the U.S. is reported to be greater than its January 2008 peak by 430,000 jobs. In contrast, according to the most recent data from the U.S. Department of Labor’s Bureau of Labor Statistics, Michigan nonfarm employment as of June 2014 is still down by 550,800 jobs or 11.7% from its previous peak of April 2000 (Chart 1). In addition, since the start of the last recession, Michigan nonfarm employment is still down 105,300 jobs or 2.5%.

Chart 1

It is important to note that since bottoming in 2010, Michigan’s job growth has outperformed the nation’s on a percentage basis, growing by 8.1% versus 7.0% for the nation. However, Michigan’s job growth since 2010 has been concentrated in nontraditional industry sectors, leading to a significant change in Michigan’s employment structure. In addition to this change in employment structure by industry, Michigan’s average weekly wage, once higher than the nation’s, has fallen below the national average (Chart 2). At $844 per week, Michigan’s average real wage in 2013 is about equal to what it was in 1999, with much of the lack of wage growth being attributed to the change in employment structure by industry sector and associated wages. This blog explores the change in Michigan’s employment structure and its impact on Michigan’s average weekly wage over the past 15 years.

Chart 2

Although job growth in Michigan has outperformed that of the nation as a whole since 2010, according to the data in Chart 2 wages in Michigan haven’t kept pace. In fact, Michigan’s positive wage gap disappeared in 2006 and has continued to turn more negative since then. Michigan’s strong job growth since 2010 started from a much lower base than any of the other states. Total U.S. nonfarm employment reached an all-time peak of 134.4 million jobs in January 2008 then fell by 6.3% to 129.7 million jobs by February 2010. However, Michigan’s employment difficulties started almost eight years earlier, just prior to the 2001 recession. Michigan’s nonfarm employment peaked in April 2000 at 4.7 million jobs, before starting to trend downward and finally leveling off in 2010. During the almost ten years of employment decline, Michigan nonfarm employment fell by 18.4 % or 861.6 thousand jobs, the biggest loss of any state in the nation. In addition, as of June 2014, Michigan’s nonfarm employment remains 11.7% below its previous peak, which gives Michigan the distinction of having the largest employment gap, defined here as current employment below a previous peak, of any state in the country. In fact, the next largest employment gap is only about half that of Michigan at 5.9% for both Nevada and Ohio.

Chart 3 shows the current percentage change in Michigan’s total nonfarm employment by major industry sector since 2000, when Michigan’s employment started its gradual decline. The two sectors that have performed the best for Michigan since the start of the recovery are leisure and hospitality and education and health services. It should be noted here that education and health services employment did not fall noticeably during the 2008 recession and, therefore, it is the only sector in Michigan that has actually sustained a positive trend of job creation since the 1990s.

Chart 3

The sectors that lost the most employment on a percentage basis were manufacturing followed closely by construction. Michigan still has one of the nation’s highest employment concentrations in manufacturing jobs but of the top manufacturing states by employment in 2000, Michigan ranks third in job loss behind only California and Ohio. While the U.S. has seen employment numbers exceed their previous peak for every sector except two (information and government), Michigan hasn’t experienced the same fortunate results.

What happened to manufacturing jobs in Michigan has been well documented. Throughout the decade of the 1990s, manufacturing employment in Michigan averaged about 20.2% of total nonfarm employment. A large percentage of those jobs were tied to the automotive industry. By 2009, manufacturing employment as a share of total nonfarm employment in Michigan had fallen to just 12.0% from 19.2% in calendar year 2000. This equates to a loss of over 433,000 manufacturing jobs in less than a decade, the equivalent of almost 23,000 jobs per year. By 2013, Michigan had recoved some of the manufacturing jobs that were lost during the recession, but manufacturing’s share of total nonfarn employment of 13.7% remained well below its share in calendar year 2000 (Chart 4). These events surrounding the loss of many automotive manufacturing jobs also explain some of the job losses in other sectors. Construction, for example, is closely tied to investment, and in Michigan much of that investment is related to the automoble industry—not only business investment on plant and equipment but also residential investment on housing and durable goods for automotive workers, some of whom lost their jobs or left the state during the recession.

Chart 4

During this time frame, Michigan’s total share of U.S. nonfarm employment fell from 3.5% in 2000 to 3.0% in 2013 (Chart 5). The decline was felt in every sector except information. Even though the infromation sector was able to gain share relative to the U.S.—going from 2.0% in 2000 to 2.1% in 2013—it actually lost share in Michigan, falling from 1.6% in 2000 to 1.4% in 2013.

Chart 5

Although there were some industry sectors that added share as a percentage of Michigan employment between 2000 and 2013, including education and health services (10.7% to 15.4%), leisure and hospitality (8.5% to 9.8%), professional and business services (13.7% to 14.7%), other services (3.7% to 4.1%), and financial activities (4.5% to 4.8%), some of these share gains can be traced back to lower overall employment. Only two of these sectors, education and health services and leisure and hospitality, have added enough employment to surpass their 2000 employment levels.

At the same time that Michigan employment was declining, so were average weekly wages. Chart 6 below shows Michigan’s average weekly wages divided by the average weekly wage for the U.S. by sector in calendar years 2000 and 2013, or the wage permium Michigan workers were earning.(1)

Chart 6

Based on the latest data from the U.S. Department of Labor’s Quarterly Census of Employment and Wages (QCEW), in calendar year 2000 Michigan’s manufacturing workers earned an average premium of 16% relative to manufacturing workers elsewhere in the country, and Michigan’s construction workers earned a premium of 15%. While workers in the manufacturing and construction industries still earn more than the national averages, their wage premiums have been reduced significantly. In addition, the ratios between wages in Michigan and the U.S. have fallen in every sector except government. As noted earlier, the manufacturing and construction sectors also had the highest percentage decline in employment since calendar year 2000 and continue to remain well below their calendar year 2000 employment levels. While Michigan workers earned a 5% premium in 2000, that premium had been entirely reversed by 2013, when Michigan workers earned about 5.0% less than the national average.

Since 2000, the structure of Michigan’s employment and average wages has changed considerably. Although Michigan has made some employment gains recently, total nonfarm employment still remains below its previous peak. But how much different might Michigan’s total employment look if we could go back to the way things were in 2000? To answer this question, I constructed a scenario in which Michigan maintained the same percentage of national employment by sector as it had in 2000. Chart 7 below shows the results of this scenario in percent change by sector from average year 2000 to June, 2004. This shows that Michigan’s total employment would be 3.2% higher than it is today and 0.2% higher than its previous peak, with the largest percentage gains coming in the mining and logging, education and health services, and leisure and hospitality sectors. However, Michigan would still have suffered significant employment declines in the manufacturing, information, and construction sectors.

Chart 7

To look at what impact Michigan’s changing employment structure has had on wages, I constructed two different scenarios. In the first wage scenario, I held Michigan’s current wage by sector constant but changed the employment shares by sector to what they were in 2000 to match what I did in the employment scenario above. In the second scenario, I held the employment shares by sector equal to what they were in 2013 but I changed the average weekly wage ratios to what they were in 2000. For each of these two wage scenarios, I then calculated Michigan’s weighted average weekly wage for all the sectors. Chart 8 shows the results of these two scenarios compared with the 2013 average weekly wage in Michigan. The first wage scenario implies that if Michigan had the same employment structure by sector that it had in 2000, the total average weekly wage would have increased by 3.0% to $933 a week. Even with this increase, Michigan’s average weekly wage would still be below the national average of $958 per week by 2.6%. In the second wage scenario, the average weekly wage in Michigan increases by 9.3% to $990 per week. This scenario places Michigan’s average weekly wages above the national average but by only 3.3% versus the 5.0% premium that existed in 2000.

Chart 8

In summary, while Michigan’s employment has made significant improvement during this economic recovery, there is still a lot of work that needs to be done. Without question, one of the most positive events pertaining to Michigan employment and wages has been the steady and long-lasting growth in the education and health services sector. The education and health sector has not only helped to offset some of the jobs lost in manufacturing and construction, but also the sector’s higher than national average weekly wage has been an added bonus to the state. Other sectors that could provide added help to Michigan’s employment structure and wage picture going forward include the manufacturing and construction sectors. Given that these two sectors still command a small wage premium, any improvement in either of these sectors would surely help total average wages for the state. However, going back to the way it was in 2000 doesn’t seem to be the remedy.

Even if Michigan could go back in time by 14 years, its employment and wage situation wouldn’t be that much different than it is today. Although total nonfarm employment would be higher today if Michigan had the same percentages of U.S. employment by sector as it did in 2000, it would only be higher by 3.2%. That would equate to an average job growth of just 0.2% per year over a 14-year span. We also saw that total average weekly wages for Michigan would seem to look considerably better if Michigan still enjoyed the same wage premiums it had in 2000, but the changes in the structure of employment by sector that have taken place would diminish some of the total wage premium. What isn’t apparent at first glance is how much more important the structural change in employment was to total wages in Michigan. Table 1 shows an estimate of total weekly wages in Michigan by multiplying total nonfarm employment by the average weekly wage for 2013 for each of the two wage scenarios discussed above. What this shows is that if Michigan maintained the same percentage of national employment by sector in June, 2014 as it had in 2000, together with the average weekly wage this assumption implies, Michigan’s total weekly wages would be greater than if the state held the same wage premiums today as it did in 2000. So even if Michigan had the same wage premiums as in 2000 and the higher weekly wage this scenario implies, total weekly wages for the state would not be as great as if the employment structure were the same today as it was in 2000.

Table 1

That’s not to say that the erosion of Michigan’s wage position relative to the national average hasn’t has a significant impact on total average weekly wages in the state, but it does seem that the wage premium change wasn’t as significant as the shift in the employment structure between sectors when taking total weekly wages for Michigan into consideration.

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(1) Calculations are based on U.S. Department of Labor’s and include only covered employment.

The Importance of Manufacturing to the Seventh District and Michigan

By Paul Traub

There has been a lot written about manufacturing returning to the United States from abroad, and there are data to suggest that this is happening. Rising wages abroad, falling energy prices in the U.S., and declining willingness of domestic manufacturers to suffer the delays and poorer quality of overseas supply chains are conspiring to shift some production back to the U.S., a trend called onshoring. At a Federal Reserve Bank of Chicago conference last April, Justin Rose of the Boston Consulting Group (BCG) attested that the U.S. still makes over 70% of the manufactured goods it consumes, while its prospects remain bright as global trends are conspiring to encourage onshoring. However, while U.S. manufacturing output remains hefty and onshoring is undoubtedly taking place, there is some debate as to whether manufacturing jobs are returning to the U.S. in a meaningful way. A recent Forbes article, “Reports Of America’s Manufacturing Renaissance Are Just a Cruel Political Hoax,” makes the case that even though “some reshoring has taken place,” there hasn’t been enough to offset the continued offshoring of manufacturing jobs. This debate is of great importance to the Seventh District and Michigan.

As Chart 1 shows, the United States lost about 33.2% of its manufacturing jobs between 2000 and 2010 compared with a 1.5% decline in total nonfarm payroll jobs. Given the extent of manufacturing job decline during the recession, it wasn’t surprising to see growth in manufacturing jobs exceed total nonfarm payroll growth through 2012 even though that pace of growth slowed somewhat in 2013. In addition, while nonfarm employment is now close to its prerecession peak, manufacturing employment is still down by more than 30% from its 2000 level and 11.0% below its 2007 level.

Chart1

Comparing U.S. employment with that of the Seventh District and Michigan (Chart 2), we see a slightly different picture. While total nonfarm employment for the District has improved, it is still 4.9% below its 2000 level and Michigan is still down 12.8%. Manufacturing employment is well below 2000 levels in both the District and Michigan, –28.9% and –38.2%, respectively. However, there has been some progress in the District since the recession, especially in manufacturing jobs. While the District has seen total nonfarm jobs grow by 4.2% since 2010, manufacturing jobs have improved by more than twice that rate, increasing by 8.7%. Michigan has seen total nonfarm employment grow by 5.5% for the same period, with manufacturing jobs increasing an astonishing 17.0%.

Chart2

Obviously, this is important to the Seventh District and Michigan economies, given the relative heft of the manufacturing sector in the region. Charts 3 and 4 use nominal data to create manufacturing’s share of total output for the United States, the Seventh District, and Michigan. The charts show that while manufacturing has been declining steadily since 1997, the District and Michigan remain more dependent on manufacturing than the nation as a whole. The charts also illustrate that manufacturing has made somewhat of a rebound since the end of the recession. In fact, the manufacturing shares of both the U.S. and the district are very close to where they were just prior to the recession.

Chart3

Chart4

Much of the District’s growth in manufacturing output is related to growth in light vehicle sales, which reached their lowest levels in almost three decades during the 2008 recession. Still, the growth is quite impressive. Chart 5, which uses data from the Bureau of Economic Analysis (BEA), shows how the District accounts for almost half of the nation’s motor vehicle and parts manufacturing and this share has remained fairly constant over the last 15 years. Michigan accounts for more than half of the District’s and about 25% of the nation’s motor vehicle and parts output.

Chart5

Chart 6 shows that U.S. light vehicle production fell about 6.0 million units from the peak in 2000 to just 5.6 million units in 2009. Between 2009 and 2013, light vehicle production rebounded by 5.2 million units or 94%. This would do a lot to explain the District’s manufacturing growth over the past four years.

Chart6

Motor vehicle and parts employment has been declining for a number of years, due to outsourcing and increased use of automation in vehicle assembly plants. As Chart 7 shows, a simple calculation of dividing the total U.S. motor vehicle and parts employment by the number of light vehicles produced in the U.S. reveals that in 2013, there were only about 74% of the number of employees it took to produce the same number of vehicles in 2006. Since the economy started to recover in 2009, the motor vehicle and parts sector has seen an increase of about 140,000 employees, while increasing total vehicle production by 5.2 million units.

Chart7

Based on projections from Ward’s Automotive, light vehicle production is expected to increase another 800,000 units by 2015. If these projections are achieved, this will certainly help the District’s overall economic output, but its impact on total employment will be more modest than that seen from 2009 to 2013. Still, we can expect the overall economic impact from the growth in production to be positive for the Seventh District and Michigan.