Michigan Economic Update

I would like to open with a short introduction of myself and the newly created Michigan Economy blog. My name is Paul Traub and I am a Business Economist for the Federal Reserve Bank of Chicago.

In this spot, I will offer some insights into the ongoing performance of Michigan’s economy as well as some analysis of important public policy issues, manufacturing, construction, services, employment and of course the auto industry. I must be honest that I have never won a notable award in economics and I’ve yet to appear on a late night talk show. But, I have lived in Michigan my whole life and worked in the Detroit area my entire working career. My hope is to be able to use my knowledge of Michigan and my working experience together with my understanding of economics to provide an analysis of Michigan’s economy that is rooted in an understanding that only a true Michigander could possess. I hope to engage the reader in a way that we all learn more about this great state and its many opportunities.

I would not venture to engage in this endeavor without the support of a great amount of talent to back me up. The Chicago Fed has a number of very talented economists and researchers that I can and will call on for help. Some of them – such as William Testa, Thomas Klier, David Oppendahl, William Strauss and Martin Lavelle all offer a volume of expertise that would be difficult to match anywhere in the country. And of course, I would be remiss not to mention Scott Brave whose work on the Midwest Economic Index will help to make much of the analysis I will be sharing possible.

In addition, I will be posting some results from many of our local conferences, presentation materials from some of my public appearances, an occasional cross posting of articles from the Chicago Fed’s Midwest Economy blog as well as links to other data resources. As a regular feature, I will offer a monthly summary of Michigan’s economy. It will contain information about different sectors of the economy as well as data on things like employment, income, housing and the consumer. So if you are from Michigan or just interested in the economy of the Midwest, I’m confident you will find something here that will help you to understand Michigan’s complicated economy just a little better.

A summary of Michigan’s Economy

Michigan’s economic growth improved slightly in November, according to the Federal Reserve Bank of Chicago’s MEI Index for Michigan. The index remained below zero, indicating that growth is still below Michigan’s long-term average, but it increased to -0.04 in November from –0.09 in October. Manufacturing’s contribution to the index turned positive again following two months of decline. The most favorable change was the positive contribution from the construction sector, marking the first positive contribution to the index from construction since September 2005.

Michigan’s per capita income rose by 0.6% in the third quarter of 2012 on a year-over-year basis, although this increase was slightly smaller than in the second quarter. Based on data through the third quarter of 2012, Michigan’s GSP is estimated to be growing at a 0.8% pace relative to 2011. Most of this growth is due to positive contributions from manufacturing. Such positive developments should stimulate Michigan’s economic growth through the end of the year.

Other key indicators include:

•     Michigan’s unemployment rate declined to 8.9% in November from 9.1% in October;
•     Michigan’s housing market is showing some minor improvement, which may be an indication that the housing sector is on the mend; and
•     U.S. light vehicle sales remained strong in December, helping to drive Michigan’s light vehicle production for 2012 to its highest level in in five years.

For a more detailed look into the numbers behind Michigan’s current economic performance, follow the link to the Chicago Fed’s Michigan MEI – 201301.