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Is Michigan ready for the next recession? Not even close

Is Michigan ready for the next recession? Not even close
Tuesday, Nov 19, 2019


From Crain’s Detroit – In the last couple of years, many economists have suggested that the U.S. economy could enter a recession in 2020 or 2021. Trade wars, ballooning corporate and personal debt, a flat manufacturing sector and many other factors have fueled the concern.

Fortunately, the U.S. economy is not yet in a recession, but that doesn’t mean that we have repealed the business cycle. A recession will come; we just don’t know exactly when it will hit. Right now, however, even as the national economy has slowed down, Michigan’s economy isn’t even doing nearly as well as the national average.

As we came out of the Great Recession of 2007-09, Michigan’s economy rebounded strongly. For several years, we added about 75,000 jobs per year. But that slowed to about 43,000 jobs per year in 2017 and 2018. This year, Michigan has had no job growth at all.

While the U.S. was adding more than 1.2 million jobs between January and September, employment in Michigan didn’t budge at all. The Bureau of Labor Statistics estimates that employment in Michigan was very slightly smaller in September than in January. (Ohio and Indiana have lost more jobs this year than Michigan has lost, but that provides small comfort.)

Employment is not the only sluggish indicator for the Michigan economy. Inflation-adjusted gross domestic product in our state declined in the fourth quarter of 2018. We have had a little bit of growth since then. Nevertheless, Michigan’s inflation-adjusted GDP in the second quarter of 2019 was only one-half of one percent larger than a year earlier.

These trends in employment and GDP paint a picture of a Michigan economy that is on the edge of recession. If the U.S. economy were to slow down further, as many economists predict, Michigan would almost certainly find itself in recession.

If we translate his words to fit the current situation in Michigan, they would be something like, “The time to fix the damn roads was from 2012 to 2016, when the Michigan economy was growing at a brisk pace. It will be much harder to repair crumbling infrastructure and make other critical investments when the economy is growing slowly, or shrinking.”

Read more from Michigan State economics professor Charles Ballard

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