Michigan's recession is over at last, economists say

Posted on June 9, 2011

New government figures released Tuesday confirm what many have long suspected: Michigan’s deep recession is over.

After two years of shrinking, the state’s economy grew 2.9% last year, faster than the national average of 2.6%, according to the U.S. Bureau of Economic Analysis. That’s a dramatic turnaround from declines of 4.3% in 2008 and 5% in 2009.

Last year, Michigan was the 15th fastest growing state in the country, a huge leap from its 48th spot in 2009. Michigan’s economy also expanded more rapidly than any other Great Lakes state except Indiana, which grew by 4.6%.

The increase in economic activity is being driven by the rebound in manufacturing of durable goods such as automobiles. This kind of bounce back normally occurs after a severe economic downturn, said University of Michigan economist Donald Grimes.

“We’re back to the future,” he said. “It’s a very good beginning to the recovery.”

Signs of state recovery spotted, but slow progress expected

You don’t have to tell Bernard Moray that Michigan’s economy is coming back.

Sales at his four Gorman’s furniture stores in metro Detroit are up 12% so far this year. And this spring, the company returned to the Grand Rapids market, opening its first store there since 1995.

The veteran furniture salesman said that many Michiganders know they can’t sell their homes, so they are reinvesting in them by fixing them up and buying new furniture.

“Surprisingly, our business has been good,” Moray said. “We weathered the storm.”

Moray is one of many business owners who are getting a lift from an improving Michigan economy. Though it’s too early to break out the champagne, the state’s economy returned to growth last year, with economic output expanding by nearly 3%, according to new figures released Tuesday by the U.S. Bureau of Economic Analysis (BEA).

Whether the state can sustain this pace is uncertain. Recent national slowdowns in auto sales, manufacturing and hiring have raised fears of a double-dip recession. But many economists caution that the hiccups are caused by temporary problems, such as the earthquake and tsunami in Japan and high gas prices. They expect the economic recovery to regain momentum.

Donald Grimes, a University of Michigan economist, predicts Michigan’s economic growth this year could range from 1.9% to 3%. “It’s going to be a slow recovery,” he said.

In 2010, Michigan’s real gross domestic product (GDP) — the value of goods and services produced in the state, adjusted for inflation — totaled $345 billion, up from $335 billion in 2009.

But the state’s economy still has a ways to go to make up for losses this past decade, when 857,000 jobs were eliminated. Michigan’s economy is 7% smaller than it was in 2000, with the number of employed people down 17%, according to Charles Ballard, an economics professor at Michigan State University.

And it’s no secret that the state’s unemployment rate is still stuck in the double digits. And the housing crisis shows few signs of abating soon.

“Technically we’re in recovery because the economy is growing,” Ballard said. “But for a lot of people, as long as you are below where you were, you are still in a recession.”

Much of the growth in Michigan’s economy last year can be traced to the recovery under way at the Detroit automakers and their suppliers, which have been hiring thousands of workers and ramping up production. Durable goods manufacturing — including auto production — accounted for 1.5% of the 2.9% increase in the state’s real GDP.

Other key growth industries for the state were wholesale and retail trade and the manufacturing of nondurable items such as food. Industries that shrank the most last year were real estate and government.

Michigan is not an anomaly. Durable goods manufacturing also led the nation’s economic recovery last year, according to the BEA. On the flip side, the construction industry continues to be a drag on the U.S. economy, declining for the sixth consecutive year.

Like Michigan’s, the U.S. economy returned to growth last year. It expanded by 2.6%, after shrinking by 0.3% in 2008 and by 2.5% in 2009.

Last year, North Dakota had the fastest growing state economy, with a 7.1% increase in real GDP. Wyoming brought up the rear, with its economy contracting by 0.3% after leading the nation with a hefty 9.8% gain in 2009. The only other state with a shrinking economy was Nevada, which saw its real GDP fall by 0.2%.