Editor's note: This post was greatly improved with the help of Mary Hennessey and Lyke Thompson.
Yesterday’s Forum on Contemporary Issues in Society (FOCIS) conference at Wayne State University brought together some of the leaders in Michigan who are searching for answers regarding Michigan’s economy. The conference, aptly titled “The Michigan Economy: Will it Get Better, Can it Get Worse?”, brought forth a notion of cautious optimism. Most of the answers bordered on- ‘Yes, it can and probably will get worse in the short term, but in the long term, it can get better’ and ‘it can get worse, but it doesn’t have to’. Of course, as many like Dr. Alice Rivlin, an economist at with the Brookings Institution and visiting professor at the Georgetown Public Policy Institute, noted, it depends largely on what we do. Rivlin noted that letting the financial sector “go wild” again could lead to worse problems if the derivatives markets are not regulated. Furthermore, if we do not stabilize national debt, we will have continuing long run problems. Rivlin, noted that the recent economic downtown did not turn into a Great Depression scenario because of many reforms that date back to the post-Great Depression era like (a) deposit insurance, (b) social security, (c) unemployment insurance, (d) size of the federal government, (e) government acting “bigtime” and “fast”, and (f) federal aid to states. While our current situation is a result of “overspending” and “overborrowing,” she notes that despite recession beginning with a financial crisis, making it longer and deeper, this is better than a recession from stagnation in ideas or from inflation. While this was a “perfect storm,” she finds hope in the increase in productivity we have seen. However productivity growth may not be completely positive; see this Washington Post article showing that past productivity gains are acting as a brake on job growth. More...
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It is not often that we get to post positive economic news concerning Michigan. The Federal Reserve Bank of Philadelphia has provided just that with its Coincident Index. This index takes into account nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index. The Federal Reserve notes that the "trend for each state's index is set to the trend of its GDP, so long-term growth in the state's index matches long-term growth in its GDP." Over the past three months, Michigan was the only state to grow by more than 1%. See the link below for more details.
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Here are the preliminary findings from a nationwide study we are conducting looking at the effects that business incubators have on economic growth. Of particular interest is the role that business incubators may play in helping businesses aqcuire non-incubated services.
UAA 2010 3_5.pdf (1.18 mb)
One can see from the table below, also found in the pdf above, the percentage of business services received from outside the incubator that were received by incubated firms. This is interesting given that non-incubated firms, on average, were around 9 years longer than incubated firms suggesting that they had additional time to receive non-incubated services. Other interesting highlights can be found in the pdf above.
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On top of losing a good portion of Michigan’s economic base, Michigan now stands to lose millions of dollars because of a decade of stagnant population growth. This loss will arise because many federally funded programs allocate a proportion of their dollars to the state based on Michigan’s population as determined by the Census. While some individuals treat the Census as unimportant or avoid being counted, many like Peter Munoz of Madison’s Centro Hispano and Christine Neumann Ortiz of the Milwaukee-based Voces de la Frontera suggest that this attitude is not a good idea. In fact, the impact on Michigan could not only be damaging for those people who choose not to be counted, but could create further economic complications for the rest of the state.
Michigan is already likely to lose one house seat in the U.S. Congress because while our population is expected to remain flat, other states have grown rapidly. This loss translates into less clout, one less electoral vote in at least three of the next Presidential elections, and potentially less dollars coming to the state because that representative is not there to advocate for them. Furthermore, there are direct economic consequences in terms of federal program dollars that will be lost if one chooses not to fill out a census form. The Governmental Accounting Office lists the top 10 funded programs, which rely at least in part on the decennial Census when determining where and how much money to disburse. For a list of these programs, see Table 1. More...
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The Wayne State University Center for Urban Studies uses Google Earth to make its research on Michigan neighborhoods and changing neighborhood conditions available to policy-makers and citizens. This mapping-system was developed by Dr. David Martin of WSU's Center for Urban Studies. The system uses the Center's research databases in conjunction with Google Earth. Just open the .KMZ files with Google Earth and start exploring!
http://maps.culma.wayne.edu/takingstock - This link features several of Dr. Martin's Google Earth Applications including vacancy data provided by the United States Postal Service.
Change in Address Vacancy 2005-2009.kmz (431.00 bytes) -
Michigan Residential Address Vacancy Data 0909.kmz (430.00 bytes)
You may need to open these after you have opened Google Earth.
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The attached report is a comprehensive analysis of the causes, consequences, and potential solutions regarding Macomb County Foreclosures. Completed in March 2009, it addresses the current academic literature surrounding the problem and describes how some government and agencies are addressing the problem. There are also several maps toward the end of the document which visually depict the distribution of foreclosures in Macomb County.
Foreclosure Report 3-16.pdf (2.22 mb)
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Our last post made reference to the Bureau of Labor Statistics report on “off shoring.” This has certainly been a hot topic as we see jobs go overseas because of globalization. However the Bureau of Labor Statistics report also shows certain types of jobs are more susceptible to being offshored. In this entry, we first analyze the relationship between these jobs and average salaries. Then, relying on data from Michigan’s Labor Market Information site, we look at how concentrated Michigan is in each of these occupations and where we are headed. This will give us a sense of how well positioned we are as more jobs continue to go overseas. More...
With the automotive industry shedding jobs at an increasingly alarming rate, we are all too familiar with the term “offshoring”. Many of the manual labor jobs on the assembly line that were the staple of the Detroit economy have been sent overseas. Certainly, these are not the only jobs that are being sent overseas. The Bureau of Labor Statistics has even started to rate which occupations are most likely to get sent overseas. It is for this reason that we found CNN Money’s new online project “Assignment Detroit” which highlighted a case of “Onshoring” so interesting. Instead of sending jobs overseas, Rukmal Fernando (native of Sri Lanka) has brought a tech-company to Detroit from Sri Lanka. (See article here)
The interesting aspect of Fernando’s story is that, as an immigrant to the region, he is among the one group of people that are slowing the declining population in Southeast Michigan and he is trying to foster the entrepreneurial spirit by working to institute a business incubator in his office building. With more than 100 articles on business incubators (See business assistance), we have found that incubators can reduce the incidence of business failure and may lead to economic growth. Attracting residents like Fernando to the region, who will help shape the entrepreneurial atmosphere, should be among the strategies that Southeast Michigan vigorously pursues.
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Experts assert that one of the positive effects of an economic downturn is the entrepreneurial spirit that is fostered. The New York Times on August 25, 2009 ran an article describing how these “…accidental entrepreneurs, unintended entrepreneurs, or forced entrepreneurs” have been moved to go into business for themselves. In fact, the article cites Shawn Achor who suggests that our creativity surges as we try to adapt to adversarial situations. If this is the case, Detroit should be in a constant state of creativity. We do, however, know that many municipalities and organizations have implemented programs that try to facilitate this entrepreneurial spirit. More...
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Regional Economic Modeling Inc. (REMI) has sent us a link to the “Cash for Clunkers” WebEx Seminar we recently cited. Simply go to the Miscellaneous 2009 tab, and you will see the “Cash for Clunkers” post along with their other analyses and simulations.
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We are the Center for Urban Studies Economic Development Unit. We have several authors who contribute directly and indirectly to this blog.
Lyke Thompson, Ph.D.
Director of the Center for Urban Studies and Professor in Wayne State University's Political Science Department, has specialized his research on the urban political and economic environment. A primary focus has been centered on municipal economic development, urban policy, and the determinants of economic growth.
Eric Stokan, MA.
Research assistant at the Center for Urban Studies Economic Development Unit. Mr. Stokan serves as the lead researcher of the Unit, analyzing economic data using various statistical techniques. Mr. Stokan is interested in questions concerning municipal economic growth and industry mix as well as determinants of local economic incentive adoption.
Research technician at the Center for Urban Studies Economic Development Unit. Ms. Hennessey researches the effectiveness of local economic development incentives. Specifically, she has conducted a thorough investigation of brownfields and is currently working on public transit.