News Story

Analysis: Two-Handed Michigan Recovery is Real

Harry Truman remarked that he was “in search of a one-armed economist, so that the guy could never make a statement and then say: ‘on the other hand.’” Michigan’s economic recovery is real, but it’s going to take a while to regain what the state lost, if it ever does.

For the first time in over a decade, Michigan is showing solid signs of economic growth. Michigan received two bits of good economic news this week — that state personal income was growing above average and that its unemployment rate continues its decline. This is good, but the state still has a long time before the state becomes a national leader, if at all.

Per capita personal income is an indicator for how well off the state is — growing economies provide greater income for its residents that they can use to devote to greater meeting their needs. Michigan’s 2011 per capita personal income increased fifth most in the country. The state’s rank among the states improved 3 places, from 39th to 36th.

The improvement is a welcome change, but Michigan remains 12.3 percent below the national average.

Michigan’s unemployment rate has been falling from its peak in 2009. The drop has been caused by the dual trends of increased employment (something new) and the long-term trend of a falling labor force. Fewer people looking for work translates into a smaller unemployment rate, even if the economy is stagnant.

However, Michigan saw slight increases in its labor force in January and February, the first increase in the state labor force since 2006. The gains were small, but that they existed at all may mean that the state’s four-year trend is at an end.

Michigan’s total labor force, however, is down by over a half million people since its 2001 peak. That’s the equivalent of losing the entire city of Detroit.

Michigan’s prospects are looking up for the first time in over a decade. On the other hand, the state has a long way to go before it returns to its former prominence.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.