News Story

Despite Popular Thinking, Michigan Economy Is Not Determined By Automotive Industry

Lansing Mayor Virg Bernero says his staff is marketing the city as an “automotive center.”

MLive Political Columnist Rick Haglund wrote: “… Michigan still is a state that largely rises and falls on vagaries of the century-old auto industry, regardless of actions by Lansing policymakers.”

Yet economic analysts say that thinking is outdated and, in some ways, inaccurate.

Auto and auto parts manufacturing jobs account for 3 percent of the total jobs in Michigan and Michigan's jobs recovery has been built outside the automobile industry.

"The auto industry gets more attention than it deserves in Michigan," said University of Michigan Economist Don Grimes, in an email. "Our long-run future as a state will not be determined by what happens to employment in the motor vehicle manufacturing industry."

General Motors Co. provides Lansing with 3,688 jobs, according to city of Lansing documents. The Greater Lansing Metropolitan area had 220,759 jobs.

Michigan's motor vehicle manufacturing and parts manufacturing jobs dropped 57 percent in the last 12 years, going from a combined 325,400 jobs in November 2000 to 139,800 as of November 2012. Michigan has just over 4 million jobs, meaning that auto jobs accounted for about 3 percent of all the jobs in the state.

“We are still seen as an automotive state,” said James Hohman, a fiscal policy analyst with the Mackinac Center for Public Policy. “It’s largely because the politics has little to do with the economics.”

Grimes said motor vehicle and parts manufacturing increased by 22,500 from November 2009 to November 2012 while total employment increased in Michigan by 142,700.

“So the vast majority of job gains were not in motor vehicle manufacturing,” Grimes said.

About half the job growth in the past three years was due to the auto industry or spin offs from the auto industry, Grimes said.

“The other half stems from improvement in the overall business climate unrelated to what has happened to the auto industry,” Grimes said.

Grimes said the auto industry jobs recovery has reached its peak and in a few years it will begin to decline again. Grimes predicts an aging population will be spending more of their money on health care, travel and restaurants rather than consumer durable goods like cars.

“So future job gains will be determined by our overall business climate, not the auto industry rebound,” he said.  

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.