January 9, 2008
By KATHERINE YUNG
FREE PRESS BUSINESS WRITER
If the national economy gets the flu, it's no longer the case that Michigan's economy will automatically catch pneumonia.
That's the prognosis from Dana Johnson, Comerica Inc.'s chief economist.
The state's economy is diversifying and becoming less cyclical, which means it won't suffer from national recessions as much as it did in previous decades, he said Tuesday during a forecast meeting held by the Howell Chamber of Commerce at the Crystal Gardens-Livingston in Howell.
"Michigan's economy is less cyclically sensitive," Johnson said. "We are developing a more diversified economy, but it's obviously an incredibly painful process to get there."
The uncertain direction of the national economy has emerged as one of the clouds hanging over Michigan's economic prospects this year. If the country enters a recession, the lack of economic growth could hinder the state's ability to emerge from its four-year recession.
Johnson said a national downturn could send Michigan's already sky-high unemployment rate even higher. But the increase will be less than during previous recessions because the state's economy is not as dependent on the auto industry as in the past.
Only 4% of the state's labor force works directly for automakers or their suppliers, he noted. That's down from 7% many years ago.
But Johnson warned that 2008 could be another tough year for Michigan.
Comerica relocated its headquarters from Detroit to Dallas last year, but remains Michigan's second-largest bank measured by deposits.
Detroit's automakers continue to lose domestic market share, accounting for 50.9% of U.S. light-vehicle sales in 2007, compared with 53.6% in 2006.
The woes in the auto industry resulted last year in a 1.7% decline in jobs statewide, the sharpest drop since 2003. The situation led more than 90,000 residents to flee in 2007.
Nationally, the outlook is more positive. But falling home prices and rising crude oil prices will hurt consumer spending, the main driver of the economy, Johnson said.
On the positive side, the trade deficit has dropped by 10% over the past 12 months, thanks to a cheaper U.S. dollar. The shrinking deficit has offset 95% of the drag from the slowdown in homebuilding over the past four quarters, he said.
For now, Johnson predicts sluggish national growth in the range of 1% to 1.5%.
But he admits, "It's almost a coin toss whether we have slow growth or no growth at all."
By KATHERINE YUNG
FREE PRESS BUSINESS WRITER
If the national economy gets the flu, it's no longer the case that Michigan's economy will automatically catch pneumonia.
That's the prognosis from Dana Johnson, Comerica Inc.'s chief economist.
The state's economy is diversifying and becoming less cyclical, which means it won't suffer from national recessions as much as it did in previous decades, he said Tuesday during a forecast meeting held by the Howell Chamber of Commerce at the Crystal Gardens-Livingston in Howell.
"Michigan's economy is less cyclically sensitive," Johnson said. "We are developing a more diversified economy, but it's obviously an incredibly painful process to get there."
The uncertain direction of the national economy has emerged as one of the clouds hanging over Michigan's economic prospects this year. If the country enters a recession, the lack of economic growth could hinder the state's ability to emerge from its four-year recession.
Johnson said a national downturn could send Michigan's already sky-high unemployment rate even higher. But the increase will be less than during previous recessions because the state's economy is not as dependent on the auto industry as in the past.
Only 4% of the state's labor force works directly for automakers or their suppliers, he noted. That's down from 7% many years ago.
But Johnson warned that 2008 could be another tough year for Michigan.
Comerica relocated its headquarters from Detroit to Dallas last year, but remains Michigan's second-largest bank measured by deposits.
Detroit's automakers continue to lose domestic market share, accounting for 50.9% of U.S. light-vehicle sales in 2007, compared with 53.6% in 2006.
The woes in the auto industry resulted last year in a 1.7% decline in jobs statewide, the sharpest drop since 2003. The situation led more than 90,000 residents to flee in 2007.
Nationally, the outlook is more positive. But falling home prices and rising crude oil prices will hurt consumer spending, the main driver of the economy, Johnson said.
On the positive side, the trade deficit has dropped by 10% over the past 12 months, thanks to a cheaper U.S. dollar. The shrinking deficit has offset 95% of the drag from the slowdown in homebuilding over the past four quarters, he said.
For now, Johnson predicts sluggish national growth in the range of 1% to 1.5%.
But he admits, "It's almost a coin toss whether we have slow growth or no growth at all."
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