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Original article URL: http://bridgemi.com/2011/09/battle-creek-lansing-ann-arbor-outpaced-grand-rapids-in-00s/

Economy & competitive position

Economic Life in Michigan:

Scoring the ’00s: How Michigan’s 14 regions changed

Despite billions of dollars in construction projects on the University of Michigan’s campus and Ann Arbor’s reputation as a high-tech business hotbed, the regional economy there contracted slightly over the past decade.

Gross domestic product in the Ann Arbor metro area fell 1 percent between 2001 and 2009 as several major businesses left town.

Pfizer Inc., the city of Ann Arbor’s largest private-sector employer at the time, stunned the community when it announced in 2007 that it was closing its research center there, eliminating 2,100 jobs.

General Motors Corp.’s Willow Run transmission plant, which employed 4,000 people in 2005, gradually reduced operations and was shut last year.

Ann Arbor also became the largest metro area in the nation without a daily newspaper when the Ann Arbor News closed in 2009.

Paul Krutko, president of local economic development agency Ann Arbor SPARK, said the agency will intensify efforts to help young growth-oriented businesses prosper.

“The large, old-line companies generally are not growing,” he said.

Far more important to the state’s overall economy than Ann Arbor, though, was the marked decline in the Metro Detroit economy. Economic output was off 14 percent in Metro Detroit from 2001 to 2009. And while other high-tech regions and college towns have grabbed many economic development headlines in recent years, an old maxim remains true… As Metro Detroit goes, so goes Michigan’s overall economy. Metro Detroit accounted for 51 percent of the state’s economic output in 2009 (down slightly from 54 percent in the hey days of 2001).

“Southeast Michigan has taken a huge hit,” said University of Michigan economist Don Grimes said. “And because metro Detroit is so large, it has a huge influence on the economy of the rest of the state.”

Indeed, metro Detroit represents more than 50 percent of the state’s economy, measured by GDP. But its GDP declined from 54 percent in 2001 to 51 percent in 2009, “a huge change over a relatively short period of time,” Grimes said.

Metro Detroit will struggle to gain back that share, Grimes predicted, because a shrunken domestic auto industry isn’t likely to regain its lost share of Michigan’s economy anytime soon.

In contrast, gross domestic product held its own in the Lansing metro area, home to state government, several GM assembly plants and Michigan State University.

But like his counterpart in Ann Arbor, Lansing economic developer Ray De Winkle said his region’s future is in growing local knowledge companies and supporting research spin-offs at MSU.

“We’re focusing on entrepreneurship and innovation, and building the infrastructure to support that,” said De Winkle, senior vice president at the Lansing Economic Area Partnership.

Metro areas in West Michigan also were hit by a decade-long decline in manufacturing, said regional economist George Erickcek of the Upjohn Institute for Employment Research in Kalamazoo.

Gross domestic product in Grand Rapids fell by 2 percent as office furniture manufacturers and auto suppliers cut production.

The Niles-Benton Harbor metro area saw GDP fall 2 percent while the Holland-Grand Haven region experienced an 8 percent decline. Muskegon’s GDP plunged 13 percent.

Most metro areas in the I-75 corridor, plus Jackson, were hammered by the auto industry’s near collapse.

Bay City’s GDP fell 3 percent while Jackson’s output declined 7 percent. Monroe’s GDP dropped 11 percent and Flint’s output plummeted 15 percent.

Metro Saginaw posted the worst performance in the state as GDP fell a staggering 16 percent over the decade.

There were some bright spots. Detroit recorded a 14 percent rise in health care and a 5 percent boost in arts, entertainment and recreation. Flint had even larger GDP percentage increases in those sectors.

Saginaw posted gains in health care, information and educational services and silicon production for semiconductors and solar panels.

But overall, 2001 through 2009 were years to forget.

“The last decade was really bad,” said Michigan State University economist Charles Ballard. “On the bright side, we’re much leaner than we were and employment is growing again. (Detailed breakdown of Michigan economy.)

“We’ve got a lot of potential to have a better decade ahead.”

A breakdown of regional economies (from best results to worst):

(Kalamazoo, Battle Creek beat the odds by posting growth in decade.)

Lansing

GDP growth: 0 percent. The Lansing-East Lansing metropolitan area saw contraction in state government, manufacturing and retailing during the past decade. But the area gained two General Motors Co. assembly plants and investment in health care. There also was growth in the high-tech sector, some of which was attributed to commercialized research at Michigan State University. (Detailed breakdown of Lansing economy.)

Lansing’s GDP share of the state economy grew from 4 percent to 5 percent during the decade.

“We’re focusing on entrepreneurship and innovation, and building the infrastructure to support that,” said Ray De Winkle, senior vice president at the Lansing Economic Area Partnership.

Ann Arbor

GDP growth: -1 percent. The Ann Arbor metro area lost two of its biggest employers, Pfizer Inc. in Ann Arbor and a General Motors Co. transmission plant in Willow Run.  With 2,100 employees, Pfizer was the city of Ann Arbor’s largest employer. The GM transmission plant employed 4,000 people in 2005, but the plant gradually reduced operations and closed last year. (Detailed breakdown of Ann Arbor economy.)

Ann Arbor also became the largest metro area in the nation without a daily newspaper when the Ann Arbor News closed in 2009.

But growth areas in Ann Arbor included health care, education and real estate.

Paul Krutko, president of local economic development agency Ann Arbor SPARK, said the agency will intensify efforts to help young, growth-oriented businesses prosper.

“The large, old-line companies generally are not growing,” he said.

Ann Arbor’s share of the state economy grew from 4 percent to 5 percent.

Grand Rapids

GDP growth: -2 percent. A severe contraction of the office furniture industry, as well as a decline in construction and auto parts manufacturing, hit the Grand Rapids metro area hard. (Detailed breakdown of Grand Rapids economy.)

Production in the U.S. office furniture industry, which is centered in Grand Rapids, fell 41 percent between 2000 and 2009, according to The Business and Institutional Furniture Manufacturers Association.

But Grand Rapids experienced strong growth in medical facilities, particularly in the downtown “Medical Mile” area. Those facilities included Michigan State University’s College of Human Medicine Secchia Center, The Meijer Heart Center, and expansions of the Van Andel Institute and the Helen DeVos Children’s Hospital.

In total, more than $1 billion was invested in “Medical Mile” construction over the past decade.

Grand Rapids’ GDP share of the state’s economy also grew from 8 percent to 9 percent during the decade.

Niles-Benton Harbor

GDP growth: -2 percent. The region, like most in Michigan, saw declines in construction, manufacturing and retail trade. The region also has suffered with the loss of production from Whirlpool Corp. and other manufacturers. (Detailed breakdown of Niles economy.)

Benton Harbor, one of the poorest cities in Michigan, also is the first city in the state to be governed under Michigan’s toughened and controversial emergency manager law.

But the region did experience growth in real estate, financial services and health care.

Bay City

GDP growth: -3 percent. Like most cities along the I-75 corridor, the Bay City metro area experienced steep declines in construction and manufacturing over the past decade. (Detailed breakdown of Bay City economy.)

A General Motors Co. powertrain plant, once among the area’s largest employers, has lost hundreds of jobs in recent years. But it has gained millions of dollars in investment and dozens of new jobs over the past year in supplying parts for new GM models, including the Chevrolet Volt and Chevrolet Sonic compact.

Bay City also saw growth over the past decade in health care, financial services, information and lodging accommodations.

Jackson

GDP growth: -7 percent. Jackson saw a steady erosion of its manufacturing-based economy over the past decade. Durable goods manufacturing fell 12 percent in Jackson, while construction plunged 57 percent over the past decade. (Detailed breakdown of Jackson economy.)

Jackson saw growth in health care, professional and technical services, wholesale trade and educational services.

Holland-Grand Haven

GDP growth: -8 percent. Holland and Grand Haven are attractive, Lake Michigan coastal towns with strong tourism sectors. But they also are heavily oriented toward manufacturing and slumped during the past decade as the auto industry went into a tailspin. (Detailed breakdown of Holland economy.)

Like most other parts of the state, Holland-Grand Haven has grown its health care, financial services and information sectors. And the region is becoming a center of advanced battery development for hybrid and electric vehicles.

The federal government has granted hundreds of millions of dollars to Johnson Controls, LG Chem and other companies making battery-related investments in the region.

But Michigan State University economist Charles Ballard said the success of the alternative energy sector will depend on whether the United States develops a comprehensive energy policy.

“There is no political will to take climate change head on,” Ballard said. “Until we do, there are limits to the growth of green sector.”

Monroe

GDP growth: -11 percent. Monroe is another metro area in the I-75 corridor that suffered with manufacturing and construction sector declines. Manufacturing output fell 41 percent as production volumes dropped at Monroe-based La-Z-Boy Inc. and auto-related manufacturers. (Detailed breakdown of Monroe economy.)

But Monroe saw growth among other new employers, including sports megastore Cabela’s and the Global Engine Manufacturing Alliance, which produces four-cylinder engines for Chrysler and Fiat.

Muskegon-Norton Shores

GDP growth: -13 percent. The Muskegon metro area has struggled for decades to attract new investment to offset the decline of its manufacturing economy. (Detailed breakdown of Muskegon economy.)

It’s had some success in growing retail trade, health care, educational services, financial services and information. But growth in those areas over the past decade could not make up for major losses in manufacturing, construction and wholesale trade.

Detroit

GDP growth: -14 percent. Metro Detroit, home to GM, Chrysler, Ford Motor Co. and dozens of major auto suppliers, was ground zero in the near collapse of the domestic auto industry during the past decade. Even prosperous Oakland County suffered steep losses of employment and business investment. (Detailed breakdown of Detroit economy.)

Manufacturing GDP in metro Detroit fell 31 percent between 2001 and 2009. That dragged down construction (-59 percent) and retail trade (-16 percent).

Health care GDP grew 14 percent in metro Detroit while educational services expanded by 5 percent, over the past decade. Experts say those are likely to continue to be areas of growth for the region.

Flint

GDP growth: -15 percent. In many ways, the Flint metro area is a miniature version of metro Detroit’s economy. Flint was the birthplace of GM, and despite the loss of tens of thousands of jobs over the past 40 years GM remains the region’s largest employer, according to the Genesee Regional Chamber of Commerce, with about 6,500 workers. (Detailed breakdown of Flint economy.)

Nevertheless, manufacturing plunged a whopping 59 percent during the past 10 years in Flint, while management of companies fell 72 percent, representing the downsizing or loss of hundreds of businesses.

The bright spots for metro Flint during the 2000s were information, up 67 percent; arts entertainment and recreation, up 18 percent; and health care, up 17 percent.

Health care, led by Genesys Medical Center, McLaren Regional Medical Center and Hurley Medical Center, employs 9,000 people in the Flint metro area.

Saginaw-Saginaw Township

GDP growth: -16 percent. Metro Saginaw was slammed particularly hard by the auto industry’s decline. It lost thousands of jobs as GM has cut operations there. (Detailed breakdown of Saginaw economy.)

GM’s former Saginaw Steering Gear operation, which employed 4,000 workers in 2005, has since been sold to a Chinese company. Now called Nexteer, the company employs about half that many workers.

But Saginaw, with two major hospital systems — Covenant HealthCare and St. Mary’s of Michigan — has become a regional health care center for mid-Michigan.

Through Dow Chemical Co. and its affiliates, the region also is a growing center of silicon production for semiconductors and solar panels. The slowdown in the U.S. solar industry isn’t affecting that, one official said.

“Dow is selling silicon for solar all over the world. That’s not going to change,” said Charles Hadden, president of the Michigan Manufacturers Association.

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.

11 comments from Bridge readers.Add mine!

  1. David G. Small

    Well written Rick,

    Though I have lost touch with many of the gang in East Tawas I still seek out and read your articles. We apparently think much the same way .

    Dave Small

  2. Greg

    This is very interesting. Though your pie chart is misleading. The text says the “metro Detroit represents more than 50 percent of the state’s economy, measured by GDP. But its GDP declined from 54 percent in 2001 to 51 percent in 2009″, yet the pie chart displays a lot more than 51% for Detroit area. Please correct your chart.

    1. John Bebow

      Thanks for keeping us honest, Greg. We fixed the graphic. – John Bebow

  3. Herbert Harroun

    It is difficult to lend much credence to a purported analysis of Michigan’s economy that totally ignores a region that comprises one-third of its land mass, and 3% of its population. You know, that inconvenient pointy thing north of the Straits of Mackinac commonly known as the Upper Peninsula? Also, your pie chart is grossly inaccurate compared to the data it is supposed to represent. You can do better.

    1. John Bebow

      Herbert,

      We understand and share your concern. Here’s the problem… The GDP data on which this report is based is calculated by the U.S. Bureau of Economic Analysis (www.bea.gov). They track GDP by metropolitan region, but they do not publish data for the Upper Peninsula or its Marquette region, for example. We very much desired to understand and publish the GDP trends in the U.P. and other areas such as Traverse, but the data wasn’t there.

      I hope you’ll appreciate a different economic report we have coming soon that will have much more regionalized data concerning the Upper Peninsula.

  4. Joe V.

    Gov. Synder and his Republican legislature promises corporate tax cuts and cuts to the safety net will create jobs and help balance the budget. It may be a way for the wealthy to become wealthier and the working poor to become poorer, but no expert I’ve read has linked those moves to significant job creation. Many businesses are sitting on cash and credit but aren’t hiring because the demand isn’t there.

  5. Bill Barker

    Interesting that no comment on Midland, which surely has a larger production output than a couple of the places mentioned, certainly more than Bay City and probably more than Saginaw, for instance. Or do I have a wrong sense of proportion? Or the Great Lakes Bay area as a whole.

  6. karen

    Why is there no information for cities north of the Grand Rapids-Saginaw line? Are they that inconsequential?

  7. Michael Heath

    Ditto Karen’s comment. Can we at least see a slice for the U.P. and another for north of Bay City to Mackinaw City?

  8. M. Chilcutt, PhD

    Incomplete information. Nothing on the Kalamazoo/Portage area. Niles certainly does not represent many people. Why did you use that area?
    So far I am not impressed with your work.

  9. Joanne Becker

    If you are going to take the time to do a report, then how about making it complete? What about Kalamazoo/Battle Creek or anything North of Grand Rapids?

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