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Original article URL: http://bridgemi.com/2013/03/whats-up-whos-down-in-state-economy/
5 March 2013
While the Holland area may be better known to outsiders for its Dutch heritage and pristine Lake Michigan beaches, the locals know its economy is driven by manufacturing.
The area suffered as manufacturing output fell by a third during the Great Recession. Unemployment exceeded 13 percent.
But a strong rebound by auto suppliers, office furniture manufacturers and others produced a 4.2 percent jump in Holland-Grand Haven metropolitan area’s economy in 2011, the biggest increase among the state’s 14 metro areas.
Overall, Michigan’s gross domestic product, a measure of goods and services produced in the state, grew 2.3 percent in 2011 to $337.4 billion, according to newly released details by the federal Bureau of Economic Analysis.
Still, Michigan’s economy is 7 percent smaller than it was in 2001, the year the state slipped into a decade-long economic decline.
Metros are where the money is in Michigan’s economy. The state’s 14 metro areas (plus the South Bend-Michawaka metro area, which covers Cass County in Michigan) produced 91 percent of the state’s output in 2011.
The Holland-Grand Haven metro area is emblematic of Michigan’s manufacturing-led recovery from what many have called its “lost decade.”
Nearly 40 percent of Holland-Grand Haven’s $7.9 billion economy in 2011 was in manufacturing, which grew 9.2 percent between 2010 and 2011.
While 2012 figures haven’t been released yet by the federal government, Holland area official say they believe the momentum has continued in this picturesque West Michigan region.
“We think we’ve strung three strong economic years together,” said Randy Thelen, president of Lakeshore Advantage, a local economic development agency. “It’s been a nice run.”
No wonder the Gallup-Healthways Well-Being Index ranked the Holland-Grand Haven metro area in the top fifth of happiest regions of the country last year.
Detroit, which is on the verge of a state takeover, is not such a happy place these days. It recently was named the most miserable city in America by Forbes magazine.
But the Motor City is at the center of a metro area that posted the second-highest increase in regional GDP in the state during 2011, growing 3.5 percent from 2010.
Manufacturing led the Detroit metro area with a whopping 13.5 percent gain from 2010 to 2011 as automakers and their suppliers began recovering from auto sales that fell to 30-year lows in the late 2000s. Manufacturing output rose from $22.3 billion in 2010 to $25.4 billion in 2011.
The Detroit area also posted strong growth in management of companies; temporary employment agencies; information, professional and business services; and accommodation and food services.
“Because the auto industry is so extensively networked in the region, the effects of its direct contributions to job growth also spill over into other parts of the private sector,” University of Michigan economist Don Grimes said.
But the Detroit area showed declines in arts and entertainment, financial services, educational services, and the category called real estate and rental and leasing.
Still, the Detroit area produced 52.1 percent of the state’s economic output in 2011. That was down from 54.2 percent from 2001, representing large shrinkages in manufacturing, construction, retail trade and others during the decade.
The heavily manufacturing-dependent Muskegon-Norton Shores metro area, located just north of Holland-Grand Haven, had the third-fastest growing regional economy in the state in 2011, rising 2.8 percent.
Grand Rapids, the second largest metro region in the state, recorded the third-highest jump in GDP from 2010 to 2011, growing 2.3 percent.
Auto-related manufacturing and food processing have been the hot industries in recent years in the Grand Rapids metro area, said Birgit Klohs, president of The Right Place Inc, a local economic development agency.
“The automotive supply chain is back and growing,” she said.
West Michigan’s agribusiness sector produces one-third of the state’s agricultural sales and contributes about $1.5 billion annually to the region’s economy, according to The Right Place.
“High-tech manufacturing and food processing are where we see a lot of potential,” Klohs said.
Growth in manufacturing and construction led the region, rising by 5.1 percent and 4.4 percent, respectively.
Flint was named the nation’s second most miserable city by Forbes magazine. But it’s the hub of a region that grew by 1.9 percent between 2010 and 2011, matching the growth of Saginaw, another region heavily dependent on manufacturing.
Manufacturing grew 16 percent in the Flint metro area between 2010 and 2011, from $1.1 billion to $1.23 billion.
That represented, in part, the recovery by General Motors Co.’s operations in the area.
“GM has been hiring people off the street for the first time since its bankruptcy” in 2009, said Janice Karsher, vice president of economic development at the Genesee Regional Chamber of Commerce.
But other manufacturing sectors, including medical devices, have been expanding the in region. And some manufacturers are diversifying away from auto-related production.
“Our new companies and traditional manufacturers have one foot in auto and are diversifying into areas such as construction and alternative energy products,” Karsher said.
Still, manufacturing output fell 50 percent between 2001 and 2011in the Flint metro area.
Like in many other communities, health care is becoming a much larger part of the Flint metro area’s economy, growing by 20.3 percent over the past decade.
Statewide, health care grew by 21 percent between 2001 and 2011.
Jackson, another metro area that relies heavily on auto-related manufacturing, saw GDP growth of 1 percent in 2011. Manufacturing grew 9.5 percent while construction output jumped by 8.1 percent.
Administrative and waste management services in the Jackson area grew by a whopping 52.1 percent, from $96 million in 2010 to $146 million in 2011. But that category, which contains janitorial, clerical and temporary workers, was a small part of Jackson’s $4.2 billion economy in 2011.
Metro areas that are the least dependent on manufacturing posted among the lowest overall GDP growth rates in 2011. Some even saw their economies shrink slightly.
Among the decliners were the Kalamazoo-Portage metro area and the Lansing-East Lansing metro area.
While private industry GDP grew a scant 0.2 percent in Kalamazoo-Portage, government GDP dropped by 2.5 percent, resulting in an overall decline for the region.
The same was true in Lansing-East Lansing, home to state government and Michigan State University. Private sector GDP grew 0.6 percent in 2011, but government GDP fell 4 percent.
Ann Arbor’s economy in 2011 was nearly flat, growing by just 0.3 percent.
Government is the biggest sector in metro Ann Arbor’s economy because of the presence of the University of Michigan, Eastern Michigan University, Washtenaw Community College and several federal government installations.
That sector declined by 1.2 percent between 2010 and 2011, as government at all levels cut budgets.
Utility GDP in Ann Arbor fell 19.9 percent in 2011, reflecting less employment, lower energy prices and lower sales by the state’s utilities. Statewide, utility GDP was down 7.7 percent in 2011.
Michigan’s smaller metro areas all saw their economies slip in 2011. Bay City, Monroe, Battle Creek and Niles-Benton Harbor posted declines in GDP.
Over the decade, metro areas less dependent on manufacturing grew more than those traditionally reliant on building cars and machinery.
The top-performing metro areas between 2001 and 2011 were, in order, Kalamazoo-Portage, Lansing-East Lansing, Ann Arbor and Grand Rapids.
Those most heavily dependent on manufacturing, including Detroit, Flint, Saginaw and Holland-Grand Haven, posted the biggest declines in GDP over the past decade.
The question is whether the current manufacturing surge can be sustained.
Thelen, of Lakeshore Advantage, is hopeful, citing long-term forecasts for cheaper energy prices, continued economic growth and increases U.S. manufacturing competitiveness with other countries.
“We visited 202 companies last year and three out of four told us they expect to expand over the next three years,” he said. “There’s increasing optimism about manufacturing.”
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.