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Published: Wednesday, 6/27/2007

Report says Michigan becoming 'poor state'

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER

Michigan's economy has been in bad shape for several years, and its short-term future could get worse, experts said. It has gotten so bad that one economist calls Michigan's plight a "one-state recession."

To make matters worse, Dana Johnson, chief economist for Detroit's Comerica Bank, said in his latest quarterly Michigan Brief publication that Michigan "is rapidly becoming a relatively poor state," and that its economy may not have bottomed out yet.

Some business groups around Michigan are trying to do something about the state's economic outlook and image. For example, several dozen members of the Lenawee Chamber for Economic Development are gathering this morning in Adrian to hammer out strategies to combat the economic lethargy, to try to attract additional industry, and to bolster tourism.

Frank Dick, chairman of the county chamber, said, "We're going to have to try to get more diversified and get more high-tech [businesses]."

The former superintendent of Toledo Public Schools and chairman emeritus of Gleaner Life Insurance Society in Adrian said Michigan can come out of its economic malaise "if we pull up our sleeves and see what we can do." And he said, "We have good industries. We just need jobs."

Randy Yagiela, president of the Lenawee County chamber and economic-development agency, said such ventures as alternative fuels should boost the county's fortunes. For example, he said, Riga, near Blissfield, has a new ethanol plant and a biodiesel plant is proposed for Adrian.

In his latest Michigan Brief, economist Johnson outlined what he called "the hard truth" about the Michigan economy. "Last year, Michigan was the only state that did not grow," he wrote. "Its real [economic output] contracted by 0.5 percent, while the nation [gross domestic product] expanded 3.4 percent."

The state's longer-term performance is just as disheartening, he said. In the six years after 2000, the state recorded zero compounded growth, compared with 2.8 percent for the United States and 1.1 percent for Ohio.

In an interview, Mr. Johnson said most of Michigan's problems in recent years stemmed from the restructuring of the auto industry.

There is hope for the state, he said, if the U.S. economy rebounds more sharply and if the Big Three auto companies complete their restructurings.

But even if domestic car makers reach a constructive settlement with the United Auto Workers, if they significantly slow their loss of market share, and if everything else goes right, he said, Michigan's "recovery in the near term will be gradual."

The state's unemployment rate was about 7 percent until its recent drop to 6.9 percent; residential building permits have declined sharply, as have housing prices; and personal income growth is flat and a couple of percentage points below the U.S. average.

The state is becoming a "relatively poor state," he said, because it ranked 23rd in per capita economic output in 2003 and now ranks 35th. Michigan lost 20,000 more manufacturing jobs from April, 2006, to April, 2007, in addition to 26,600 non-manufacturing jobs.

Economists at National City Corp. in Cleveland ranked Michigan the lowest, by far, in its latest monthly small business confidence survey.

Despite the bad economic news, some in the region remain cautiously optimistic. Among them is H. Douglas Chaffin, president of MBT Financial Corp., parent of Monroe Bank & Trust.

"There are some uncertainties, and the auto industry outlook is not all that bright," said Mr. Chaffin. But there are two major car engines plants in Dundee which are doing well and have helped spur development in the western part of Monroe County.

"They had the right products, at the right time, and they're extremely efficient," he said.

Contact Homer Brickey at: homerbrickey@theblade.com or 419-724-6129.



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