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Published: Wednesday, 6/3/2009

Ohio, Michigan economies shrinking smaller

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

A new federal analysis of state-level gross domestic product - the value of all goods and services produced - shows the economies in Ohio and Michigan shrank in 2008 and ranked 45th and 47th, respectively, in terms of growth.

According to the annual study by the U.S. Bureau of Economic Analysis, Michigan and Ohio are the only two states whose economies are actually smaller today than they were in 2004. In the last four years, Michigan's economy has contracted by 3.5 percent, and Ohio's by 0.5 percent. Indiana's economy was third-worst, but grew an anemic 0.1 percent during the four-year period.

"There's a common theme there: It's the industrial Midwest," explained Ken Mayland, an economist with ClearView Economics in suburban Cleveland.

"There's the general weakness of the industrial sector, and the specific weakness of the auto sector in particular. The auto industry has a pretty substantial footprint [in the Great Lakes region]."

The bureau's analysis for 2008 shows that the economic hardships once contained to Michigan have spread to 11 other states whose economies contracted last year. Alaska, Florida, and Delaware contracted at a faster rate than Michigan did in 2008, and economies also shrank in Rhode Island, Ohio, Nevada, Arizona, Georgia, Indiana, Connecticut, and Kentucky.

Collectively, the gross domestic product of the five-state Great Lakes region - Ohio, Michigan, Indiana, Illinois, and Wisconsin - shrank by 0.4 percent in 2008, compared to a growth rate of 0.7 percent in 2007. The industrial heartland of the nation still represented 14 percent of the nation's overall gross domestic product last year. For comparison, California represented 13 percent of the U.S. GDP, the analysis concluded.

Within the overall numbers, the bureau's analysis showed manufacturing took the heaviest hit in

Michigan and Ohio during 2008.

In Ohio and Michigan, the professional and technical services sector showed the strongest growth among any portion of those states' economies.

In Ohio, the agriculture, utilities, and information sectors showed some growth, but were offset by contractions in mining, construction, manufacturing, wholesale and retail trade, transportation and warehousing, and finance and insurance.

Mr. Mayland said the worst may not be over for the region's economy.

"[Chrysler LLC and General Motors Corp.] are going to be devastated by their bankruptcies. Skinnying down is not a painless process," Mr. Mayland said.

"There are going to be loads of people and loads of companies adversely affected. The elimination of production lines, the eliminations of dealers, the reduction in featherbedding that's required by the new reality - all of that is going to hurt, and it's going to hurt where they have the greatest presence, and that's Michigan and Ohio."

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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