Michigan’s recovery

Good news! The Bureau of Labor Statistics just released revised data on Michigan employment for 2011 and 2012. They show larger job gains than previously reported. For the two years combined Michigan added 160,800 jobs, an increase of 4.2%. After a decade of annual job losses (totaling 813,000) this is welcome news indeed.

What I want to explore in this post is how does this compare to past recoveries. Particularly the first two years of the Blanchard Administration (which I was part of) when Michigan was also recovering from a strong national downturn and a near collapse of the Detroit 3. As I wrote in a previous post:

… Governor Blanchard inherited a Michigan economy in worse shape – one can make a strong case far worse shape – than Governor Snyder. We have short memories. The story we have told ourselves over and over again that Governor Snyder inherited the worse economy in Michigan since the Great Depression is not true. Jim Blanchard took office in January 1983. The month before (December, 1982) the state’s unemployment rate was 16.8%. And going up. That month was the peak unemployment rate during the serve downturn of the early Eighties. For all of 1982 the unemployment rate was 15.6%. Rick Snyder took office in January 2011. The month before (December, 2010) the state’s unemployment rate was 11.2%. And going down. The peak Michigan unemployment rate during the Great Recession was 14.2% in August, 2009. When Governor Snyder took office the Michigan unemployment rate had been falling for 16 consecutive months. For all of 2010 the unemployment rate was 12.7%.

Michigan job growth for 1983 and 1984 was 187,700, an increase of 5.9%. The year before (1982) Michigan lost 171,000 jobs. The year before Governor Snyder came to office (2010) Michigan lost 7,000 jobs. Michigan added 180,000 more jobs in 1985 and 96,000 in 1986. No one expects that size job growth in Michigan the next two years.

So what drives these economic turnarounds? The Snyder Administration and its supporters argue that it is their policies working. Basically big business tax cuts, smaller government and now right to work. The Blanchard Administration (as do state elected officials of both parties across the county when their state economies are strong) argued that the Eighties turnaround was driven by their policies working. But in many ways the policies it pursued are the exact opposite of the Snyder Administration. A big income tax increase (to 6.35%), no reduction in the so-called job killing Single Business Tax and once the economy began to expand increased state investments in education, infrastructure and activist business development programming.

So what is the prime driver of the recovery? Quite simply the national economy and particularly the fortunes of the domestic auto industry. Both Governor Blanchard and Governor Snyder took over immediately after the domestic auto industry was in such bad shape that it required federal government bailouts. Those bailouts –– as we explored here and here –– allowed the Detroit Three to reposition itself to regrow once the national economy and auto sales rebounded.

As I wrote previously: …  “I don’t believe that the Blanchard tax increases were a major reason for Michigan’s growth in the Eighties. Anymore than I  believe the Engler tax cuts were a major reason for Michigan’s economic growth in the Nineties. Or the Snyder business tax cuts have much of anything to do with the growth we are now experiencing that started at the end of the Granholm Administration. … The evidence is overwhelming that what drives Michigan’s economy is the national economy and, most importantly, the domestic auto industry.”

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