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Michigan Economic Update Martin Lavelle Senior Research Associate Federal Reserve Bank of Chicago-Detroit Branch December 11, 2013

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Presentation on theme: "Michigan Economic Update Martin Lavelle Senior Research Associate Federal Reserve Bank of Chicago-Detroit Branch December 11, 2013"— Presentation transcript:

1 Michigan Economic Update Martin Lavelle Senior Research Associate Federal Reserve Bank of Chicago-Detroit Branch December 11, 2013 Martin.lavelle@chi.frb.org Michiganeconomy.chicagofedblogs.com The comments and opinions that I will be expressing are my own and do not reflect the thinking or policy posture of the Federal Reserve System nor of the Federal Reserve Bank Of Chicago, (7th District).

2 Michigan Economic Activity: Sector Breakdown Sector2000 (% of Total Real GSP)2012 (% of Total Real GSP) Agriculture & Mining0.91.0 Utilities2.02.2 Construction6.22.7 Manufacturing18.918.3 Trade, Transportation, & Warehousing 14.715.9 Information2.03.0 Financial Activities17.618.1 Professional & Business Services 13.513.1 Educational & Health Services7.29.3 Leisure & Hospitality3.13.6 Other Services3.02.4 Government11.510.6

3 US vs. Michigan Personal Income (Real) (Quarterly Y/Y% Change)

4 US, Midwest, Michigan Unemployment Rates Source: BLS

5 Labor Force Participation Rates Source: BLS

6 Michigan Regional Unemployment Rates (12 MMA) Source: BLS

7 Michigan Initial Unemployment Claims

8 Changes in MI Total Nonfarm Payroll Employment (Level vs. 3 month MA, 1990-present)

9 Nonfarm Payroll Employment Growth (US, Michigan, 7 th District; 2013Q3/2012Q3) 9 Source: BLS

10 Michigan Top Job Gaining Sectors (2013 YTD) SectorNumber of Payroll Employees Added Total Nonfarm Payrolls72,600 Professional & Technical Services12,600 Retail Trade10,600 Durable Goods Manufacturing9,100 Health Care9,100 Accommodation & Food Services5,900

11 US Top Job Gaining Sectors (2013 YTD) SectorNumber of Payroll Employees Added Total Nonfarm Payrolls2,074,000 Restaurants260,500 Employment Services243,500 Ambulatory Health Care185,500 Specialty Trade Contractors95,600 General Merchandise Retail90,500

12 Michigan Retail Sales Source: MI Retail Association

13 Purchasing Managers Indexes (US, 7 th District) Values above 50 indicate expansion; values below 50 indicate contraction. The chart shows each PMIs 12 month moving average. 13 Source: ISM, Grand Valley St., Creighton University

14 Michigan Housing Starts vs. MI FHFA Home Price Index (Quarterly, 1990-present) Source: FRED, FHFA

15 Still Deflating The Bubble CityPeak-to-TroughRemaining Gap USA-33.5%-22.5% Phoenix-56.4%-39.0% Los Angeles-41.1%-24.7% San Diego-41.6%-24.8% San Francisco-44.3%-20.6% Denver-13.8%+3.3% Washington, DC-32.0%-20.8% Miami-50.8%-40.1% Tampa-47.3%-37.4% Atlanta-36.1%-20.3% Chicago-35.7%-28.2% Boston-15.9%-8.5% Detroit-46.0%-28.8% Minneapolis-35.5%-24.0% Charlotte-17.3%-8.7% Las Vegas-61.5%-48.1% New York-25.4%-22.4% Cleveland-20.0%-15.3% Portland-28.5%-16.3% Dallas-11.6%+4.6% Seattle-30.5%-17.7%

16 Current Monetary Policy Target Federal Funds Rate: 0-.25% – Will be appropriate at least as long as: Unemployment rate remains above 6.5% Medium-term inflation expectations less than 2.5% Anchored long-term inflation expectations – Projection: Wont move until 2015 Purchasing $45 billion/month of longer-term securities Purchasing $40 billion/month of mortgage- backed securities

17 Capacity Utilization Rates (Total vs. Auto) Source: Federal Reserve

18 2014 Federal Fiscal Policy Potential Short-term Budget Deal? – 2 years – Eliminates some of the sequester – Avoids Government Shutdown Debt Ceiling: February 2014 Affordable Care Act: Employer Mandate

19 Things To Look Out For (Michigan version) Any sign of letup in the states growth drivers? – Auto-related manufacturing – Health Care Potential Growth Additives – Financial Activities – Infrastructure Employment growth – Sustainability? – Improvement? Continued Issues with State & Local Government Finances – Unfunded pension liabilities – School districts 2014: Michigan economic growth will pickup, but not at the same rate as the US.


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