Michigan leads Great Lakes states in personal income growth

May 21, 2012
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LANSING — Michigan’s personal income grew 5.2 percent in 2011 — the highest per capita level in a decade — and ranks 15th in the nation, according to a new report by the U.S. Bureau of Economic Analysis.

And that’s just one indicator of an economic recovery, said experts at Grand Valley State and Oakland universities.

Tricia Kinley, senior director of tax and regulatory reform at the Michigan Chamber of Commerce, said, “Undoubtedly, the state’s overall job growth would have to be the main factor that is pushing our residents’ personal income in a positive direction.”

Kinley said the state’s primary industry, manufacturing, is showing signs of recovery — particularly in the automotive sector — and job providers overall express more confidence in the direction that Michigan is heading.

Earnings, one of three major components of personal income, rose 5.2 percent in Michigan from 2010 to 2011, but was below peaks reached in 2007 and 2008, according to the federal report.

Although Michigan appears to be turning the corner, there is still significant work to be done to improve the business climate, which would, in turn, motivate employers to expand their businesses, Kinley said.

Michigan’s per-capita personal income was $36,533 in 2011, up from $34,714 in 2010, which outpaced neighboring Great Lakes states.

Paul Isely, chair of economics at Grand Valley State University, said hourly income growth has been only around 0.7 percent. That means most of the increase in per-capita personal income is because about 70,000 more people were working in 2011.

In addition, many companies saw increases in the number of hours each employee worked, he said.

“Close to 30,000 of these additional jobs were in relatively high-paying manufacturing,” said Isely. “This can be traced to improvements in automotive sales and the productivity of the firms that survived the economic downturn.

“This is why Michigan is seeing a faster growth rate than the country as a whole,” he said.

However, Isely added a cautionary note. “Unfortunately, at the current growth rate, we have a long way to go to get back to our 2000 peak in employment.”

Kevin Murphy, professor of economics at Oakland University, said Michigan’s economy has been hyper-sensitive to national conditions for many decades. When the national economy goes into recession, Michigan is among the two or three states hit hardest.

“The silver lining is that as things improve at the national level, Michigan tends to benefit more than most states. All of this has to do with the fact that Michigan is very dependent on durable goods production such as the automobile industry, which is very cyclically sensitive,” Murphy said.

According to the federal report, durable goods manufacturing earnings increased 10.7 percent in 2011.

Murphy attributed that growth to President Barack Obama who “single-handedly” saved much of the auto industry.

“Had he not done this, we’d have a much different picture in Michigan,” he said.

“Through his action, he not only saved those companies and those jobs, but he helped restore them to much more solid footing than they’d been on in almost a decade,” he said. “This has made a huge difference for Michigan.”

Murphy said things are definitely improving.

“Income and spending are up. Unemployment has dropped considerably. Michigan had the highest unemployment rate at one point, but now that’s come down so far that we’re moving toward the middle of the pack,” he said.

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