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Michigan's economy: Better than advertised

Word cloud using the text of the story in the shape of Michigan.ANN ARBOR—Michigan's economy is stronger than we think, says a University of Michigan economist.

According to recent data from the Bureau of Labor Statistics' Quarterly Census of Employment and Wages, total wage and salary employment in Michigan rose by 2 percent (nearly 81,000 jobs) between December 2012 and December 2013. The increase is higher than that reported by the more widely cited Current Employment Statistics Data, which shows that Michigan employment climbed only 1.26 percent (51,500 jobs) during the same period.

"The CES data, also reported by the BLS, is timelier, but is less accurate because the data is based upon a sample of business and government establishments," said Don Grimes of the U-M Institute for Research on Labor, Employment and the Economy. "The QCEW data is based upon administrative records and thus includes all firms whose employees are covered by an unemployment insurance program.

"The data is more accurate, and eventually the CES data is benchmarked by the BLS to the QCEW data. But, right now, the CES data is inaccurately reporting that Michigan's employment growth is below the U.S. growth rate. When the CES data is revised next year it will show much higher employment growth, but for now it is painting a misleading picture of Michigan's employment performance."

Using the BLS/QCEW data, Grimes said that employment growth in Michigan exceeded U.S. gains during this same period (1.75 percent) and employment gains in all of the other Great Lakes states, as well.

In fact, he said, employment growth in Michigan has trumped job gains in the U.S. overall and in all of the other Great Lakes states every year since December 2009. Since that time, employment in Michigan has grown by 8.1 percent, compared to 6.1 percent in the U.S. The only other Great Lakes states to have enjoyed employment growth over this period that exceeded the U.S. average are Indiana (6.85 percent) and Minnesota (6.15 percent). The Great Lakes state with the weakest employment growth is Illinois at 4.2 percent.

"Despite Michigan's comparatively strong employment gains since December 2009, employment in Michigan remains about 3 percent below pre-recession, December 2007 levels," Grimes said.

Job gains in manufacturing in most Great Lakes states have been relatively strong, particularly in Michigan (21 percent) and Indiana (13 percent) between December 2009 and December 2013, he said. However, the manufacturing sector was notably weak in Illinois with a gain of only 3.3 percent, while relatively large job growth in Ohio and Wisconsin was not enough to pull their overall employment gains above the national average.

"Year-over-year employment gains in manufacturing have slowed across the board," Grimes said. "It appears that the manufacturing sector will shortly no longer be able to drive employment gains in any of these states, including Michigan."

According to Grimes, nonmanufacturing (both private and government) has grown more slowly in all of the Great Lakes states than in the U.S. overall between December 2009 and December 2013, except for Michigan where the nonmanufacturing sector grew at the same rate as in the U.S. overall. Job gains in nonmanufacturing were particularly weak in Wisconsin and Illinois.

Between December 2009 and December 2013, government employment declined in the U.S. and in all of the Great Lakes states. Michigan had the largest decline in government employment (7.2 percent) during that time.

"If private-sector employment is used as the metric of economic recovery than the gap between Michigan and the U.S. and the other Great Lakes states widens sharply," Grimes said.

Between December 2012 and December 2013, Michigan's private sector grew by 2.6 percent, while in the U.S. it grew by 2.1 percent. Over the entire recovery period, private-sector employment grew by about 11 percent in Michigan, compared to less than 8 percent in the U.S. overall.