Economic Forecast
OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:
Michigan’s GDP forecast is derived from the
national forecast by allocating output to each
of the 50 states based on employment
shares. So, forecast misses reflect surprises
in the aggregate forecast as well as
unexpected shifts in a state’s GDP share.
Michigan is reviving like the national
economy.
KEY MESSAGES:
Michigan’s economy is forecast to continue
to gradually accelerate into 2014 and 2015.
Note: GDP figures are based on quarterly values that are
interpolated from annual GDP estimates using quarterly
employment changes. Unbolded figures are reported actual
values and bold figures represent forecasts.
Sources: US Department of Commerce;
US Department of Labor.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 2
2007 2008 2009 2010 2011 2012 2013 2014 2015
United States
Real GDP
$ billions (fourth quarter) $14,996 $14,575 $14,540 $14,942 $15,242 $15,540 $15,933 $16,490 $17,109
% change over the four quarters 1.9% -2.8% -0.2% 2.8% 2.0% 2.0% 2.5% 3.5% 3.8%
Nonfarm employment
Job count (fourth quarter) 138,246,000 135,493,667 129,877,667 130,652,000 132,642,667 134,853,667 137,247,667 139,209,881 141,187,603
% change over the four quarters 0.9% -2.0% -4.1% 0.6% 1.5% 1.7% 1.8% 1.4% 1.4%
Average monthly change 101,667 -229,361 -468,000 64,528 165,889 184,250 199,500 163,518 163,518
Michigan
Real GDP
$ billions (fourth quarter) $359 $334 $320 $334 $344 $351 $358 $371 $385
% change over the four quarters -2.3% -7.2% -4.0% 4.4% 3.0% 2.0% 2.1% 3.5% 4.0%
Nonfarm employment
Job count (fourth quarter) 4,246,300 4,081,767 3,835,100 3,891,500 3,987,033 4,030,833 4,095,000 4,163,571 4,232,685
% change over the four quarters -1.2% -3.9% -6.0% 1.5% 2.5% 1.1% 1.6% 1.7% 1.7%
Average monthly change -4,133 -13,711 -20,556 4,700 7,961 3,650 5,347 5,714 5,759
The Economy’s Structure
PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES WHAT THE CHART SHOWS:
The figure compares the relative importance of
selected industries to the state’s economy with
the national footprint of each industry (state
and national figures reflect the value added of
each industry as a percent of aggregate state
or US nominal GDP, respectively).
Michigan’s outsized exposure to manufacturing
underscores its vulnerability to the
transformation of industry in this decade.
Away from the disproportionately large footprint
of the motor vehicle industry, the state’s
economy generally mirrors the composition of
the national economy.
KEY MESSAGES:
The state’s services businesses bring some
stability to its economy and now the revival in
the manufacturing industries is becoming a
positive force.
Source: US Department of Commerce. Updated through
2011.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 3
0
2
4
6
8
10
12
14
Agr
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Min
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Util
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Con
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US industry mix
Michigan industry mix
Bankruptcies
RATIO OF BANKRUPTCY FILINGS TO THE 2007 Q4 NUMBER WHAT THE CHART SHOWS:
The figure illustrates trends in bankruptcy
filings by businesses and persons relative to
the number of filings in 2007 Q4, prior to the
recession.
Financial stress is back down to pre-
recession levels.
KEY MESSAGES:
Indicators of financial stress are a useful
coincident indication of economic distress.
From this perspective, economic pressures
are slowly receding.
Source: Administrative Office of the U.S. Courts; Updated
through December 2013.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 4
0
1
2
3
4
5
0
1
2
3
4
5
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Business bankruptcy filingsNonbusiness bankruptcy filings
All US bankruptcy filings (shaded area)
FRB Chicago Business Survey
REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEX (2007 = 100) WHAT THE CHART SHOWS:
The figure shows GDP growth in Michigan
along with the Federal Reserve Bank of
Chicago’s survey of local conditions.
Business conditions continue to improve,
according to the Federal Reserve Bank of
Chicago’s survey.
KEY MESSAGES:
Business conditions are forecast to continue
to strengthen this year.
Sources: Federal Reserve Bank of Chicago; US Department
of Commerce. Updated through October 2013 (surveys) and
2013 Q4 (GDP).
Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage
reporting no change in activity.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 5
50
75
100
125
150
-8
-6
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Michigan real GDP (left scale)FRB Chicago's manufacturing survey (right scale)
Forecast
Private Business Surveys
REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:
The figures shows the Business Barometer
Index, based on the survey of purchasing
managers, and real GDP growth in Illinois (a
reading above 50 means the state’s
economy is growing, while less than 50
means the economy is shrinking). The index
comprises seven business activity
indicators, including production, new orders,
order backlogs, inventories, employment,
supplier deliveries, and prices paid.
The index is has rebounded recently.
KEY MESSAGES:
Diffusion indexes, like those based on
responses from purchasing managers, are a
timely indicator of activity in the state and
these may be moderating.
Note: Business Barometer data unavailable prior to 1997.
Sources: Institute of Supply Management; US Department
of Commerce. Updated through February 2014 (survey) and
2013 Q4 (GDP).
Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage
reporting no change in activity.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 6
10
20
30
40
50
60
70
80
90
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Real GDP in the Midwest (left scale)
Business Barometer Index, Mid-America Purchasing Managers (right scale)
Forecast
Private Business Surveys
REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:
The figure features the business conditions
index in Southeast Michigan, based on a
survey of purchasing managers and
Michigan’s real GDP trends.
Purchasing managers are signaling slightly
slower growth.
KEY MESSAGES:
Still, business activity is forecast to
strengthen gradually in coming years.
Note: Purchasing Managers data unavailable prior to 2004.
Sources: Institute of Supply Management; US Department
of Commerce. Updated through February 2014 (survey) and
2013 Q4 (GDP).
Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage
reporting no change in activity.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 7
30
40
50
60
70
-8
-6
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Michigan real GDP (left scale)
Southeast Michigan Purchasing Managers Index (right scale)
Forecast
Initial Jobless Claims
RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 2007 Q4 LEVEL WHAT THE CHART SHOWS:
The figure tracks layoffs in Michigan and the
national level of claims.
Weekly layoffs, both the state and national
tallies, are illustrated in the figure as a ratio
to the level of layoffs in the fourth quarter of
2007, prior to the recession.
Layoffs in Michigan have plunged to levels
that are far below pre-recession levels, in
part, owing to the smaller size of the labor
force compared with the last decade’s level.
KEY MESSAGES:
The turnaround in the motor vehicle industry
and the drop in the real trade-weighted value
of the dollar versus most trading partners
are driving the Wolverine State’s recovery.
Source: US Department of Labor. Updated through
February 18, 2014 (state) and February 25, 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 8
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2007 2008 2009 2010 2011 2012 2013 2014
MichiganUS (solid area)
Michigan accounts for 33.5% of US auto manufacturing employment
Economic Growth
REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) WHAT THE CHART SHOWS:
Real GDP growth in Michigan (the line in the
figure) is superimposed on top of US real
GDP growth (bars in the figure).
Michigan’s growth is pacing the nation’s,
even if it has moderated somewhat.
KEY MESSAGES:
Michigan’s economy is projected to speed
up further in the coming year.
Source: US Department of Commerce. Updated through
2012 (state) and 2013 Q4 (US). Quarterly estimates for
states after 2012 are interpolated from employment figures,
based on the historical correlation of state and national
employment changes.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
MichiganUS
Forecast
Economic Output
REAL GDP LEVEL (RATIO TO 2000 Q4) WHAT THE CHART SHOWS:
The figure illustrates the evolution of real
GDP of the state and the overall US
economy since the fourth quarter of 2000,
the peak of the previous business cycle—
that is, at any point in time the lines trace the
ratio of real GDP to its level in 2000 Q4.
Michigan’ economy stagnated in the last
decade. It suffered badly during the
recession, but has recovered about two-
thirds of the output lost.
KEY MESSAGES:
Michigan’s economy is slowly reviving.
Source: US Department of Commerce. Updated through
2012 (state) and 2013 Q4 (US). Quarterly estimates for
states after 2012 are interpolated from employment figures,
based on the historical correlation of state and national
employment changes.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 10
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US
Michigan
Forecast
Employment Growth
NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 12 MONTHS EARLIER) WHAT THE CHART SHOWS:
Job growth in the state, compared with the
national employment trends.
Echoing the recovery in the state’s GDP,
employment is growing as well, although a
little more slowly in the past year than
earlier.
KEY MESSAGES:
Michigan’s economy at least has turned the
corner and is leaving a difficult decade
behind.
Job growth is forecast to remain steady and
moderate.
Source: US Department of Labor. Updated through
February 2014 (state) and February 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 11
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
MichiganUS
Forecast
Employment in Relative Terms
NONFARM PAYROLL EMPLOYMENT (RATIO TO THE 2000 Q4 LEVEL) WHAT THE CHART SHOWS:
The figure illustrates the evolution of
employment in the state compared with the
nation since 2000 Q4, the peak of the
previous business cycle. The lines trace out
the ratio of employment at the time to
employment in 2000 Q4.
Michigan lost 392,000 jobs since the latest
recession began in December 2007.
The state’s payroll count has contracted
almost 20% in the last decade, but so far
has retraced ¼ of that.
KEY MESSAGES:
Michigan is slowly on the mend.
Source: US Department of Labor. Updated through
February 2014 (state) and February 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 12
0.80
0.85
0.90
0.95
1.00
1.05
1.10
0.80
0.85
0.90
0.95
1.00
1.05
1.10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US
Michigan
Forecast
Employment in Absolute Terms
NONFARM PAYROLL EMPLOYMENT (THOUSANDS) WHAT THE CHART SHOWS:
The figure trades job trends in Michigan.
Michigan’s business community has
replaced or recovered about 40 percent of
the jobs that were lost during the 2007-09
recession.
KEY MESSAGES:
Economic activity in Michigan has been
recovering gradually, reflecting support from
its manufacturing businesses.
Source: US Department of Labor. Updated through
December 2013 (state) and February 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 13
127,500
130,000
132,500
135,000
137,500
140,000
3,800
3,850
3,900
3,950
4,000
4,050
4,100
4,150
4,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US (right scale)Michigan (left scale) Forecast
Intrastate Employment
NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2000 Q4 LEVEL) WHAT THE CHART SHOWS:
Job trends in local communities within the
state.
Auto-exposed communities close to Detroit
are struggling far more than the
economically-more-diversified communities
in the central and southwestern regions of
the state.
Southwest and Western Michigan have been
more successful in weathering the
transformation of the manufacturing industry.
With the exception of Battle Creek and Flint,
employment is expanding.
KEY MESSAGES:
Michigan’s economic fortunes still ride on
the fortunes of the motor vehicle industry so
that industry’s recovery is a good omen.
Source: US Department of Labor. Updated through
December 2013 (state) and February 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 14
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
2001 2003 2005 2007 2009 2011 2013 2015
US forecast
US
Ann Arbor
Holland-Grand Haven
Grand Rapids-Wyoming
Lansing-East Lansing
Muskegon-Norton Shores
Battle Creek
Kalamazoo-Portage
Saginaw
Warren-Troy-Farmington Hills
Niles-Benton Harbor
Jackson
Flint
Detroit-Warren-Livonia
Detroit-Livonia-Dearborn
Michigan forecast
Michigan
Forecast
Unemployment
UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) WHAT THE CHART SHOWS:
Unemployment rate trends in Michigan,
compared with the national average.
Michigan’s unemployment rate stayed
around 7 percent for most of the last
decade, despite the national recovery that
saw national unemployment rate fall to 4½
percent.
The state’s unemployment rate has plunged
to almost 8 percent from the 14 percent plus
peak in the recession.
KEY MESSAGES:
The unemployment rate is the single best
indicator of the relative economic
performance of a region.
Unemployment is forecast to continue to fall.
Source: US Department of Labor. Updated through
December 2013 (state) and February 2014 (US).
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 15
0
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Michigan
US (shaded)
Forecast
Relative House Prices
RATIO OF THE STATE’S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q2 = 1.0) WHAT THE CHART SHOWS:
The figure tracks the relative price of houses
in the state versus the nation—that is, it
reflects the ratio of the state price index to
the national house price index, with that ratio
set to unity in the summer of 1995. A drop
in the line means that house prices in the
state lag the national trend. States that did
not suffer from speculative conditions saw a
decline in the relative price of houses in this
last decade.
Michigan’s house prices have fallen 15
percent below the national average
compared with the norm prior to the previous
decade.
KEY MESSAGES:
Michigan’s real estate problems are the
result of its earlier economic struggles and
not real estate speculation.
Source: FHFA. Updated through 2013 Q4.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 16
0.6
0.7
0.8
0.9
1.0
1.1
1.2
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Real Estate Markets
HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q2 LEVEL) WHAT THE CHART SHOWS:
The figure tracks the cumulative percentage
deviation in house prices since 1995 in
selected local markets and compares those
with the national average.
Virtually all local real estate markets have
lagged national market trends since mid-
decade but prices are climbing in many
areas.
KEY MESSAGE:
Housing markets are more vulnerable the
closer the proximity to Detroit and the heart
of the motor vehicle industry.
Sources: FHFA; Standard & Poor’s. Updated through
2013 Q4.
0.75
1.00
1.25
1.50
1.75
2.00
0.75
1.00
1.25
1.50
1.75
2.00
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
US Holland
Ann Arbor Grand Rapids
Bay City Detroit
Flint Battle Creek
Jackson Kalamazoo
Lansing Monroe
Muskegon Niles-Benton Harbor
Saginaw Detroit (Case-Shiller)
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 17
New Home Building
HOUSING STARTS (RATIO TO THE JULY 1990 LEVEL) WHAT THE CHART SHOWS:
Home building in Michigan, compared with
the pace of national home construction.
The figure illustrates the level of activity
relative to July 1990.
Home building activity has yet to pick up
meaningfully.
KEY MESSAGES:
Housing activity is forecast to recover slowly.
Source: Census Department. Updated through January
2014.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 18
0.0
0.5
1.0
1.5
2.0
0.0
0.5
1.0
1.5
2.0
2000 2002 2004 2006 2008 2010 2012 2014
USMichigan Forecast
Office Markets
PERCENT OF OFFICE SPACE THAT IS VACANT WHAT THE CHART SHOWS:
The state of the office market in Detroit and
that in the nation.
A large percentage of the office market
remains vacant but the office vacancy rate
now seems to be coming down gradually.
KEY MESSAGES:
Naturally, the struggling economy is taking a
toll on the commercial real estate market.
Pressures in Detroit’s depressed market
may be easing.
Source: CB Richard Ellis (formerly CB Commercial Property
Information Systems), Office Vacancy Index of the United
States. Updated through 2013 Q4.
April 3, 2014
Regional Perspectives: Michigan Economic Outlook
Commercial Banking 19
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Detroit metropolitan area
All metropolitan areas (shaded area)
CONTACT:
James E. Glassman
Telephone: (212) 270-0778
© 2014 JPMorgan Chase & Co. All rights reserved. Chase, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide
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