When it comes to the Midwest, a recently released report of the Midwest Economy Index from the Chicago Federal Reserve puts Michigan’s economy on top.
While the region as a whole remained flat according to the report released July 31, Illinois (-.07), Iowa (-.04) and Wisconsin (-.14) saw economic losses while Indiana (+.05) saw a small gain. Michigan gained +.19, and that’s the best in the Midwest, based on those states that comprise the Seventh Federal Reserve District.
Here’s little explanation on this number that at first could seem a little confusing. The Midwest Economy Index is a weighted average of 129 state and regional indicators encompassing the entirety of the five states in the Seventh Federal Reserve District (Illinois, Indiana, Iowa, Michigan, and Wisconsin).
The index measures growth in nonfarm business activity based on indicators of four broad sectors of the Midwest economy: Manufacturing, construction and mining, services, and consumer spending.
A zero value for the MEI indicates that the Midwest economy is expanding at its historical trend rate of growth; positive values indicate above-average growth; and negative values indicate below-average growth.
Michigan Economy Grows
The Michigan economy grew in monetary terms to an inflation-adjusted $417.3 billion, or by 1.9 percent in 2014 compared with 2013, according to the U.S. Bureau of Economic Analysis.
The private service sector saw the most growth, including professional and businesses services, up 4.3 percent.
Manufacturing also showed signs of strength. It had the second largest growth in real dollar value, increasing by $2 billion year over year. Additional sectors that grew in Michigan were information at 3.6 percent; trade, transportation, and utilities at 2.4 percent; and education and health services at 2 percent.
Michigan’s economy still remains dependent on the manufacturing sector, which accounted for 21.2 percent of Michigan’s Gross State Product (think of GSP like Gross Domestic Product for a nation, but on a state level).
Nearly half of Michigan’s manufacturing output is related to the auto industry, and the experts at the fed say the projected growth in light vehicle sales in the foreseeable future should help Michigan’s economy maintain growth.
Manufacturing Employment Down
Although there has been monetary value growth recently, manufacturing employment has decreased significantly as a percentage of total nonfarm employment in the state as it lost more than 321,000 jobs over the last decade in a half. In 2000, the manufacturing sector accounted for 19.2 percent (about 896,900 jobs) of all nonfarm jobs. In 2015, it accounted for 13.8 percent (575,700).
Michigan has seen some employment growth in several sectors, including education and health services, professional and business services, leisure and hospitality, and financial services.