Transcript Some Insights to Economic Development Programs in Michigan and

Some Insights to Economic Development
Programs in Michigan and Observations
of the Michigan Economy
Presented to
By:
Steven Miller
August 13, 2008
Rural Economic Development
Why is Rural Economic
Development Important?
• Nearly 80% of Michigan is rural and hosts
nearly 20% of its population
• Decreasing share of rural income earned on
the farm
• Rural income lags urban income
• High rate of income earned off-farm
• High rates of unemployment
• Farm and rural population is increasingly
depending on non-farm economy
Challenges and Opportunities for
Rural Economic Development
• Access to venture capital
• Low education attainment and skills gaps
• Consolidation of Community Reinvestment
Act (CRA) funds
• Decreasing share of total population
• “In-sourcing” and “Rural sourcing”
• High gasoline prices will likely increase retail
demand in non-central regions
What is Economic Development?
• Economic development is a local
phenomenon
• Economic development is not economic
growth
– Economic Development entails qualitative
changes that impact the quality of life
– Economic Growth entails quantitative
changes measured in dollars
Local and Regional Development is
a Two-Part Equation
• Development = c · r
c = capacity
economic, social, technological, and political capacity –
the level of functioning of social, political, and
organizational structures and leadership
r = resources
natural resources, location, labor, capital investment,
entrepreneurial climate, transportation,
communications, industrial composition, technology,
size and linkages to export markets
Landscape of ED Approaches
• Business attraction “Smokestack Chasing”
• Strategic planning
• Promoting the development of new
products and services - Entrepreneurship
• Business retention
• Workforce development
• Support services and technical assistance
• Quality of life investments
Entrepreneurship as an Economic
Development Strategy
• “Smokestack Chasing” has lost favor as an ED
approach especially in rural communities.
• Rural emphasis is on developing the economy
from within through business facilitation
– Locally owned businesses are more likely to purchase
from local suppliers
– Locally owned businesses tend to share community
values
– Multitude of smaller employers provides more job
stability than a single large employer
– Contributes to the quality of life of residents
Quality of Life as an Economic
Development Strategy
• It is well documented that quality of life
measures impact regional economic
development
–
–
–
–
–
–
Wildlife
Recreation
Historic tourism
Creative economy
Agricultural tourism
Retirement destinations
Conclusions
• Economic development is about
increasing the quality of life measures
within a community.
• Business attraction models of ED are no
longer favored and greater focus is on
developing growth from within.
• Much focus has been directed at
increasing the quality of life and supporting
local entrepreneurs.
Scan of the Michigan
Economy
Employment By Industry Breakout
2007*
Michigan
*Source: Bureau of Labor Statistics
U.S.
Industry
Natural Resources and Mining
Construction
Manufacturing
Trade, Transportation, and Utilities
Information
Financial Activities
Professional & Business Services
Education & Health Services
Leisure & Hospitality
Other Services
Government
MI
0%
4%
14%
19%
2%
5%
14%
14%
10%
4%
15%
US
1%
5%
10%
19%
2%
6%
13%
14%
10%
4%
16%
U.S. and Michigan Unemployment
Rates and GDP Growth
18
U.S. and Michigan Unemployment Rates
Average Annual Growth in Real GDP:
16
2000-2007
2.5%
14
2.0%
10
1.0%
0.9%
0.5%
8
1.5%
1.3%
-0.3%
0.7%
Ohio
1.5%
Michigan
12
2.3%
0.0%
6
1980
1985
1990
1995
Michigan
Source: Bureau of Labor Statistics
2000
U.S.
2005
Source: Bureau of Economic Analysis
United
States
2
Wisconsin
4
Indiana
Illinois
-0.5%
Michigan’s Employment Situation
Appears Bleak
Employment Growth Since 1990
30
Percent Growth
25
20
15
10
5
0
-5
90
92
94
96
98
00
02
04
06
08
U.S. Employment Total Growth
Michigan Employment Total Growth
Source: Bureau of Labor Statistics
10
Michigan’s Tax Base Remains Flat
MI State Tax Collections*
Dollars
RealNominal
1997-Valued
Dollars
Millions
Millions
$25,000
$20,000
Other Taxes and Fees
$15,000
Sales and Use Tax
Net Single Business Tax
$10,000
Net Individual Income Tax
$5,000
*Excludes property
property TTaxes
axes
*Excludes
$- $-
2001 2002 2003
2003 2004
2004 2005
2005 2006
Sources: 2005-2006 and 2000-2001Annual Reports of the State Treasurer
Population Growth Rates
Population Growth Rates
2000 - 2007
-11.8% - -5.0%
-4.9% - 0.0%
0.1% - 5.0%
5.1% - 10.0%
10.1% - 20.0%
20.1% - 77.5%
Source: U.S. Bureau of the Census
Is a Recession on the Horizon?
Inverted Yield Curves Have Historically
Indicated an Imminent Recession
20
16
12
8
4
0
1980
1985
1990
1995
2000
30-Year Treasuries
1-Year Treasuries
Source: Federal Reserve Board
2005
Energy Concerns
• High energy costs,
– Reduce consumer discretionary spending
– Absorb government budgets
– Decrease local margins at the pump
– Reduce tourism
– Impact rural areas with longer travel distances
to destinations
– Require industries to retool toward less
energy intensive production methods
How Important is Energy to the
Economy?
While expenditures on energy continue to rise,
energy expenditure’s share of total GDP is much
lower than late 1970’s and early 1980’s
Energy Expenditures as Share of GDP (Percent)
Energy Expenditures per Person (Nominal Dollars)
3500
14
3000
13
12
2500
11
2000
10
9
1500
8
1000
7
500
0
1970
6
1975
1980
1985
1990
1995
2000
2005
Source: Energy Information Administration
5
1970
1975
1980
1985
1990
1995
2000
2005
CPI versus Energy Prices
Price Indices
240
Price Indices
240
200
200
160
160
120
120
80
80
40
40
0
1970 1975 1980 1985 1990 1995 2000 2005
0
1970 1975 1980
CPI 1985 1990 1995 2000 2005
Unleaded Gasoline
CPI Refiner
ENERGY
GASOLINE
Acquisition of Crude
Source:
Bureau
andEnergy
EnergyInformation
Information
Administration
Source:
BureauofofLabor
Labor Statistics
Statistics and
Administration
Rural Tourism Destinations Will
Need Re-tooling
3.20
3.00
2006
2.80
2007
2008
2.60
Travel Month
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Ju
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Ju
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M
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2.40
Ja
Average Daily Vehicle-Distance Traveled
(Billion Miles)
Rural Highways
The Exchange Rate Impacts the
Price at the Pump
Trade Weighted Exchange Index: Broad: Index
January 1997=100
Source: Federal Reserve Board
2008:01
2007:01
2006:01
2005:01
2004:01
2003:01
2002:01
2001:01
2000:01
140
130
120
110
100
90
80
Manufacturing Jobs
• Manufacturing makes up a sizeable
portion of a region’s economic base
• One lost manufacturing job is likely to lead
to more than one lost job in the region
• The largest manufacturing sectors in
distress is the auto and auto-related
sectors
Manufacturing Job Growth
Metropolitan-Nonmetropolitan Manufacturing Employment
Percent Change from 1970
30
Percent Cange from 1970
20
10
0
-10
-20
-30
-40
Midwest: Metropolitan*
Midwest: Nonmetropolitan*
US: Metropolitan
US: Nonmetropolitan
-50
1970 1975 1980 1985 1990 1995 2000 2005
* Includes Indiana, Illinois, Michigan, Ohio, and Wisconsion
Source: Bureau of Economic Analysis
Manufacturing Continues to Shrink,
but…
Proportion of Total Wage and Salary
Employment In Manufacturing
40%
30%
20%
US
10%
MI
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
0%
Proportion of Manufacturing Employment
In Non-Metropolitan Areas
25%
20%
15%
10%
US
5%
MI
Source: Bureau of Economic Analysis
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
0%
Distribution of Rural Manufacturing
Centers
Relative Manufacturing
Employment Concentrations
MSA County
No Data Available
Less Manufacturing Intensive
More Manufacturing Intensive
Source: U.S. Department of Commerce, Bureau of Economic Analysis based on Wage and Salary Employment
Employment concentrations are relative to non-metro proportion of total W&S employment in manufacturing
Michigan Unemployment Rates
• Between 2000 and 2006
– Population 18 to 65 has increased by 234,196
– Labor force has declined by 70,833
– Essentially, 305,029 nearly 5%, of working age
residents have left the labor force in Michigan since
2000
• It is expected that young Michigan workers are
most impacted
– Michigan lost 22,515 people aged 18-24 between
2000 and 2005
Sources: Census and Bureau of Labor Statistics
Michigan Unemployment Rates
Continue to Exceed the Nation’s
U.S. and Michigan Unemployment Rates
9
8
7
Percent
6
MI-NonMetro
5
MI-Metro
4
U.S.
3
2
1
0
1998 1999
2000 2001
Source: Bureau of Labor Statistics
2002 2003
2004 2005
2006 2007
Unemployment Rates by County
Unemployment Rates
2007 Annual Average
2.9 - 5.0
5.1 - 6.7
6.8 - 9.1
9.2 - 13.0
Source: Bureau of Labor Statistics: Local Area Unemployment Statistics
Housing
• Housing is a store of wealth
• The current mortgage crises has so far
been isolated to the subprime market, but
there are signs that it is creeping into the
prime mortgage markets
• Michigan is less exposed to subprime risk
than many states but delinquency rates
and foreclosure remain high
Housing Price Indices
Index of Housing Prices
210.0
190.0
170.0
IL
IN
150.0
MI
130.0
OH
WI
110.0
2008:1
2007:1
2006:1
2005:1
2004:1
2003:1
2002:1
2001:1
2000:1
1999:1
1998:1
1997:1
1996:1
1995:1
90.0
Source: Office of Federal Housing Enterprise Oversight
Relative Nonmetro to Metro Housing Price Index
40.0
30.0
20.0
IL
IN
MI
10.0
0.0
OH
WI
-10.0
-20.0
Source: Office of Federal Housing Enterprise Oversight
2008:1
2007:1
2006:1
2005:1
2004:1
2003:1
2002:1
2001:1
2000:1
1999:1
1998:1
1997:1
1996:1
1995:1
-30.0
Mortgage Stressed States
Source: Wall Street Journal
Rural Health Care and the Elderly
• Rural seniors tend to have lower financial
resources than their urban peers.
• Rural seniors self-report lower health
quality than urban peers.
• Retiree attraction has been pushed as an
economic development strategy.
Distribution of Population Over
65-Years of Age
Percent of Population Over
65 Years of Age: 2000
7.1% - 11.0%
11.1% - 14.0%
14.1% - 16.0%
16.1% - 20.0%
20.1% - 25.0%
Source: U.S. Bureau of the Census, Decennial Census
Nonmetropolitan RetirementDestination Counties 2000
Nonmetropolitan Counties with 15
or 20% or more growth in population
aged 65 or older 1990 – 2000
Metropolitan County
Retirement Destination 15% Growth
Retirement Destination 20% Growth
Not a Retirement Destination
U.S. average rate is 12 percent growth
Source: Woods and Poole using Census Data
Healthcare Providers versus Needs
of Elder-Care
Number of Healthcare Employees
per 1,000 Residents Over 65
0 - 161
161 - 277
277 - 452
452 +
Urban County
Source: EMSI: 2005 Estimates
Conclusions
• Evidence points to a forthcoming national recession.
• Michigan remains steeped in an industrial sector that has
a clear negative growth bias.
• Recent statistics indicate that Michigan’s economic
growth tails the nation.
• Michigan’s employment sector has experienced declines
since 2001 failing to benefit from the post-2001 national
expansion.
• Michigan is loosing a substantial portion of its young
population.
Conclusions Cont’d
• Decline of the dollar makes US produced goods more
attractive in overseas markets. It also makes the US a
more attractive tourist destination for foreign tourists.
• Michigan may be partially shielded against the
forthcoming ARM resets, but the state of the economy
threatens the economic health of Michigan’s home
owners.
• Michigan provides the amenities sought by retirees.
However, fully capitalizing on this strength calls for
investment in rural healthcare.
•