Recovering Detroit region still drives the state

For all the dire news coming out of Detroit lately, it's easy to forget a stubborn fact. The Detroit region, while shaken by a rough decade, remains the dominant economic power in the state.

Michigan cannot be well if Detroit is sick.

“The southeast side is going to be the center for economic activity for many years,” said George Erickcek, an analyst for the Kalamazoo-based Upjohn Institute for Employment Research. “It is going to be a long time before the west side of the state matches the east side of the state.”

Gross domestic product in the Grand Rapids region – second largest in the state – grew by 3.9 percent in 2013, compared with 1.3 percent in the Detroit region. But according to the U.S. Bureau of Economic Analysis, the Grand Rapids region’s economic output – $48 billion – is less than a fourth of the Detroit region's $225 billion. (BEA defines the Detroit region as covering Wayne, Lapeer, Livingston, Macomb, Oakland and St. Clair counties.)

The Detroit region's share of the state economy has dropped, however, from 54.7 percent in 2001 to 52 percent in 2013. And the area’s GDP last year is 8 percent below its peak in 2005. But the Detroit-area’s most critical business sectors are gradually clawing back, with health care emerging as a vital new area of growth.

Manufacturing output increased by 3.1 percent in 2013, with manufacturing comprising roughly 18 percent of the region’s economy. That's a big improvement from 2009, when it accounted for just 12 percent. But it's still a ways down from the 21.3 percent share of the economy it claimed in 2002. Nondurable goods manufacturing - which includes goods like food and medicine and products such as clothing and small electronic devices - rose 5.2 percent but is still 16.1 percent below peak year of 2004.

The Detroit region’s finance sector – which includes insurance and real estate – grew by 1.6 percent and stood at 19.3 percent of the region economy. Government, perhaps driven in part by Detroit’s entrance into bankruptcy, fell 3.1 percent and is 14.6 percent below 2007 and 22.1 percent below peak.

Michigan State University economist Charles Ballard said he believes manufacturing will remain a vital part of this region's economy for some time to come. But it will never be what it was in the 1960s, when manufacturing was nearly half of Michigan's economy.

Future growth will come from many different sectors,” Ballard said.

“There is a good chance that health care, biotechnology, and information technology will all be important parts of the mosaic. Of course, it may be that the hot sector of 2030 is something we haven’t even thought of yet.”

Health care rises

The Detroit region’s health care sector – which includes social services – has grown the most in the past few years, to 9 percent of the region's economy. It is the only major sector that stands above its output in 2007, at 4.8 percent above that.

Perhaps a confirmation of that trend, work continues at the corner of Woodward Avenue and Piquette Avenue in Detroit – just down the street from where Henry Ford produced the Model T – on a $90 million biomedical research center affiliated with Wayne State University.

When completed in 2015, the biomedical center will house programs in cardiovascular disease and metabolic disorders as well as computational biology and biomedical engineering. It is expected to employ hundreds of researchers.

In a long-range planning document completed in 2012, the Southeast Michigan Council of Governments forecast that education and health care would post significant growth by 2040, its employment rising 40 percent from 370,000 in 2010 to 520,000 by 2040.

“As manufacturing becomes leaner, I believe that health care will be one of the sectors where people who used to work in manufacturing will find work,” said SEMCOG economic analyst Brian Parthum. “One reason for that growth is that the population is aging. As the population ages, what tends to happen is that as a person ages they shift their consumption from retail goods over to health care services.
“Health care is going to pay a large role in our economy in the years going forward.”

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