The sound of construction and steel-frame buildings going up is a familiar note around Grand Rapids, where the manufacturing, finance and real estate sectors have led to more robust growth, with a 3.9 percent rise in gross domestic product in 2013.
In far smaller Monroe County, the production of giant towers for wind turbines pushed that region’s economy even further. With only 1 percent of statewide GDP, Monroe posted the highest regional growth in the state last year at 5.5 percent, according to the U.S. Bureau of Economic Analysis.
All told, nine of 15 regions in Michigan posted growth higher than 2 percent GDP gain in 2013, BEA data show.
But this rising tide did not equally raise all boats: Detroit regional GDP, while recovering, grew by just 1.3 percent in 2013. And that's a big deal, since the region still churns out 52 percent of Michigan's economic output.
Overall, the state’s numbers are a grab bag of the promising and the troubling.
For example, statewide GDP grew by 2 percent in 2013. On the bright side, that’s above the five-state Midwest average of 1.6 percent, trailing only Indiana at 2.1 percent. To the negative, Michigan's GDP is still 6 percent below its output in its peak year of 2005.
That's primarily because the state remains tethered to manufacturing, still its largest economic sector despite a considerable drop in the last 15 years. It was 24.7 percent of GDP in 2000, falling all the way to 14.6 percent in 2009 before climbing back up to 19 percent in 2013. That's about 2 percent above the insurance and finance sector, at 16.9 percent.
Wind turbines lift Monroe
Monroe’s 5.5-percent rise was good for 27th among 273 regions BEA tracked across the United States. What explains the Monroe jump? Well, it helps to be a smaller region, whose economy can rise and fall more precipitously with the fortunes of key area businesses.
In Monroe, that business is Ventower Industries, a hometown fabricator and supplier of wind-turbine towers, which expanded operations to meet demand from the burgeoning wind industry. It makes cylindrical steel sections for wind towers that can top 200 feet.
Last spring, Ventower went to three shifts, seven days a week as it geared up to fulfill a contract with a major manufacturer of wind equipment.
“We’re now faced with some good problems,” vice president Scott Viciana recently told the Monroe News. “We’re going to build everything we can and going to be really at full capacity this year...maybe doubling the amount of towers that are coming out of our plant next year.”
Monroe saw a 15.3 percent jump in its business and professional services sector in 2013, rising to $361 million. Manufacturing grew by nearly 14 percent, remaining the region's largest industry. But that's still 29.7 percent below its peak year of 2004. On the other hand, retail trade rose 8.9 percent to $306 million, which is 15.9 percent above 2007.
Truck traffic rises in Berrien
Following Monroe in 3013 GDP growth was the Niles-Benton Harbor area, which gained 4.5 percent, and Jackson, which grew 4.1 percent.
The advances in Niles-Benton Harbor, in Berrien County, were led by a 12.5 percent gain in durable goods manufacturing, its highest output in 14 years. That sector represents 30 percent of the local economy. The finance and insurance sector gained 7.7 percent and construction grew by 5.7 percent.
Victoria Pratt, president and CEO of Cornerstone Alliance, a Berrien County economic development organization, said she didn’t have to pore through data to know the economy was improving. All she had to do is look at I-94, which has 14 exits in the county.
“If truck traffic tells you anything – I don't know if I've ever seen that sector of I-94 so busy, oh my God,” Pratt said. “They are getting on and off at those exits.”
Pratt said her organization counted $187 million in capital investment in 2013, including Whirlpool, which invested $95 million for a new product development facility and a refrigeration tech center. Auto parts manufacturer Kay Manufacturing put nearly $10 million into an expansion.
“I have a list of businesses. What we hearing is that their orders are up. Their sales are up. They are working at much higher levels in the past year than they have in the three or four years prior to that.
“They have a high-class, woe-is-me problem. Now, woe is me is, 'I'm running out of workers. I'm running out of space.'”
In the Jackson County region, the big winners were the finance and insurance, which gained 13.6 percent, wholesale trade, which climbed by 10.8 percent, and professional, scientific and technical services, which increased by 10.3 percent.
The Flint region is still digging out from a plunge in its manufacturing sector. It grew by a tepid 1.3 percent in 2013. Because of a large drop in manufacturing its economy is 16 percent below 2003 levels. Manufacturing is 44 percent of its peak year of 2003.
One Flint bright spot: Information and telecommunication. That sector has grown 86 percent since 2007, according to BEA data, rising 175 percent from 2001, from $240 million to $649 million.
Elaine Redd, spokesperson for the Flint & Genesee Chamber of Commerce, attributes part of that increase to the expansion of several call centers in the region. That includes Diplomat Specialty Pharmacy, which operates a call center and medical information that functions in a former General Motors building. It has about 800 employees, half of which were added since 2010.
Grand Rapids keeps humming
Just about all sectors posted gains in the Grand Rapids region. Of the major industries, only government spending was down, by 2.9 percent. Arts and entertainment grew by 7.8 percent, real estate by 7.7 percent and information (publishing and telecommunications) by 7.7 percent. Manufacturing, the region’s largest sector, gained 6.2 percent. The region includes Kent, Barry, Montcalm and Ottawa counties.
And judging by recent news, West Michigan's economic momentum may extend through 2014 and beyond, as local officials announced in September that nearly 1,000 new jobs and $170 million in investments are headed to the region in the coming years.
In Greenville northeast of Grand Rapids, Dicastal North America Inc. which makes aluminum wheels, expects to create up to 300 jobs over four years, with development of a manufacturing facility to build aluminum alloy wheels. It will do so on the site of Uni-Solar, a solar panel firm that once employed 300 workers before it closed in 2012.
Plasan Carbon Composites plans to add up to 620 new jobs over the next three years as it invests $29 million and consolidates operations from a facility in Vermont to Walker, a suburb of Grand Rapids. Plasan makes carbon fiber components for automotive companies.
Birgit Klohs, CEO of The Right Place, a West Michigan economic development agency, agrees that Michigan must look beyond manufacturing for its recovery. But she said she believes that advanced manufacturers that find specialized niches in the auto and industrial marketplace will have a place in the coming decade.
“There is no question,” Klohs said. “Yes, there is a future in manufacturing and it is highly technological and advanced. There is absolutely room in this region and the state and this country for advanced manufacturing.”
She said that regions that supply such manufacturers with the workforce talent they need will have a leg up on the competition.
“You don't give an unskilled worker a $1 million piece of equipment. These are really good paying jobs but we don't have the labor force to match.”
Three leading regions
West Michigan's bounce-back squares with analysis by Public Sector Consultants that projects that three regions – Grand Rapids, Traverse City and Ann Arbor – will lead the state in job growth in the coming decade.
According to its findings, those regions are expected to generate jobs at twice the rate of the metro Detroit region, which is defined as Wayne, Oakland and Macomb counties. PSC projected that region to add about 70,000 jobs, while the three high-growth regions are expected to collectively add more than 115,000 jobs.
With a longer forecast lens, 2012 analysis by the University of Michigan's Institute for Research on Labor, Employment, and the Economy predicted that much of Michigan jobs growth to the year 2040 will be found in private education and health care – at 1.23 percent a year – and in professional and business services, at .94 percent a year.
The UM report projects a .49 percent-a-year decline in manufacturing jobs, even though it forecast GDP growth in that sector because of rises in productivity. In a sobering note, it also predicted that total employment would not reach the level it was at back in 2000 – about 5.6 million – until 2034.
Analyst Lou Glazer, co-founder of Michigan Future, Inc., a nonpartisan research organization, said he is convinced Michigan will falter in the decade ahead if it fails to produce more college-educated graduates to compete in a knowledge-based economy. Glazer notes that Minnesota had a per capita income in 2012 of $46,227. That's nearly $9,000 more than Michigan. According to the U.S. Census, 31.5 percent of those age 25 and older in Minnesota had bachelor's degrees in 2009, compared with 24.6 in Michigan. The national average was 27.9 percent.
Education will steer future
MSU economist Ballard concurs.
“As long as Michigan lags behind the national average in educational attainment, we are likely to continue to lag behind the national average in incomes,” Ballard said.
“That’s why I will continue to make the case for further expansions of early-childhood education, for expanding the K-12 school year to 200 days, and for reversing the policy of disinvestment in higher education.”
The University of Michigan report expects growth to be constrained by the graying of Michigan's population, which points to a potential labor shortage in critical sectors. In 2010, Michigan's share of the population 65 and older was 13.8 percent, compared with 13 percent for the nation. In a younger age group – those 25 to 44 – Michigan's share was 24.8 percent, compared with 26.6 percent for the United States.
Mike Wilkinson contributed graphics to these reports.