But some say it's far from hopeless
January 23, 2008 Detroit Free Press
BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER
Beyond the gyrations on Wall Street lies a very real fear that Main Street Michigan is headed for more trouble as the national economy struggles.
The state has been losing jobs for seven years, probably stands to lose more this year, and predictions of a partial recovery in 2009 are based on the premise of no national recession this year, an increasingly dubious assumption.
"I don't think there's any doubt that the national weakness will bruise Michigan yet again," Dana Johnson, senior economist for Comerica Inc., said Tuesday.
Even so, the outlook Tuesday was far from hopeless.
The Federal Reserve trying to ride to the rescue with interest rate cuts will mean immediate relief for consumers and companies with adjustable rate loans.
"Having the Fed step in and take this ... action creates a level of hopefulness that they're taking significant steps to improve the economy," said Tom Shafer, president of Consumers Bank Southeast Michigan.
Johnson agreed that the economic stimulus applied by the Federal Reserve could soften any economic decline.
"There's still a real shot that this weak patch won't degenerate into a recession," Johnson said. "But if it does, I think it won't be a deep and difficult recession."
Even so, Michigan may have to brace for more pain. The likelihood that consumers will hold off on car buying because of falling stock prices and other worries would be bad news for Michigan's signature industry.
Those other worries include gasoline prices rising above $3 a gallon and the continuing slump in housing markets.
Fears of a recession have seen investors pummeling the stocks of many of Michigan's leading employers. General Motors, Ford, Dow Chemical, Pulte Homes and Kellogg, saw their stocks trading Tuesday at or near their 12-month lows.
Tough times also are hard on the state treasury. This month, state Treasurer Robert J. Kleine and other budget authorities issued lower estimates for tax revenues this year because of lower predictions of consumer spending.
Meanwhile, the federal government confirmed this month that Michigan's 7.6% unemployment rate for December remained the highest in the country. The national rate in December was 5%.
University of Michigan economists, in their annual forecasts of Michigan's economy in November, predicted the state would lose 60,000 payroll jobs this year after losing nearly 80,000 in 2007.
Yet how much more pain a national recession could inflict on Michigan is a matter of debate. Shafer suggested Tuesday that Michigan firms already have done most of the cutting they need to and won't necessarily trim their workforces much more.
"The message to Michigan is a little different ... because our businesses have been working in a very difficult environment for a protracted period of time," he said.
Even that assessment was tempered by realism of what a national recession could mean for the state.
"We want the rest of the nation to be strong because buying cars still makes a difference in Michigan," he said.
January 23, 2008 Detroit Free Press
BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER
Beyond the gyrations on Wall Street lies a very real fear that Main Street Michigan is headed for more trouble as the national economy struggles.
The state has been losing jobs for seven years, probably stands to lose more this year, and predictions of a partial recovery in 2009 are based on the premise of no national recession this year, an increasingly dubious assumption.
"I don't think there's any doubt that the national weakness will bruise Michigan yet again," Dana Johnson, senior economist for Comerica Inc., said Tuesday.
Even so, the outlook Tuesday was far from hopeless.
The Federal Reserve trying to ride to the rescue with interest rate cuts will mean immediate relief for consumers and companies with adjustable rate loans.
"Having the Fed step in and take this ... action creates a level of hopefulness that they're taking significant steps to improve the economy," said Tom Shafer, president of Consumers Bank Southeast Michigan.
Johnson agreed that the economic stimulus applied by the Federal Reserve could soften any economic decline.
"There's still a real shot that this weak patch won't degenerate into a recession," Johnson said. "But if it does, I think it won't be a deep and difficult recession."
Even so, Michigan may have to brace for more pain. The likelihood that consumers will hold off on car buying because of falling stock prices and other worries would be bad news for Michigan's signature industry.
Those other worries include gasoline prices rising above $3 a gallon and the continuing slump in housing markets.
Fears of a recession have seen investors pummeling the stocks of many of Michigan's leading employers. General Motors, Ford, Dow Chemical, Pulte Homes and Kellogg, saw their stocks trading Tuesday at or near their 12-month lows.
Tough times also are hard on the state treasury. This month, state Treasurer Robert J. Kleine and other budget authorities issued lower estimates for tax revenues this year because of lower predictions of consumer spending.
Meanwhile, the federal government confirmed this month that Michigan's 7.6% unemployment rate for December remained the highest in the country. The national rate in December was 5%.
University of Michigan economists, in their annual forecasts of Michigan's economy in November, predicted the state would lose 60,000 payroll jobs this year after losing nearly 80,000 in 2007.
Yet how much more pain a national recession could inflict on Michigan is a matter of debate. Shafer suggested Tuesday that Michigan firms already have done most of the cutting they need to and won't necessarily trim their workforces much more.
"The message to Michigan is a little different ... because our businesses have been working in a very difficult environment for a protracted period of time," he said.
Even that assessment was tempered by realism of what a national recession could mean for the state.
"We want the rest of the nation to be strong because buying cars still makes a difference in Michigan," he said.
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