Detroit Stabilizes After Auto Bounce

  • Job growth in the Detroit metro area is easing in late 2012 after beating the U.S. average through 2011. On a year-ago basis, payroll jobs in Detroit were up 0.4 percent in October, compared with 1.5 percent for the U.S. as a whole.  Multiple factors are shaping overall job growth as we close out 2012. A major factor is the flattening out of manufacturing employment in the metro area. The auto industry bailout and the subsequent gain in auto sales from a recession low of 9.0 million units (annualized) in February 2009 to post-recession high of 14.9 million units in September 2012 have brought tens of thousands of jobs back to the Detroit area. However, gains in manufacturing employment are now flattening out. The expected climb in auto sales over the next two years will add far fewer new jobs than did the climb in auto sales over the last two years. The outlook for auto sales in 2013 is clouded, like everything else, by the Fiscal Cliff. We assume that the U.S. averts a Fiscal-Cliff-induced recession in 2013 and auto sales hit 15.0 million units for the year. The government sector is another factor in cooling job growth. With the ongoing fiscal crisis of the City of Detroit, government employment is falling. Total government employment in the Detroit metro area is down 5.2 percent on a year-ago basis in October. Housing is adding some stability, as prices firm and sales and construction pick up. However, the positive influence from housing will remain relatively small due to the area’s high housing vacancy rate.
  • House prices in the Detroit metro area are firming, up 7.6 percent on a year-ago basis as of September, according to the Case-Shiller data. This is well above the Case-Shiller 20-City Composite gain of 3.0 percent. The Detroit area has suffered with some of the highest foreclosure rates in the country since 2007. This had a very depressive effect on house prices. Now, as the percentage of distressed properties in the mix of home sales declines, area house price indexes will continue to show strong gains.

Click here for the complete 2012Q4 Detroit Regional Economic Update: Detroit 2012Q4.

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