Detroit Area Still Expanding But at a Slower Rate

The good news is that the Detroit metro area is still adding jobs. However, job growth in the  Detroit MSA is underperforming the U.S. average. For the 12 months ending in October 2013, Detroit added jobs at a 1.1 percent rate while the U.S. average was 1.7 percent. The regional economy has downshifted after rebounding out of the recession. Year-over-year job growth peaked at a 3.4 percent rate in March 2012 as the auto industry regained its footing. With auto-related production closer to its zenith for this expansion cycle than its nadir, the regional economy is feeling less of a boost. Total U.S. auto assemblies reached 11.6 million unit annual rate in November, well above the recession low of a 4.2 million unit rate in June 2009. The high of 13.5 million in October 1999 suggests that the upside from auto-related hiring for Detroit has largely played out.

On December 3, the City of Detroit successfully thwarted a legal challenge to its bankruptcy proceedings. Detroit emergency manager Kevyn Orr is expected to unveil a reorganization plan for the City early next year. A reorganization of contract and pension obligations will have a double-edged impact on the regional economy. A sustainable fiscal outlook for the City of Detroit is necessary for a healthy regional economy. However, reduced benefits for retirees and reduced payouts to city creditors will be a near-term drag on the regional economy.

The City is making some progress in addressing the decades-long slide toward bankruptcy. The Detroit City Council is considering plans for a new $650 million hockey arena and entertainment district to replace the aging Joe Louis Arena. A $400 million project to build a new commercial rail tunnel under the Detroit River, to Canada, is expected to begin in 2014. Symbolically, a plan is underway to redevelop the site of the crumbling 3.5 million-square-foot Packard plant in the City. The Detroit lighting authority has successfully completed a bond sale that will allow it to start repairing broken street lighting.

Detroit 2013Q3

Click here for the complete Detroit MSA Regional Economic Update: Detroit 2013Q3.

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