The Detroit metro area is adding jobs, but only slowly. As of December, payroll jobs increased in the Detroit metro area by 0.8 percent over the previous year, significantly under the U.S. national average of 1.7 percent. The metro-area unemployment rate, at 8.9 percent in December, stands well above the U.S. average, at 6.7 percent for that month. The good news is that the rate of decline in the Detroit unemployment rate is about on par with the U.S. as a whole. We expect to see only modest job growth for the Detroit metro area over the next year.
The City of Detroit’s financial crisis and bankruptcy continue to dominate headlines. The city submitted its financial restructuring plan to a federal bankruptcy court on February 21. The plan, pending approval, will restructure about $18 billion in long-term obligations. Secured creditors will be paid in full, pension funds will get a haircut and unsecured creditors will receive about 20 cents on the dollar. It could be several months before the court approves Detroit’s plan. We expect to see a spillover effect in bankruptcies in Detroit as a result of the city’s restructuring. It is very difficult to estimate the exact extent of the spillover. We show stable to rising bankruptcies for the Detroit area this year. This pattern is intended to provide a cautionary signal about credit quality for Detroit at this uncertain time.
The Detroit metro area economy remains dominated by the auto industry. Severe winter weather held auto sales to a 15.2 million unit annual rate in January, after reaching a 16.4 million unit rate in November. We expected auto sales to resume their moderate upward track early this year. The early word on February auto sales is positive. The economic push from the rebounding U.S. auto industry will ease as auto sales approach a cyclical high of around 17 million units per year in the second half of 2015.
Click here for the complete Detroit MSA Regional Economic Update: Detroit 2013Q4.