A clearer view for the Detroit metro area economy is developing as the City of Detroit exits bankruptcy. Officially, the City emerged from bankruptcy after 17 months as the calendar flipped over to December 11. On December 10, the City completed the sale of $1.28 billion in bonds. Proceeds from the sale will pay off creditors, refinance municipal debt and pay for improvements to public services. Authority for Detroit’s finances now reverts to the mayor and city council. Kevyn Orr, the emergency manager appointed by Governor Snyder, has stepped down.
As the City of Detroit reemerges from under the shadow of bankruptcy, the Motor City’s marquis industry is catching a tail wind. Crude oil prices have fallen dramatically from a late June high for West Texas Intermediate of $102 per barrel to now about $55 dollars per barrel. The national average price of gasoline has responded by falling to $2.55 per gallon. Falling gasoline prices, strong U.S. job growth and rising consumer confidence is a potent combination for U.S. auto sales. Light vehicle sales improved to a 17. 2 million unit pace in November. A 17 million unit sales rate is near the high water mark for this cycle of auto sales, which we believe will occur in 2015. Then sales will ebb moderately after that.
The Southeast Michigan Purchasing Managers Index for November increased to a solid 56.8 indicating improving conditions for area manufacturers. Even with solid economic metrics and more clarity for the City of Detroit, we have a cautious employment outlook for the Detroit metro area. Manufacturing remains a high productivity growth industry so strong output gains may have smaller impact on job growth in some industries. We expect payroll employment growth for the Detroit metro to firm up to a still-subdued 1.0 percent in 2015, well below the U.S. average, but enough to bring the regional unemployment down.
Click here for the complete Detroit MSA Regional Economic Update: Detroit 2014Q3.