Michigan is enjoying widespread prosperity, as prolonged strength in automobile sales and the broader manufacturing complex has acted as a great stabilizing force in the state. It is widely understood that the pace of this improvement in the manufacturing sector will subside, testing the strength of the diversity of the state economy. The economic climate in the state is broadly positive, as housing markets continue to gather momentum, while maintaining affordability, and job growth remains diverse. As reported by the BLS, the strongest year-over-year job growth in Michigan for March was concentrated in the construction, financial activities, professional/business services, and leisure/hospitality sectors. This is an ongoing trend. In the coming year, it is the service sector, paired with improving real estate conditions, that will propel Michigan.
The BLS reported that year-over-year job growth in the Detroit area was outpacing the national average, at 2.2 percent for the year ending in March. Ann Arbor’s employment grew by over four percent over the same period. Both financial services and professional/business services in the Detroit area saw annual growth exceeding four percent for this period. The construction sector remains strong, as development continues across the area. A pullback in auto sales, leading to more tepid manufacturing growth through the remainder of this cycle, means that the majority of job growth for the next year will emerge from the professional sectors currently gaining momentum.
Developers in Detroit are citing the widespread renovation of downtown’s buildings as a reason to build from scratch, like the newly announced Scott at Brush Park multi-use development, coming in at an estimated $65 million. Studies are being conducted on the East Riverfront to formulate a development plan, and Bedrock Detroit continues to snatch up buildings. Detroit home price growth continues to best the national average, but this pressure should cool as the currently strong construction numbers increase supply.
Waves are being made in the region by auto producers, for better and worse. FCA announced a cooperative partnership with Google in the development of automated driving technologies, and the investment of almost $75 million at its Trenton plant. This is on the heels of their layoffs in Sterling Heights. Ford plans to invest part of over $1 billion in its Livonia transmission plant, in addition to the construction of a massive new corporate campus. The thriving business environment is further evidenced by the re-development of two formerly closed hotels. The strength of this environment will be tested however, as auto sales moderate.
Click here for the complete South East Michigan Regional Economic Update: SEMI 2016Q2.