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Michigan last in economic growth

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Michigan's economy dead last among states, study finds

Tuesday, April 12, 2005

By Sarah Kellogg

Washington Bureau

WASHINGTON -- A new national report confirms what Michigan residents have suspected for much of the last two years: The state has settled into the nation's economic basement.

Michigan ranks last among the states in economic momentum, according to an analysis published in the State Policy Reports newsletter, a project co-sponsored by the National Governors Association and the National Conference of State Legislatures.

"I think Michigan's ranking reflects the fact that the state is much more firmly entrenched in manufacturing than most states," said Marcia Howard, the newsletter's executive editor. "Michigan's reliance on heavy industry, especially the auto industry, is just higher than the typical state and when those industries are in trouble, Michigan is in trouble."

The index of state economic momentum ranks states on growth in three key areas: personal income, employment and population. It is designed to determine which states are pulling the national economy up and which ones are dragging it down.

Michigan received a -1.45 on the index, according to the report released last week. To calculate each state's score, analysts averaged the results of the three measures nationally, and then set the national average at zero. Each state's score is expressed then as a percentage above or below the national average.

Nevada, which ranked first, received a score of 3.66. Only Michigan and Alaska (-1.29) scored below a -1 on the index. Illinois (-0.76), Ohio (-0.72) and New York (-0.64) rounded out the bottom five.

Howard said what spells trouble for Michigan is that while the rest of the nation appears to be shaking off the economic doldrums of just two years ago, Michigan isn't.

"Looking at 2003, Michigan was lagging the national average by half a percent and in 2005 it's lagging by a percent and a half," Howard said. "A state like Ohio was doing worse than Michigan in 2003, and now it's doing better than Michigan."

In March 2003, Michigan ranked 44th on the index while Ohio ranked 46th. Ohio ranked 47th in 2005 compared to Michigan's 50th. Michigan also ranked 50th in March 2004.

A spokeswoman for Gov. Jennifer Granholm said the governor's "Jobs Today, Jobs Tomorrow" plan, which would invest in new technology, public infrastructure and education to woo jobs and people to Michigan, is designed to address the problem.

"We know that Michigan's economic fortune has long been tied, for better or for worse, to the auto industry," said Heidi Hansen. "That's why the governor is fighting so hard to protect automotive jobs and to diversify the economy beyond the automotive base and encourage job providers to bring new jobs here."

An economist at the Mackinac Center for Public Policy, a free-market policy group in Midland, argues that Michigan's prospects might improve if it adopted the same kind of low-tax and low-cost-labor policies of states in the South and West that are doing far better.

"People in Michigan would like to see the type of blistering growth that's associated with Nevada," said Michael LaFaive, a Mackinac Center economist. "But the only way we can compete with it is to change our tax policy, because we certainly can't compete on how nice the weather is."

The three measures of economic momentum, based on the most recent statistics available, showcase Michigan's challenges:

Personal income grew in Michigan by 3.29 percent between March 2003 and March 2004, placing Michigan second to last among the states. The national average was 5.15 percent.

Michigan was last among the states in employment growth between January 2004 and January 2005 with a -0.3 percent decline, compared to a national average of 1.4 percent.

And Michigan tied for 43rd in population growth between 2003 and 2004 with 0.3 percent. The national average was 1 percent.

Contact reporter Sarah Kellogg at (202) 383-7810 or e-mail her at [email protected]

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