West Michigan/Grand Rapids Economy

[GR8scott]

Des Moines seems to be the closest comparison on a lot of levels to GR, and although its metro is smaller they seem to trend slightly above GR in a lot of things. Lets hope this means wages raise here to "catch up" and adjust. I thought Raleigh would be a higher number but maybe that doesnt include Durham/Chaple Hill? 

[GRDadof3]

Colliers just put out their recent market reports and I always love this graphic of the major downtown office buildings and their vacancies, which downtown/CBD is running right around 10% vacant now (lower than it's been in the last 5 years). 

 

[GRDadof3]

The Grand Rapids area in July dropped to its lowest July Unemployment rate in almost 20 years (1999 was lower by a few tenths of a point).

I'm not a fan of the "unemployment" number/percentage though because it's based on a lot of variables (labor force size, participation rate, benefits start/ending, etc) which can skew the number, but the actual labor force in the area is continuing to grow at historic rates (around 583,000 this past July), and non-farm payroll stood at 560,200 in July 2018, or around 21,000 people in the labor force looking for work and not employed. For comparison, in 2010 that number was 61,000 people actively looking for work and not working. 

None of these stats show 1099's who are working, as they don't report to a payroll department. 

https://www.bls.gov/regions/midwest/mi_grandrapids_msa.htm#eag

"Mining, logging and construction" is showing the healthiest gains with 8% more employed over this time last year. 

[joeDowntown]

On 8/8/2018 at 8:19 AM, GRDadof3 said:

Colliers just put out their recent market reports and I always love this graphic of the major downtown office buildings and their vacancies, which downtown/CBD is running right around 10% vacant now (lower than it's been in the last 5 years). 

 

That;s a great way of quickly showing vacancy downtown. Nice! I like the tiny sliver on the 10th floor of 171 Monroe.

[GRDadof3]

On 9/2/2018 at 2:21 PM, joeDowntown said:

That;s a great way of quickly showing vacancy downtown. Nice! I like the tiny sliver on the 10th floor of 171 Monroe.

Yes, I wonder what suite that is? 

[GRDadof3]

Job growth (non-farm payroll) back up to 2.9% year over year in September, to 571,600 employed. Unemployment rate will probably come in at 2.7% ish (not reported yet for GR).

16,600 more jobs than in September 2017. 

 

Other notable cities/metro area comps:

Grand Rapids 2.9%, 571,600

Indianapolis - 2.1%, 1.089 Million employed

Raleigh: 3.3%, 639,600

Buffalo, NY - 1.2%, 574,000

Omaha - 2.2%, 510,000

Louisville, KY - .8%, 675,800

Des Moines - 3.2%, 375,200

Boise ID - 2.8%, 330,200

Jacksonville FL - 4.4%, 714,400

Hartford, CT - 1.4%, 583,200

Denver CO - 2.7%, 1.509 Million

Salt Lake City - 2.9%, 741,500

Richmond VA - 1.4%, 684,400

Milwaukee - .7%, 874,500

Austin TX - 3.9%, 1.072 Million

Memphis - 2.3%, 658,500

Nashville 1.7%, 1.007 Million

Portland OR - 2.3%, 1.206 Million

Oklahoma City - 2.3%, 656,300

Columbus OH - 1.4%, 1.104 Million

Toledo OH - .8, 312,100

Las Vegas 3.2%, 1.020 Million

I didn't click through every metro but it looked like Orlando, FL was the reigning king/queen (of sizable metros) at 5.9% growth in one year to 1.306 Million employed, adding 73,300 jobs in one year (9/2017 - 9/2018). How the heck do you add 73,000 jobs to your economy in one year? 

 

I think not long ago I predicted we would pass Buffalo NY and Hartford CT soon... 

Source for GR data: https://www.bls.gov/regions/midwest/mi_grandrapids_msa.htm#eag

In our next issue, we may delve into the local and national housing market....   Probably after mid-term elections (as some economists are saying that the run-up is affecting big-ticket purchases). 

[GRDadof3]

I was having a discussion on another site as to the validity of Grand Rapids having the strongest economy (of large metros) in the Midwest and had to defend myself.   Of course the data is there. In addition to job growth, the GDP for the metro area has grown 45% since the recession, to just over $60 BILLION, which puts it on par with COUNTRIES like Panama, Luxembourg, and Costa Rica. You can knock manufacturing all you want but the GDP being kicked out by our local manufacturers is quite admirable and a lot of metros, especially in the South, would love it. 

Other Midwest/Great Lakes metro areas with sizable growth had GDP increases since the recession of: Columbus 42%, Mpls  30% and Indianapolis 29%.   The major metropolitan areas in the Great Lakes like Chicago and Detroit have not had nearly the GDP growth. 

https://fred.stlouisfed.org/series/NGMP24340

[thebeerqueer]

Thanks for pointing out the oft-overlooked GDP numbers.

Facts don't lie. 

[GRDadof3]

22 hours ago, thebeerqueer said:

Thanks for pointing out the oft-overlooked GDP numbers.

Facts don't lie. 

Poor little GDP!! 

[GRDadof3]

Because Brian Long primarily surveys purchasing managers (manufacturers mainly), he's usually pretty dower about the overall economy. Surprised to see this report:

 

GRAND RAPIDS – The economic pace for West Michigan was strong in September, but October was even stronger, said Brian G. Long, director of Supply Management Research in Grand Valley State University’s Seidman College of Business.

The current economy is about as good as it gets, Long said. “Hiring and retaining new workers continues to be a big problem for some firms, so we can’t expect much more expansion.”

https://mitechnews.com/featured/gvsu-economist-the-current-west-michigan-economy-is-about-as-good-as-it-gets/

 

[GRDadof3]

UM economists: Michigan job growth enters longest period since WWII

Breana Noble, The Detroit NewsPublished 9:30 a.m. ET Nov. 16, 2018 | Updated 11:21 p.m. ET Nov. 16, 2018

   

(Photo: Elise Amendola / AP file)

Michigan soon could enter the longest period of job growth since the World War II era, according to economists from the University of Michigan.

"The state has reversed the brain drain seen in the years leading up to the Great Recession when college graduates fled the state for jobs elsewhere. From 2010 to 2017, Michigan saw a 29-percent rise in the number of college-educated 25-to-34-year-olds. Thirteen of the 16 largest cities in the state, especially Detroit and Grand Rapids, are outgrowing the national average rate for young adults with at least a bachelor's degree."

https://www.detroitnews.com/story/business/2018/11/16/university-michigan-economy-michigan-job-growth-record-forecast/2013974002/

 

[TheSutterKing]

I wonder what impact the legalization of marijuana will have on the economy for Grand Rapids. If its anything like it was for Colorado, Michigan could be seeing some good numbers in the future. Maybe we need a "Weed" forum..

[GRDadof3]

2 hours ago, TheSutterKing said:

I wonder what impact the legalization of marijuana will have on the economy for Grand Rapids. If its anything like it was for Colorado, Michigan could be seeing some good numbers in the future. Maybe we need a "Weed" forum..

Sure, I thought about that the other day.

[walker]

Not sure where to put this one.  I guess this might be the best fit:

I just got around to reading it but a couple of weeks ago The Economist ran an article about last year’s federal tax cut legislation creating “opportunity zones.”  If I’m understanding this right, if you invest in these zones you can write off any capital gains you make for ten years.  As you can see by the title of the article, they consider it a boondoggle:

Will opportunity zones work? Or are they just a tax break for America’s wealthiest?

Now The Economist is not some radical hippy publication, it’s a staid old British news magazine started in 1843.  It is definitely well right of center.  The editors seem to be still grumpy about the loss of their empire.  I read it though mostly for the international news.   It is sort of like listening to the BBC.

Anyway, so I got to thinking, are any of these “opportunity zones” around here?  Can we get into this?

The answer is YES!  Here's a map showing the Grand Rapids area "opportunity zones";

  

Was anyone aware of this?  Anyone know of anyone thinking about taking advantage of this?

 

Footnotes:

OPPORTUNITY ZONES RESOURCES including how I came up with the map:

GOV: Opportunity Zones

From the IRS: List of “opportunity zone” census tracts by state and county:

IRS: opportunity zones - census tracts

Edited November 29, 2018 by walker
to fix link

[mpchicago]

Isn't the DeVos backed group working in one of these zones in the Boston Square area?  Amplify GR?   

Edited November 29, 2018 by mpchicago

[GRDadof3]

2 hours ago, walker said:

Not sure where to put this one.  I guess this might be the best fit:

I just got around to reading it but a couple of weeks ago The Economist ran an article about last year’s federal tax cut legislation creating “opportunity zones.”  If I’m understanding this right, if you invest in these zones you can write off any capital gains you make for ten years.  As you can see by the title of the article, they consider it a boondoggle:

Will opportunity zones work? Or are they just a tax break for America’s wealthiest?

Now The Economist is not some radical hippy publication, it’s a staid old British news magazine started in 1843.  It is definitely well right of center.  The editors seem to be still grumpy about the loss of their empire.  I read it though mostly for the international news.   It is sort of like listening to the BBC.

Anyway, so I got to thinking, are any of these “opportunity zones” around here?  Can we get into this?

The answer is YES!  Here's a map showing the Grand Rapids area "opportunity zones";

  

Was anyone aware of this?  Anyone know of anyone thinking about taking advantage of this?

 

Footnotes:

OPPORTUNITY ZONES RESOURCES including how I came up with the map:

GOV: Opportunity Zones

From the IRS: List of “opportunity zone” census tracts by state and county:

IRS: opportunity zones - census tracts

I hate to be ol grumpy pants like the Economist but you don't pay capital gains on your primary residence unless it's more than $250,000 profit for single filer or $500,000 for married filling jointly.  I can't imagine any house in those census tracts ever appreciating that much in 10 years. So capital gains tax primarily just applies to investment properties. This Opportunity Zone tax benefit only goes to investment property owners (landlords) which heaven knows I don't think this area needs any more of those. 

This is a really bad tax break that was not needed. If you're a landlord (like me), I'm charging enough rent to be cash-flow-positive enough to make the risk worth my while. If the home goes up in value over the time I own it and go to sell, that's just a bonus (one for which I'll pay capital gains tax on and not complain). 

So investors will flood into these zones and buy up properties (even more than they have been) driving up prices which will in turn drive up rents, forcing people out or at least giving them way less disposable income to spend on local businesses. Making poor people even poorer. I would think even most conservatives would see this as a bad idea. 

 

[walker]

1 hour ago, GRDadof3 said:

I hate to be ol grumpy pants like the Economist but you don't pay capital gains on your primary residence unless it's more than $250,000 profit for single filer or $500,000 for married filling jointly.  I can't imagine any house in those census tracts ever appreciating that much in 10 years. So capital gains tax primarily just applies to investment properties. This Opportunity Zone tax benefit only goes to investment property owners (landlords) which heaven knows I don't think this area needs any more of those. 

This is a really bad tax break that was not needed. If you're a landlord (like me), I'm charging enough rent to be cash-flow-positive enough to make the risk worth my while. If the home goes up in value over the time I own it and go to sell, that's just a bonus (one for which I'll pay capital gains tax on and not complain). 

So investors will flood into these zones and buy up properties (even more than they have been) driving up prices which will in turn drive up rents, forcing people out or at least giving them way less disposable income to spend on local businesses. Making poor people even poorer. I would think even most conservatives would see this as a bad idea. 

 

Even though I was trying to present this in sort of neutral way to see what people had to say, you answered it exactly the way I was hoping someone would.  Makes me feel good.  I completely agree and thanks. 

[BLUESCRUBS]

I am not super educated on this topic. Can anyone share how this is different/similar to the Renaissance zones of the late 90's early 2000's?Am I correct that the Renaissance zones were just tax free for something like 10 years? 

Edited November 29, 2018 by BLUESCRUBS

[x99]

28 minutes ago, BLUESCRUBS said:

I am not super educated on this topic. Can anyone share how this is different/similar to the Renaissance zones of the late 90's early 2000's?Am I correct that the Renaissance zones were just tax free for something like 10 years? 

There was no state income tax for people who lived there, or businesses who operated there (among other perks).  It wasn't necessarily intentional, but RenZones brought about scads of apartment conversions, with lots of high income single people living in them (see: Union Square).   It was probably singly responsible for Wealthy Street as it is today, obviously Union Square, and arguably the new Meijer could even be an offshoot.  I think that tax break worked shockingly well.  This tax break is not as direct.  This break is designed to tempt rich people to stuff their capital next door to poor people, and grow businesses there, but it isn't nearly as aggressive about it as RenZones were in terms of tempting rich people to actually move into impoverished areas.  

Edited November 29, 2018 by x99

[joeDowntown]

1 hour ago, x99 said:

There was no state income tax for people who lived there, or businesses who operated there (among other perks).  It wasn't necessarily intentional, but RenZones brought about scads of apartment conversions, with lots of high income single people living in them (see: Union Square).   It was probably singly responsible for Wealthy Street as it is today, obviously Union Square, and arguably the new Meijer could even be an offshoot.  I think that tax break worked shockingly well.  This tax break is not as direct.  This break is designed to tempt rich people to stuff their capital next door to poor people, and grow businesses there, but it isn't nearly as aggressive about it as RenZones were in terms of tempting rich people to actually move into impoverished areas.  

I'd also say that North Monroe saw a boom from the Ren Zone. Jonathan Rooks was a master at Marketing the Ren Zones for residential (he took a couple unsuccessful condo projects and sold them out pretty quickly). He moved on from downtown GR and now has his hands in a lot of Muskegon development.

Joe

[GRDadof3]

3 hours ago, BLUESCRUBS said:

I am not super educated on this topic. Can anyone share how this is different/similar to the Renaissance zones of the late 90's early 2000's?Am I correct that the Renaissance zones were just tax free for something like 10 years? 

In Ren Zones businesses and individuals were exempt from city of GR income taxes, Michigan Single Business Tax (no longer around), Michigan personal income tax, and local real and personal property tax. It was a HUGE tax savings and actually encouraged a good thing: ownership in the Ren Zones. If you bought a condo in a Ren Zone you had no income taxes and no property taxes. And as Joe mentioned, it encouraged turning vacant or underused industrial buildings into reuse, either as commercial property or residential. John Rooks sold nearly 500 condo units in Ren Zones. I think I remember 10 years into the program which started in 1997 (?) , the city had seen almost $400 Million in investment in Ren Zones. Oak Industrial Park was a Ren Zone and saw a lot of commercial and industrial investment. 

Only Brownfield has been more successful, and that's statewide too. 

Neighborhood Enterprise Zones are a better deal for homeowners to invest in struggling areas.

Giving tax breaks for capital gains taxes? Pretty friggin stupid. 

 

[GRDadof3]

Interesting article today in Rapid Growth about people moving to the area:
 

http://www.rapidgrowthmedia.com/features/Relocating_to_GR.aspx

[GRDadof3]

The Right Place in their yearly economic forecast is saying that 2019 will be a strong year for the local economy. I even read a quote lately that the country will "talk itself into a recession in 2020," which is kind of how I feel lately. There really isn't a warrant for a recession, other than "we're due for one."  The housing market will take a much needed breather in 2019 I think, but there's no "mountain of inventory of homes" for sale like there was before the Great Recession. A return to a normal real estate market shouldn't mean = recession.

The major concern lately is still that employers nationally cannot find the talent they need. How that changes any time soon or leads to a recession is above my pay grade. 

https://www.grbj.com/articles/92225-region-is-right-place-for-growth

My only concern for the local economy is that, while service/professional jobs have skyrocketed in growth in the past 6 or 7 years, so have manufacturing jobs. Mfg jobs are still close to 20% of the local workforce. Perhaps it's a way more diversified manufacturing workforce (food is big, medical, military suppliers have all surged locally). 

 

[ProtoSapien]

A recession could be triggered by the fact that the average worker's pay has not grown as quickly as the economy and with the current occupant of the White House being a "tariff man" but clearly not understanding the mechanics of how tariffs actually work, should a trade war ensue and companies become forced into passing along some of the increased costs of importing both raw materials and finished goods, this will drive up prices on a wide variety of items for consumers, construction companies, manufacturers and others.  The issue then becomes a decline in sales as customers pull back spending or ballooning debt due to a greater reliance on credit - or worse, a combination of the two.   The trick will be managing a potential trade dispute into a modest economic slowdown rather than a full on recession.  So if you are a betting person, it comes down to your confidence that the clown car currently driving around Washington D.C.  has the acumen to pull off such a feat.  Or, things may just work out fine and in the spirit of camaraderie and cooperation, the United States could look to lead with policies that advance the interests of all involved  and economic stability is achieved for the foreseeable future.

[GRDadof3]

On 12/17/2018 at 9:56 AM, ProtoSapien said:

A recession could be triggered by the fact that the average worker's pay has not grown as quickly as the economy and with the current occupant of the White House being a "tariff man" but clearly not understanding the mechanics of how tariffs actually work, should a trade war ensue and companies become forced into passing along some of the increased costs of importing both raw materials and finished goods, this will drive up prices on a wide variety of items for consumers, construction companies, manufacturers and others.  The issue then becomes a decline in sales as customers pull back spending or ballooning debt due to a greater reliance on credit - or worse, a combination of the two.   The trick will be managing a potential trade dispute into a modest economic slowdown rather than a full on recession.  So if you are a betting person, it comes down to your confidence that the clown car currently driving around Washington D.C.  has the acumen to pull off such a feat.  Or, things may just work out fine and in the spirit of camaraderie and cooperation, the United States could look to lead with policies that advance the interests of all involved  and economic stability is achieved for the foreseeable future.

I think also managing the Fed rate to stave off inflation while not putting the brakes on the economy will be tricky. 

But then again, when the employment/unemployment situation was as good as it is now was back in 1998. We went into a recession that was pretty short lived but then 9/11 hit and a general doldrum hung around after that for almost a decade. 

Then the Great Recession hit to compound matters, which was almost completely driven by the sinking housing market and reckless lending. Homebuilders had almost two years of inventory built up that they couldn't sell, which killed everyone else's home values and down everything fell.

Right now there's about 6 months of new home inventory (nationally) and about 4 months inventory of existing homes (nationally).  It's still a pretty tight (healthy) housing market, although sales slowed the second half of 2018 mostly due to rising construction costs and interest rates. Many people are saying they picked up again in November/early December. 

file:///C:/Users/grjef/Downloads/nationwide-sales-and-inventory-100218.pdf

I was reviewing Kent County's financial data from last year with all of this Land Bank kerfuffle and found this interesting table, particularly about school enrollment. Particularly with the mini baby boom around 2000, those kids have pretty much all moved onto college now.