Thursday, December 18, 2008

Got Hope?

Very hard to find it right now. On the near horizon all you can see is a tidal wave that will destroy our state budget and threaten everything that we fought so hard to protect, and, when you realize that the only thing that can save us in the short term is George W. Bush, it starts to feel like we are living in a version of "Twas the Night Before Christmas" as told by Stephen King. Some really scary stuff being uttered out there; unemployment shooting up, tax revenue down, and Republicans still insisting that we "dig faster!" as a way out of our problems. Not good.

Through all the darkness, there are still glimmers of hope, believe it or not. Some wise person once said, "There is always hope in crisis", so, you just gotta go look for it, and cling to it with all your might.

Found some hope this morning in the form of Donald Grimes, economic forecaster with the University of Michigan. IF we can save some semblance of the auto industry, and IF St. Obama can stuff our stockings next year with an aggressive national stimulus plan, our future here in Michigan will be very bright indeed. How? By continuing down the path we had already set out on, because as it turns out, it really is working.

Michigan Business Review: Do you see any hopeful sectors for Michigan? You have previously talked about health care as strength in particular in Oakland County.

Grimes:There's an amazing number of hopeful sectors actually in Michigan. As part of the study with the Research Seminar for Quantitative Economics that I was involved in, I believe we found 280 private-sector industries that between 2002 and 2007 actually grew faster in terms of employment growth in Michigan than they did nationally. That's a staggering number I never would have expected. Health care was one of the aggregate industry groups. There was also some that were in medical product manufacturing, pharmaceutical product manufacturing, agricultural and foodstuff manufacturing. It was in a wide variety of industries. Even semiconductors in Michigan were doing better than they were nationally.

One down-side - these industries don't pay as well as the ones that are contracting, and the loss of auto jobs still threatens to overwhelm everything. But eventually, consumer demand will build, the gates will open up, and we will be positioned to benefit from it all.

MBR: Obama has talked about spending some of the stimulus on alternative and renewable energies. Gov. Jennifer Granholm traveled to Washington recently to pitch spending some of it in Michigan. How much would that help?

Grimes:It would help in the short term sort of a little bit, not to offset the tremendous job losses that are going to come from auto sales being down, but it'll help a little bit in creating jobs in the near term. But in the long term it'll make for a more prosperous future. The key is to keep your eye on the ball of what you're going to look like in five years, 10 years, 20 years down the road. A lot of this infrastructure that President-elect Obama is talking about is a great idea.

MBR: In previous recessions, Michigan, led by Detroit, tends to slip into recession before the rest of the country but also emerge earlier. Is that likely to happen this time?

Grimes: We never got out of the 2001 recession, so we never emerged in 2003 or '04. Historically that's always been the case up until 2003. What tends to happen is there's this pent-up demand for consumer durables or factories for investment product. So when you come out of a recession that pent-up demand really boosts Detroit, which makes both a lot of consumer durables, like cars, but also we are a big center for investment in factories, machinery that goes into factories. So to the extent that there's this pent-up demand that's met as we're coming out of the recession, we would benefit. But that's assuming that the Detroit Three survive and then turn around in 2010, '11 and come up with a product mix that's very appealing to the consumer.

You could quibble about the use of the word "recession" here - we basically ended up treading water until the past couple of years - but during the time from 2002-07 we have been adding those new industries that will eventually pay off. The "five year" projection was only erroneous in time frame; the credit crisis/auto sales downturn has delayed our recovery for now, but we are going in the right direction.

There is no doubt that 2009 is going to be a very rough year. The auto industry will not look the same after this is done, and neither will this state, but with a few lucky breaks we all will survive and be better off for the restructuring. The only question now is whether or not Bush will screw up this last little piece of his legacy and set us back even further time-wise, but even if he does - there is always hope in the darkness.

Right now, it's all we have left, so nurture it as best you can. Even Stephen King stories tend to end on a positive note - you just have to get through all the screaming first.