Detroit Regional Chamber President and Chief Executive Officer Sandy K. Baruah presented the 2023 State of the Region report by sharing the good, mixed, and bad news within the report’s findings. This year’s report focused on a few themes:
- The impact of inflation and rising interest rates – and how consumers feel about these dynamics
- The disconnect between general economic concerns and consumer behavior
- The outlook for a recession in 2023
The Good News: Detroit Region Outpaced State and Nation GDP
Although the adage is “when the United States gets a cold, Michigan gets the flu,” the data shows that the Detroit Region has been resilient in its post-pandemic recovery, with a GDP that outpaced the state and nation in 2021 and Michigan tracking with national-level results in 2022.
Private-sector jobs also returned to pre-pandemic levels, which are up 2.5% year-over-year.
“Despite elevated inflation and the high-profile layoffs we have seen in the media, our region has 200,000 job openings today,” which is a strong number, according to Baruah. There are seven unemployed people for every 10 job openings.
Baruah also remarked on the Region’s low unemployment rate. “Just like the GDP number, our unemployment rate defied expectations and we have been at or below the national average for most of the pandemic,” with it currently being lower than the national rate at 2.9%.
When looking at consumer spending, it’s clear that inflation concerns have not stopped consumers from spending. Baruah noted that despite high inflation, consumers bought more goods and services than they did a year ago with an increase from $13.8 trillion in Q3 2021 to $14.1 trillion in Q3 2022. This rate, however, is cooling and is expected to continue throughout 2023.
Another good sign for the Detroit Region’s long-term economic health is new business applications, which has been 45% higher than pre-pandemic. This is notable considering the precedent of people not starting new businesses during economic challenges.
The Mixed News: Inflation Still Concern Despite Robust Spending
Inflation remains a great concern for residents, yet consumers keep spending. Peaking in June 2022 at 9.1% and recently tracked at 6.5%, inflation is still a top concern, but it has not kept people from spending and perceiving their economic position as the same or better as in the past.
Baruah noted that Chief Executive Officers are not much different than consumers as they “remain bullish about their own situations.” With 90% expecting to increase their capital budgets in 2023 and 44% planning to expand their workforces. 85% are expecting a brief and shallow economic downturn overall.
The Bad News: Detroit Region’s Labor Force Participation Rate Continues Downward
“Moderating inflation numbers is not lifting the mood of consumers,” Baruah said, noting consumer sentiment is reached a record low in June 2022 – even worse than during the Great Recession in 2008. However, consumers remain optimistic about their own circumstances, with two-thirds reporting that they are doing the same or better than they were a year ago — they just think everyone else is in trouble.
The Detroit Region’s labor force participation rate continues a downward trend, with Michigan ranking 39th out of the 50 states.
“These are not the numbers we need to see in order for our businesses to fill their hallways, offices, and factory floors with the talent that is needed to compete and win in the 21st century,” Baruah said.
Despite visitor levels reaching near pre-pandemic levels, momentum remains slow for daily workers in downtown Detroit. With remote workers in the Detroit Region increasing from 4% to 20% during the pandemic, Baruah suggests “thinking about how we pivot our downtown to ensure it remains the vital piece of this state that it has been.”
The Chamber Agenda: Looking Forward
Baruah wrapped up his presentation with a look forward at a few key areas that the Chamber is focused on supporting and improving. These include increasing educational attainment and strengthening Michigan’s talent pipeline, closing equity gaps, growing the state’s population, making Michigan more economically competitive, and making smart investments.
Troubling data such as Michigan’s 43% educational attainment rate – which ranks it well below peer regions – and the Detroit Region’s wage gaps among difference racial demographics growing since 2019. The state and Detroit Region have a lot of work to do, but the Chamber is committed to participating in positive progress.