2018-10-21 / Marketplace

MSU economist wary about the future

BY PHIL FOLEY
810-452-2616 • pfoley@mihomepaper.com


Michigan State University Economist Charles Ballard told the Economic Club of Lapeer County Thursday that Lapeer County is in the state’s top third for per capita income. 
Photo by Phil Foley Michigan State University Economist Charles Ballard told the Economic Club of Lapeer County Thursday that Lapeer County is in the state’s top third for per capita income. Photo by Phil Foley ELBA TWP. — Lapeer County is “a little boat floating on a vast world economy,” Michigan State University (MSU) Economist Charles Ballard told members of the Economic Club of Lapeer County at their last luncheon of the year held Thursday.

Michigan and Lapeer County are doing well, but the concern, he said, is how long will it last? Ballard, who’s been director of the State of the State Survey at MSU’s Institute for Public Policy and Social Research since 2007, said the national economy is in the midst of its second longest expansion since 1854, when records began being kept.

He told club members that during a meeting of economists in August everyone agreed there’s likely to be a recession in the next five years, but no one could predict exactly when it will begin or what will trigger it.

“My parents,” he said, “are in their 90s and they could live another 30 years, but that would be outside the statistical norm.” By the same token, the national economy could continue to expand indefinitely, but that would be outside the statistical norm.

Noting that the longest economic expansion on record, 120 months, ran from 1991 to 2001, Ballard said the current expansion could run past its 112 months, which began in 2009, but that would be outside the statistical norm.

He said the seven longest national economic expansions have all taken place since 1938 because “The Federal Reserve has gotten better at managing these things.” Intervention by the federal government during the last downturn, he said, meant that Michigan “had a bumpy landing, but the plane did not explode on impact.”

Still, Michigan has seen a dramatic shift in fortunes. In the early 1950s, Ballard said, Michigan was in the top 10 nationwide for per capita income but the state slipped to 30th as manufacturing faded. Michigan, he said, “was the poster child for an undiversified and booming economy,” with manufacturing accounting for between 48 and 49 percent of the state’s economic activity.

He said the state’s economy has become more diverse, but that’s been more a function of a shrinking manufacturing sector than a dramatic expansion of other sectors.

Still, he said, “We’re clawing our way back one job at a time.” Since 2015 the state’s poverty rate has dropped from 13.5 percent to 12.3 percent and per capita income has grown from 13 percent below the national average to just 10 percent below.

But, said Ballard, there are mixed results in Michigan’s economic news. While the per capita income statewide was 14 percent higher last year than it was in 1999, the median household income is 15 percent lower.

Compared to other counties, Lapeer seems to be doing pretty well on a per capita basis. At 28th among the state’s 83 counties with $39,449 per capita, Lapeer County ranks in the state’s top third.

A month ago, Ballard said, trade was at the top of his list of things that might trigger the next recession, but he said instead of blowing up NAFTA, the federal government tweaked it.

Now he said his major concerns include an upsurge in corporate debt, rising interest rates, a continued labor shortage and a serious drop in oil inventories. Noting that Venzuela is on the “verge of collapse” and that U.S. relations with Saudi Arabia are tense at the moment, oil is his biggest concern at the moment.

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