Michigan's economy backpedaling, study shows

WASHINGTON -- Michigan's economic momentum is the worst among the 50 states, lagging the vitality of even other Rust Belt states and those in the Deep South, according to an analysis of state economic trends.

The latest report by Federal Funds Information for States, a research group financed by the National Governors Association and the National Conference of State Legislatures, shows Michigan's economic momentum in the fourth quarter of 2006 was moving in reverse.

``Michigan is clearly in the worst shape of all the states,'' Marcia Howard, the analyst and author of the report, said Tuesday. ``Michigan's population isn't growing that much, and on top of that, you have the whole contraction of the manufacturing sector.''

The Index of State Economic Momentum ranks states based on their most recent performance on three key measures -- growth in personal income, employment and population. The components are averaged, and the national average is set at zero. State scores are expressed as a percentage above or below the national average. Michigan's score was -1.97.

State officials acknowledged the last-place score reflects Michigan's current economic predicament.

``We would never deny that Michigan's economy is challenged because of globalization,'' said Liz Boyd, a spokeswoman for Gov. Jennifer Granholm. ``Our state's economy has been built for over 100 years on a manufacturing platform. It is going to take some time to transform that economy.''

Boyd said she had reservations about the index's findings in the fourth quarter of 2006 because they were slanted by changes in Louisiana. States are graded on a curve, and Louisiana's robust employment and population growth a year after Hurricane Katrina resulted in poor scores for other states.

Howard conceded that Louisiana's hurricane recovery efforts affected the scoring curve, but she said it doesn't change the fact that Michigan and a handful of other states in the Midwest and New England are struggling.

``Every state around Michigan isn't doing that well, either,'' Howard said, noting that Ohio ranked 48th, Indiana 45th and Wisconsin 43rd.

In fact, 19 of the 50 states had negative economic momentum in the analysis, Howard said.

The analysis found that Louisiana jumped to No. 1 in economic momentum with a score of 35.85, followed by Nevada (2.29), Wyoming (2.08), Arizona (2.07) and Utah (1.96). Along with Michigan at No. 50, the bottom five included Connecticut (-1.21), Rhode Island (-1.25), Ohio (-1.28) and Vermont (-1.35).

On the three key measures, Michigan ranked last on two of them -- personal-income growth and employment growth. It ranked 44th in population growth, seeing a 0.2 percent increase between 2004 and 2005.

Comerica economist Dana Johnson, based in Detroit, said Michigan continues to suffer as a result of its strong ties to the automobile industry, noting that even steady growth in service-sector jobs cannot offset the losses in manufacturing employment in the last few years.