Good news and bad news from Michigan
First, the good news, courtesy of Wayne State University.
Southeast Michigan economy experienced six straight months of growth according to local Purchasing Managers Index
The Southeast Michigan Purchasing Managers Index (PMI) dipped nearly 10 points to 56.7 in July, suggesting that the local economy experienced growth, but at a slower rate than in May and June.
July marks the sixth consecutive month with PMI values over 50. An index above 50 indicates an expanding economy. The higher the value is above 50, the greater the rate of expansion. The three month average for the Southeast Michigan PMI is 61.6.
According to the survey of local purchasing managers, employment experienced the greatest rate of growth in July when compared to other components of the index such as production, new orders and deliveries. Those areas also experienced growth, but at a slower rate than in recent months.
The local index is compiled monthly by the Wayne State University School of Business Administration and the Southeast Michigan chapter of the Institute for Supply Management. According to Nitin Paranjpe, an economist and member of the global supply chain faculty at Wayne State's business school, the employment index is a lagging indicator, hinting at how the economy performed over the preceding months.
"Purchasing managers' confidence grew as economic conditions improved during the last quarter. That is now showing up as an increase in the employment index and a slight decrease in Michigan's unemployment rate," he said.
A slow but steady rate of economic growth was apparent across the country and other parts of the world in July, though some areas experienced growth and others a slowdown. The national version of the PMI, a compilation of manufacturing data for the United States as a whole, experienced a slight drop from 56.2 to 55.5. Chicago's PMI expanded from 59.1 to 62.3. The Euro Zone PMI increased to 56.7 from 55.6, primarily a result of a strong showing by Germany, but China's PMI showed a slight slowing.
In Southeast Michigan, more than 95 percent of purchasing managers surveyed in July said they expect that the local economy will remain the same or become more stable over the next six months. Stabilization of automotive sales, recovery in home sales and unemployment remain concerns, though there is a sense of relief that those with jobs appear to be spending money.
Paranjpe said that as purchasing managers start to see and have seen some sustained growth in the economy, they will become more comfortable with the idea of hiring again.
Purchasing Manager Indexes are among the most closely watched business surveys in the world. They are used by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate, and often unique monthly indicators of economic trends. To download the complete Southeast Michigan Purchasing Managers Index report for July, or to view an archive of prior reports, visit the Institute for Supply Management - Southeast Michigan economic surveys library at http://www.ism-sem.org/cat/Additional+Links-9.html?49.
And now, the bad news, courtesy of the University of Michigan.
Local governments struggle with fiscal, service and staffing pressures
ANN ARBOR, Mich.-Michigan communities are sick-and their prognosis for fiscal health is grim.
The Michigan Public Policy Survey by the University of Michigan indicates that many local jurisdictions are struggling financially due to declines in tax revenues, state aid and revenue from fees and licenses.
"The latest MPPS confirms anecdotal evidence in recent news reports, showing that local governments across Michigan are less able to meet their fiscal needs now than they were in the previous year," said Brian Jacob, who directs the Center for Local, State, and Urban Policy, which conducted the biannual survey.
MPPS compiles local government leaders' assessments of their jurisdictions' fiscal conditions. The surveys, which were conducted in spring 2010 and spring 2009, were sent via the Internet and hardcopy to top elected and appointed officials in all 1,858 local jurisdictions. More than 1,300 individuals returned valid surveys each year.
The Upper Peninsula, Northern Lower Peninsula and West Central regions of the state had particularly high spikes in the incidence of declining property taxes in 2010, nearly doubling their rates compared to a year earlier. Still, this problem is most prevalent in Southeast Michigan, which is the most stressed region with lost property tax revenues.
Declining fiscal health also results from higher costs, particularly related to personnel, and greater demands for public service such as public safety, infrastructure and human services.
Some jurisdictions are implementing strategies to cope with their fiscal challenges: relying more on general fund and "rainy day" fund balances, charging higher fees and licenses, spending less on infrastructure and cutting services.
Nearly one in three Michigan jurisdictions overall (29 percent) report they will "somewhat" or "greatly decrease" the amount of services they provide in the coming year, according to the survey.
The survey also noted other options to help communities, but few government leaders have pursued them. Compared to other options, relatively few jurisdictions are selling assets (parks and buildings), increasing property tax rates, or increasing their levels of debt.
When coping with the spreading fiscal crisis, many governments are looking at their employee costs to offset declining revenues, according to the survey. Overall, 27 percent of governments reported decreasing their employment levels over the last year, though this rises to 85 percent of the state's largest jurisdictions. In the upcoming year, while only 14% of all jurisdictions expect further staff layoffs, this increases to 55% in the largest communities.
Another option being implemented by many local governments to address personnel costs is having employees and retirees cover more of their own health care costs. In addition, some governments plan to have their employees pay a higher share of their retirement contributions in the upcoming year.
Government leaders also answered survey questions about employee furloughs and four-day work weeks. While these strategies were less common last year, state residents should expect to see more communities utilizing these options in the coming year.
CLOSUP is located at U-M's Gerald R. Ford School of Public Policy.
You know what, these are interesting times here in Michigan, and especially in Detroit, and I wouldn't miss them for the world.