Even with new COVID-19 restrictions in place for the next three weeks, Michigan sits “well positioned” to eventually recover economically from the COVID-19 pandemic, according to a new Comerica Inc. outlook.
The restrictions announced Sunday by state officials largely affect restaurants, entertainment venues and schools, resulting in economic drags that are felt locally and by households, Comerica economists wrote in their outlook issued today.
Comerica economists noted the strength of Michigan’s manufacturing sector that is not directly affected by the new round of restrictions that take effect at 12:01 a.m. Wednesday until Dec. 8.
“As long as durable goods production can continue, we expect that this new round of social mitigation policy tightening will not exert the severe drag on state and national-level economic performance that we saw during the lockdowns of last spring which included a production halt by U.S. automakers,” the outlook states. “The fact that we are seeing another surge in the virus suggests that there will be even more pent-up demand for the autos and other manufactured goods that Michigan produces once final demand starts to renormalize, hopefully by the second half of 2021.”
Michigan was a “growth leader for the U.S. in the aftermath of the Great Recession in late 2009 and 2010 with the help of the auto industry bailout and the cash-for-clunkers program,” according to Comerica.
“Similarly, we expect to see positive manufacturing conditions in Michigan through 2021, supporting household income and the service sector,” economists wrote.
Comerica forecasts Real GDP growth of 4.3 percent for Michigan’s economy in the fourth quarter and 2.6 percent in the first quarter of 2021.
Real GDP in the state should average a negative 5.7 percent for all of 2020 and grow 4.5 percent throughout next year, Comerica predicts.
In a national economic outlook, Comerica predicted Real GDP for the U.S. of 3.2 percent in the fourth quarter and 2.9 percent in the first quarter of 2021. U.S. Real GDP should average 3.8 percent for all of 2021, according to Comerica’s latest national economic outlook that takes into account tighter restrictions across the nation.
“The economic drag from tighter social mitigation policies in the U.S. may range from barely observable on the national scale, to disastrous. To put it another way, we know that there is a large brake tightening on the wheels of the U.S. economy,” Comerica economist wrote in the Nov. 11 U.S. outlook. “We do not know how far the tightening is going to go, where the tightening will be and how long it is going to last. The range of outcomes between the optimistic case — not far, isolated and brief — and the pessimistic case — restrictive, widespread and enduring — is huge.”
After hitting 20.1 percent in the second quarter, Michigan’s unemployment rate should continue to gradually decline, according to the updated state outlook. Comerica predicts a 7.4 percent state unemployment rate for the fourth quarter, dipping to 6.8 percent by the end of 2021.