Michigan’s economy fell further than the nation as a whole in the second quarter and could take three years to return to the peak of late 2019, according to a new economic outlook from Comerica Inc.
Comerica estimates the state’s economy declined at a nearly 41 percent annualized rate from April to June. The state’s quarterly economic plunge was “a little worse” than the nearly 33-percent decrease recorded nationally in Real GDP, a result of the concentration of the auto industry that was essentially shutdown for weeks in the spring, according to Comerica.
“Automotive assembly lines were shut down in April and thousands of employees were furloughed, rippling through the state economy. We expect to see some recovery in Q3 reflecting the resumption of auto production and the partial rollback of social mitigation policies,” Comerica economists wrote in their updated outlook for Michigan. “U.S. auto sales have climbed out of a deep hole in April, when they sunk to a 9.0 million unit rate, narrowly worse than their collapse during the Great Recession. By July, U.S. auto sales had rebounded to a 15.0 million unit rate, still well below February’s 18.0 million unit rate.”
Comerica predicts state GDP, after a 40.6-percent decline in the second quarter, will grow 17.3 percent in the present third quarter, followed by 8.3 percent in the fourth. The state will record a decline in GDP of 7.9 percent for the full year.
Michigan GDP growth slows to 3.0 percent for the first quarter of 2021 and picks up to 5.5 percent for the second quarter, according to the outlook that predicts a 2.3 percent economic growth for the state for all of 2021.
“Michigan and all other states face ongoing uncertainties about the path of the coronavirus pandemic, school closures, fiscal stimulus and the policy ramifications of the upcoming presidential election,” the outlook states. “Our third quarter forecast shows an ongoing economic recovery beginning in Q3, but it is a slow recovery requiring more than three years to recapture peak GDP from 2019 Q4.”
After a “quick partial reabsorption of furloughed workers this year,” Comerica expects Michigan’s “labor uptake to slow significantly in 2021,” keeping unemployment high at least through next year.
Comerica predicts the state’s unemployment will decline from 20 percent for the second quarter to 16.4 percent in the third quarter and 15.3 percent in the fourth.
The state’s unemployment rate will begin 2021 at 14.6 percent for the first quarter, the outlook adds, while the rate will ease only slightly throughout next year to 13.3 percent in the fourth quarter.
Amid the slow economic recovery for Michigan, the Comerica outlook also expects personal and business bankruptcies to spike in the fourth quarter and well into 2021.