The Detroit Regional Chamber, based in Detroit, examined the impact of COVID-19 on metro Detroit’s economy and found in a new report that some sectors are still struggling to overcome the pandemic.
“COVID-19 continues to leave deep scars on the Detroit region’s businesses and communities,” says Sandy K. Baruah, president and CEO of the chamber. “The pandemic has exacerbated long-term inequalities with many parts of the economy and society. This has led to a deeply uneven recovery where some industries have shown quick improvements and gains, while millions of Americans, Michiganders, and the businesses that once employed them are still struggling.”
- More than 2.2 million initial unemployment claims were filed in Michigan from March-December 2020. The number of claims from those continuing on unemployment have decreased yet remained at nearly 200,000 per week through the end of 2020.
- As of the end of December, the number of small businesses open in the region decreased by 32.6 percent, with nearly a 40 percent drop in revenues since January 2020.
- Consumer spending in the region decreased by 18.4 percent by the end of December compared to January 2020.
- The region’s transportation and arts, entertainment, and recreation industries experienced the most extensive consumer spending declines, by 61.2 percent and 66.7 percent, respectively.
- In a December 2020 Detroit Regional Chamber poll of Michigan voters, one in four respondents said they continued to deal with catastrophic or major effects on their household finances.
- Housing insecurity was amplified over the course of the pandemic, with more than one-third of households surveyed nationally and in the region in December 2020 expressing they are not current on rent or mortgage payments, to the point that eviction or foreclosure in the next two months is likely.
- Detroit Metro Airport, paralleling national trends, saw a decrease of 61.6 percent in airline passengers in 2020 to 14 million, compared to 36.2 million in 2019.
- Nationally, the hotel industry experienced the worst year on record. The Detroit region’s hotel occupancy rates recorded a 35.5 percent decrease in December 2020 compared to the same month in 2019, exceeding the national decline of 32.3 percent.
Reasons for Optimism and Concern:
- Quarterly changes to Michigan’s gross domestic product fluctuated dramatically throughout 2020 as the pandemic drove economic contraction, particularly because of manufacturing-related shutdowns that occurred in the second quarter. Michigan’s GDP fell 37.6 percent from the first to second quarter but rose by 44.2 percent from the second quarter to the third.
- U.S. light vehicle sales seasonally adjusted annual rate dropped to as low as 8.7 million in April 2020. Resilience in the retail market resulted in much better performance than expected, with the total U.S. light vehicle sales reaching 14.6 million in 2020 compared to 17.1 million in 2019, a drop of 14.4 percent annually.
- Private sector jobs in the Detroit region reached a low of 1.5 million in April, a loss of 556,000 jobs over two months, before ending the year at 1.9 million jobs, a 10 percent decrease compared to the beginning of 2020.
- The Detroit region’s monthly unemployment rate peaked at more than 24 percent in April, 10 percentage points above the same month’s national rate. The rate decreased through 2020, ending at 10.1 percent in December, compared to the national rate of 6.7 percent.
Reasons for Optimism:
- The number of new business applications in Michigan saw a 42.2 percent increase in 2020 compared to 2019. New business application growth after a recession is a leading indicator of recovery.
- As an indicator of the manufacturing sector’s economic health, the U.S. Manufacturing PMI (Purchasing Managers’ Index) reported eight consecutive months of growth, rising to 60.5 percent in December, after the low in April 2020 of 41.7 percent. All six of the biggest manufacturing industries demonstrated moderate to strong growth in December 2020.
- In the Detroit region housing market, single-family homes’ median sale price increased 23.3 percent from the first quarter of 2020 to the third quarter, rising to $236,300. New construction remained resilient through 2020 also, with construction permits for 2020 matching that of 2019.
“There is often a strong correlation between national economic downturns and deep recessionary periods for Michigan,” Baruah says. “However, critical sectors for our economy like automotive, manufacturing, and housing have all shown remarkable resiliency. Full recovery for all sectors of our economy will require the effective administration of vaccines and targeted governmental support for the unemployed and business that the pandemic has disproportionately impacted.”
The full report is available here.