Rising price stickers are fueling talks of a recession.
When it comes to predicting the possibility of another recession, experts say to look back at the Great Recession 14 years ago.
Economic activity is what experts say we all need to be looking at to forecast the possibility of a recession. Because Michigan’s auto industry represents 28% of the state’s gross economic output, we need to be looking at the Big Three, specifically.
Michigan auto workers like LaShawn English remember it well.
“Scary, very scary. We didn’t know what was going to happen. We didn’t know if we were going to have jobs or not,” said English, a Stellantis employee and a United Auto Workers chapter president.
In 2008, the Great Recession sent the wheels of Michigan’s auto industry — and the country — spinning.
“You’re talking millions of people employed just by the auto industry and with the swipe of a hand, it was gone,” English said.
Michigan’s auto industry and its role in the Great Recession are important to look at today because the industry represents 20% of Michigan employment, creating 1 million employment jobs. So with 79% of Michigan consumers expecting bad times for business conditions this year, and the word “recession” being tossed around, it’s a scary thought for many.
“When it happens, it destroys your whole family,” English said.
It’s important to compare the auto industry in 2008 to today.
“I don’t see similarities between now and 2008. Just as the Great Recession was hitting, the Detroit Three had enormous legacy costs — enormous that in fact, that’s what drove them into bankruptcy, or in near bankruptcy in Ford’s case. That’s not the case anymore,” Autoline President John McElroy said.
It’s perhaps unexpected news to some.
McElroy told 7 Action that because of the chip shortage, automakers aren’t able to make enough cars right now to keep up with consumer demand. So even if less people can buy cars, the auto industry this time around can take it.
“I think if there’s a recession, the auto industry won’t even notice the difference,” McElroy said.
The auto industry remaining stable means many Michigan jobs will remain intact, which will help enormously in making sure Michigan’s economic activity remains high.
According to the National Bureau of Economic Research, a recession is when there is a significant decline in economic activity that lasts more than three months.
“There’s really no similarities. I mean, we had structural failures in our economy in 2007, and ’08, which led to the Great Recession. We do not have that this time around,” Detroit Regional Chamber CEO Sandy Baruah said.
Baruah says savings balances are up, buying power and consumer savings remain strong and our unemployment rate is incredibly low, making the economic structure in Michigan today much stronger than 2008.
“In a nutshell, here’s where we are right now: Individually, people and families feel pretty good. In fact, our statewide polling shows very strongly that people are not concerned about losing their job, and they feel like they’re in pretty good shape financially. However, they’re soured generally, on the state of the country,” Baruah said.
Baruah says predicting a recession is a bit like predicting rain. If you predict it every day, eventually it will come. But due to the state of Michigan’s auto industry and economic activity today, the forecast remains dry.
“If gas prices are able to stay down, if the supply chains are able to be eased even a little bit more than they are right now, I think we have seen peak inflation. But I’m not going to put a lot of money on that. My mortgage payment is not going to be bet on inflation reached its peak or not,” Baruah said.