Michigan business outlook down from 6-year highs

Breana Noble
The Detroit News
Jeff Mason, CEO Michigan Economic Development Corporation, discusses the outlook of Michigan's economy at the Detroit Economic Club's annual Michigan Economic Outlook meeting at Motor City Casino Hotel.

Michigan's business outlook has softened in 2019, according to a new survey presented at a Detroit Economic Club meeting Tuesday.

As the federal government remains partially shut down, trade wars brew, a new administration takes power in Lansing and automakers look to enact restructuring plans, Michigan businesses are facing uncertainty in the new year.

"I'm still bullish on 2019," Jeff Mason, CEO of the Michigan Economic Development Corp., said during the meeting. "I think the outlook suggests maybe we're going to have to work harder this year. ... There's some uncertainty out there in terms of what the playing field is going to look like, which creates some angst."

According to 177 responses from Michigan businesses, nonprofit and public institutions, Michigan's outlook fell from a six-year high in 2018.

On a 100-point scale, Michigan organizations' confidence in the future fell from 80 to 79 for the next six months, 83 to 78 for the next year and 82 to 77 for the next three years.

Kevin Johnson, center, President & CEO, Detroit Economic Growth Corporation, answers a question from moderator Daniel Howes, right, during a discussion about Michigan economy while Jeff Mason, left, CEO Michigan Economic Development Corporation listens.

The rating of Michigan as a great place to grow or start a business fell from 72 to 70, while the U.S. average rose from 69 to 70. The likelihood of these organizations to recommend Michigan as a great place to grow a business dropped from 81 to 76.

"The short-term outlook looks strong," said David Baker, managing partner at Baker Strategy Group, which conducted the survey. "Overall, there is some concern over the uncertainty as we head into 2019, but Michiganders say the outlook remains healthy."

Michigan is on par or above the U.S. average on several measures such as business-friendliness. The most dramatic difference was that Michigan's economic regions were eight points higher than the U.S. average for having a large pool of skilled, educated talent available. The state, however, remained two points below the U.S. average for its educational system.

Mason said addressing that gap in education should be a top priority.

"I think we should focus on the education system, not just K-12 and preschool," he said, "but all the way through skilled trades, associate degrees, higher education, four-year degrees. We need more talent in Michigan. Period. On all levels."

Mark Johnson, chief financial officer of Ann Arbor-based real estate development firm Norfolk Homes, said the difference between available talent and Michigan's below-average education system was striking.

"I think it shows the strength of our universities and institutions of higher education," he said. "I think they both presented some good ideas in terms of moving forward to be ready for development."

Lisa Comben, director of corporate and foundation relations at the Eastern Michigan University, said addressing that education gap should be a top priority in the future.

"We have a lot of students at Eastern who are interested in becoming entrepreneurs," she said. "I think a big question we are asking is how do we help and support them?"

Michigan has shown improvement in its competitiveness over the years, Mason said. CEO Magazine ranked the Great Lake States at No. 27 in its list of best places to do business last year, up from 36th in 2017.

"People react to being No. 1," said Kevin Johnson, CEO of the Detroit Economic Growth Corp. "When I'm out on the road, I don't talk about Detroit coming back. I talk about our competitive advantages. ... All the other stuff is just noise."

Part of business attraction is incentives. In 2018, the state of Michigan and the city of Detroit offered up millions in tax breaks for various projects, including Ford Motor Co.'s renovations of Michigan Central Station and the bid for Amazon.com's second headquarters.

Johnson and Mason said incentives are just one type of tool to attract investment to Michigan and Detroit and are used to make a beneficial deal better.

"We don't lead with incentives," Mason said. "We're trying to price a product or some product of value, a value of the infrastructure, the talent and the education system, the value of the quality of life and cost of living. That's the compelling business case that we are trying to lead with when we are competing."

Johnson said the DEGC will focus on building partnerships with the new administration to ensure the deals and incentives in the pipeline for the Ford project, the Hudson's Tower and other major developments will continue to be available.

"We want to make sure we don't depart from that," Johnson said. "We want to make sure that is followed through with."