Detroit City Wire

Michigan’s economy is showing signs of strain as the state faces high unemployment, slow income growth, and uncertainty caused by new federal tariffs. The situation has become a focal point for Governor Gretchen Whitmer, who is set to deliver an address titled “Protect and Defend Michigan’s Economy” at the state Capitol. The speech comes amid a deadlock over the state budget, which must be approved before the fiscal year ends on September 30.

Economist Paul Isely from Grand Valley State University described volatility in Michigan’s economy as “very high,” citing national trends that are being felt acutely in the manufacturing-heavy state. Recent data show inflation rising to 2.9%, the largest monthly increase since January, and weekly unemployment claims reaching their highest level in four years. Consumer sentiment has dropped by 5% since August, with expectations down 30% compared to last year, according to University of Michigan researchers.

Job growth revisions revealed nearly one million fewer jobs created nationwide for the year ending in March. More recent numbers fluctuate between small gains and losses, reflecting little net change in a workforce of over 170 million people.

Governor Whitmer called these developments “concerning signs for our economic future.” She warned that Michigan is facing “massive job loss, instability in our nation’s manufacturing sector,” and urged lawmakers to pass a state budget.

Patrick L. Anderson, CEO of Anderson Economic Group in Lansing, noted that the auto industry could be particularly vulnerable as tariff-free vehicles fell from 91% to 21% in July. He stated that this shift increases the likelihood of price hikes: “the price shock will become impossible to ignore.”

Sandy K. Baruah, Chief Executive Officer of the Detroit Regional Chamber, said uncertainty now extends beyond autos and manufacturing: “I don’t care what kind of business you’re in, you are or will be impacted by tariffs. They are increasing your costs.” He also pointed out that Lansing’s ongoing budget impasse is eroding business confidence: “This budget crisis is certainly draining confidence from the business community.”

In July, Governor Whitmer directed state departments to evaluate how tariffs might affect Michigan consumers and businesses, estimating up to 60% of increased costs could be passed along. In August she warned President Donald Trump about tariffs’ potential impact on Michigan’s auto sector and its suppliers—an industry already experiencing job cuts linked to trade policies.

Recent inflation figures show price increases for products sensitive to tariffs such as apparel, audio equipment, groceries, and auto parts. Since February—when new import taxes were imposed—the state lost 6,300 manufacturing jobs; this represents a decline three times greater than the national average during that period. As of July there were about 595,000 workers employed in manufacturing statewide—a drop of 28,000 since summer 2023.

Isely attributed some weakness in manufacturing employment not only to tariffs but also changes in federal electric vehicle policy.

Some Republican lawmakers disagree with Whitmer’s criticism of tariffs. Rep. Matt Maddock argued: “Tariffs are working and allowing Americans to rebuild the companies, capacity and manufacturing that was sold out to China by the Bidens… Tariffs will take a couple years to work, not a couple weeks.”

The expiration of tax credits for electric vehicles has led companies like Fortescue and Sandisk to cancel planned investments or facilities after failing to secure federal funding or support.

Danielle Emerson from the Michigan Economic Development Corp said factors outside Michigan’s control are affecting local business decisions.

West Michigan has been hit especially hard; Ottawa County’s unemployment rate climbed from a low of 3.1% earlier this year to 5.2%. Isely commented: “I haven’t seen this type of weakness in west Michigan ever.”

Baruah observed that today’s job market differs significantly from two years ago: employees switch jobs less frequently and it takes longer for job seekers to find work.

Many new positions represent second jobs rather than primary employment—a sign that economic conditions may be weakening further according to Isely.

Despite these challenges some businesses have benefited from tariff-driven contracts; economists caution against reading too much into monthly data due partly to anomalies like surges ahead of tax cut deadlines.

Baruah acknowledged certain Trump administration tax provisions could help businesses manage tariff impacts but maintained broader concern about overall economic direction.

Republicans continue blaming Biden administration spending policies for current problems; US House Ways and Means Committee Chair Jason Smith said Friday: “Biden’s economy was much worse than originally reported… his promises to create jobs through massive government spending programs clearly failed.”

Whitmer’s upcoming speech coincides with preparations for a possible government shutdown if no budget deal emerges by month-end. Proposed budgets range from $78.5 billion (House) up to $84.5 billion (Senate), while estimates suggest next year’s federal spending cuts could reduce available funds by about $1.1 billion.

Brian Calley—president and CEO of the Small Business Association of Michigan—noted growing frustration among entrepreneurs due to rising regulations, insurance costs, interest rates and labor market misalignments alongside trade uncertainties: “Entrepreneurs today are weary and frustrated… really taking a toll.”

Baruah emphasized that improving innovation systems, education outcomes and developing comprehensive economic strategies require bipartisan cooperation beyond just resolving immediate fiscal disputes: “There are things that we can and should be doing in a bipartisan manner… But if lawmakers can’t complete their basic responsibilities for the budget it gets hard to imagine how they can come together on some even bigger things.”