Inaugural Detroit Free Press Guest Column on the Dow

March 18, 2013 § Leave a comment

Starting today, I will be a guest columnist at the Detroit Free Press, which is the largest daily newspaper in Detroit and the largest city newspaper owned by Gannett. My inaugural column just appeared: It is on the Dow’s record highs and the uneven economic recovery, and it extends my discussion from the Melissa Harris-Perry Show last Sunday.

From time to time, I will write about interesting and relevant research in economics (hopefully some of it will be mine!), the Michigan economy, innovation, entrepreneurship, the euro zone, and other topics. Enjoy! Let me know what you think.  The conversation will continue here.


Detroit, Michigan, and the Sequester

March 4, 2013 § Leave a comment

Automatic across-the-board spending cuts will hit Detroit, Lansing, and all of Michigan hard.  I talked about this on the Melissa Harris-Perry show —

— and on WLNS —

On Hiatus

March 4, 2013 § Leave a comment

This blog is on hiatus while I am at the White House working on the euro zone, innovation, small business, entrepreneurship, and auto suppliers.  It will return in Spring 2013.

Recent Data on the Economic and Financial State of Michigan Households

March 6, 2011 § 1 Comment

I recently reviewed the latest data from the Michigan Financial Health Survey.  This study is an effort to collect data on the financial condition of Michigan households during and following the Great Recession and to provide information on ways these households can improve their financial standing.  To take it, click on the Financial Health Survey tab at   It is sponsored by Michigan State University.

What has happened in the last year?  Has the financial standing of Michigan households changed significantly?   If so, in what ways?  To answer these questions, I reviewed responses from the early April 2010 survey and the late February 2011 survey.  These surveys are not exactly comparable.  This is an online survey, and the sample size is constantly changing.  Also, the survey was slightly revised after the May 2010 survey was completed.  The sample will have different respondents from the sample in April 2010.  The number of respondents in April 2010 was 325, and in February 2011 it was 124.  Despite the two slightly different snapshots in time, I still think they provide interesting insights.  Here are a few of them.

1) Job Loss and Uncertainty

There is more employment in households.  In 2010, 40% of households reported having a member who had lost a job or had his or her hours reduced.  In 2011, this was 35% of households.  Michigan households are less uncertain about whether someone in the household expects to lose his or her job or have their hours reduced.  In 2011, 18% don’t know; whereas, in 2010, 25% did not know.   Only 22% expect to a member to lose a job in the next three months compared to 40% a year ago.  These data are consistent with the Bureau of Labor Statistics employment data released last week, which showed that manufacturing jobs contributed to the addition of 192,000 jobs overall and that 33,000 jobs had been added in the auto industry between February 2010 and February 2011.

2)  Responding to Financial and Macroeconomic Shocks

A surprising finding from our ongoing research (see October post) is that households are neither responding to nor prepared to respond to shocks to household employment and income.  That is, only around half of households have a budget (spending plan)!   This is astonishing, given the decade-long upheaval in the automobile industry and, therefore, in the Michigan economy.

There is a bit of a worrisome trend.  Last year, 47% of households did not have a budget, while this year, 56% of households do not have a budget.  The only silver lining seems to be that those who do have a budget now are more responsive:  43% change their household budgets regularly in comparison to 37% last year.  Not having a budget may reflect increased optimism.  I have found the same puzzle using another (larger, more representative) survey of Michigan households.  However, the good habit of having (and changing) a flexible spending plan should not be used in bad times and then abandoned in good times.  This discipline should be maintained and enhanced throughout the business cycle.   Households cannot count on all or most of the adjustment coming from changes in income, something that can be unpredictable, especially in Michigan.   Such a recommendation of discipline during booms and busts is consistent with last week’s blog post related to saving and credit cards.

I will continue to explore changes to the financial status of Michigan households, including with respect to credit-card debt, foreclosures, and bankruptcies, over the past year in the next posts.


Will the Saving and Frugality Shock Be Permanent?

February 27, 2011 § Leave a comment

America Saves Week was last week. This is an appropriate time to review what has happened to saving behavior during and following the Great Recession. Americans are saving more. The Commerce Department reports that personal saving was 1.9% in May 2007, 7.1% in May 2008, 8.2% in May 2009, and 5.3% in December 2010. Americans are also using their credit cards less. According to TransUnion, the average combined credit card balance was $4,965 in the fourth quarter of 2010, 8.6% lower than in the fourth quarter of 2009. They have also become more frugal in other ways. Data from R.L. Polk and Co. show that new cars are being held a record 63.9 months, which is up 14% from the end of 2008. We are also stretching consumer products, such as toothpaste, razors, and cell phones.*

Will this trend last? It is an open question among economists. Some, like me, believe that it is too early to tell, particularly given recent increases in credit card use and issuance. Others argue that this is a defining moment in American consumer history and that we are taking on the values of our more frugal and cautious grandparents. Certainly, this is a delicate balancing act, because consumer demand should continue picking up to fuel the economic recovery. Nonetheless, the high rates of household debt accumulation, e.g., mortgages and credit cards, in in the 1990’s and early 2000’s were unsustainable and outpaced growth in real incomes substantially. Returning to them would be disastrous. It is my hope that saving in all forms will continue to increase in the long run without compromising our fragile recovery in the short run.

*See Mark Richtel, “Consumers Hold on to Products Longer,” New York Times, February 26, 2011.

Foreclosures and the MI Economy, Consumer Finance Survey

October 19, 2010 § Leave a comment

I recently completed a paper on the Michigan households’ responses to the financial and economic crisis. Among other things, an analysis of data from the MSU State of State Survey shows that Michigan households which experience an income decline are not significantly adjusting their spending plans relative to those whose incomes have not declined. While they are not smoothing consumption noticeably, they are using their retirement savings, like many others in the sample.   Another MSU-based study focused on consumer finance gives more detail about how households are responding, including with respect to past and future foreclosure plans. In this survey conducted between June 2009 and April 2010, 40% of households had at least one person in the household to lose his or her job or take a pay cut in the last 6 months. Of the respondents, 11% had been late on a rental or mortgage payment in the last year, 4% had been involved in foreclosure proceedings in the last two years, and 2% anticipate being in foreclosure proceedings in the next 2 months. While the data show that Michigan entered the foreclosure crisis earlier than most states, according to the New York Fed, foreclosure rates are beginning to rise faster than in the US overall (since mid-2009), and mortgage delinquency rates (90 days+) are increasing across the state relative to a year ago. Foreclosures have been temporarily halted by a number of banks, but repossessions continue by other banks in the state.

If you would like to take part in the second survey mentioned above, go to This site is interactive, and respondents also receive a score and information on financial resources — web sites, etc. — based on analysis of the information received.

New Data, New Paper on Michigan Households

October 11, 2010 § Leave a comment

The Census reported at the end of September that real personal household income in Michigan fell more than in any other state, 6.2%, between 2008 and 2009 (  This is striking but not surprising, given longer-term trends.  My new paper on the Michigan economy evaluates how Michigan households are responding to the financial and economic crises using data from the State of the State Survey.  It will be posted at the web site for the Institute for Public Policy and Social Research at MSU shortly.  One of the most interesting, although not altogether unpredictable, findings is that spending plans (budgets) adjust flexibly to positive income shocks but less flexibly to negative income shocks.  In general, Michigan households are using both consumption-smoothing (changing spending plans)  and income-smoothing (diverting retirement savings to other expenses, e.g., food and health) instruments to respond to idiosyncratic and macroeconomic shocks.  There are a number of interesting results in the paper, so stay tuned.