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 www.MIMoneyHealth.org. 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.