U of M Forecast shows Detroit’s economy holding steady in face of national economic headwinds


U of M Forecast shows Detroit’s economy holding steady in face of national economic headwinds


  • Report says most measures of real economic activity, especially in the labor market, have remained strong through the second quarter of the year
  • Growth continues as Detroit development projects and demand among automakers drive City’s economic recovery, risks remain
  • More money in Detroiters’ pockets as wages are expected to grow

DETROIT, Michigan – The Detroit Economic Outlook for 2021-2027 released this week shows the City’s economy holding up in the face of national economic headwinds, as development projects in Detroit and pent-up demand in the auto industry prove to be major drivers in the City’s ongoing economic recovery. The forecast report acknowledges that “most measures of real economic activity, especially in the labor market, have remained strong through the second quarter of the year.”  

Growth continues, development projects and auto industry are major drivers
“The incoming data continues to point to an ongoing recovery in Detroit's economy. We are projecting local growth to continue despite a slowing national economy in part because of pent-up demand in the auto industry," said Gabriel Ehrlich, director of U-M's Research Seminar in Quantitative Economics and lead author of the forecast.

The forecast maintains a faster recovery for Detroit than the State overall through 2023.  Jobs at establishments within city boundaries are projected to surpass pre-COVID pandemic numbers by the end of 2023. Specifically, job growth is predicted to increase from 3% in 2021 to 5.4% this year, then cool down to 2.7% in 2023, but more development projects could help sustain robust growth.  Economic growth is expected to moderate to a steady state starting in 2025 as major projects like the Gordie Howe bridge and the Hudson site come online. Blue-collar jobs in manufacturing, construction, and transportation continue to be key drivers for economic growth through 2027.  These job gains are the ongoing economic benefits from major City-led projects, such as the Stellantis and General Motors automotive plant expansions and Amazon’s new distribution center.  

Detroit’s unemployment rate dropped to 10.6% in May a significant decline from a nearly 40% high in the early days of the pandemic.

Wage growth, more money in Detroiters’ pockets
The Forecast also predicts strong wage gains for Detroit residents to resume in 2022, with wage growth increasing to 6.6 percent, then cooling to 3.7 percent in 2023 and moderates throughout the forecast while inflation makes an impact. By 2027, according to the report, the average annual wage of Detroit payroll employees will reach $89,500 dollars per year, or 34 percent higher than 2019 levels. The outlook adds, even though we expect Michigan’s wage growth to outpace Detroit’s slightly over our forecast, we believe that the city’s average wage rate will be approximately 15 percent higher than the state’s level in 2027.”

In looking at Detroit’s three major industry groups, the Forecast report predicts Detroit’s blue-collar jobs will lead sector growth this year with a 6.4 percent growth. White-collar wage growth increased by a fraction, 0.1 in 2021, but is expected to jump to “an astonishing 8.0 percent in 2022.”  And service industry wages grew by 8.3 percent in 2021 and is expected to grow 5.2 percent in 2022.

The report expressed optimism that various recession scenarios will not come to pass and “that the U.S. economy will enter a period of moderate but sustainable growth and more tolerable price inflation in the years to come. Detroit’s economy has room to prosper in that scenario, which remains our baseline forecast.”

“The Detroit economy, despite the tests posed by the pandemic and its consequences, remains steady and has supported consecutive years of balanced budgets for the City since exiting bankruptcy in 2014. We will continue our careful efforts in using growth and opportunity strategies to further stabilize the City’s recovering economy” said, Jay Rising, Chief Financial Officer, City of Detroit.

The forecast is prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers at the City, Wayne State University, Michigan State University, and the Research Seminar in Quantitative Economics (RSQE) at the University of Michigan.

Detroit’s economic outlook will be discussed at its next Revenue Estimating Conference at 1:00 p.m. Monday, September 12 in the 13th Floor Erma L. Henderson Auditorium. The public is invited to attend in person or virtually at https://cityofdetroit.zoom.us/j/83125587117.


City of Detroit Forecast | U-M LSA Department of Economics (umich.edu)

U-M forecast: Detroit economy overcoming pandemic challenges while grappling with recession fears | University of Michigan News (umich.edu)