Report on Business

A supply managment survey of the Greater Grand Rapids economy is taken each month by Dr. Brian Long in conjunction with the Seidman College of Business at Grand Valley State University.  This local report is sent to ISM to be compiled for their national Report on Business which is used by the Federal Reserve and other economists.  To learn how the survey is conducted, what the numbers mean, and how it can be useful to you click Seidman College of Business Supply Chain Management Program and ISM Report on Business.

Links to national and international reports are also provided below.  Adobe Acrobat Reader is required to view.  If you have comments or questions, Brian can be reached at brian@mmii.org

 

Greater Grand Rapids, July 2017

ISM  National Manufacturing Report

ISM National Non-Manufacturing Report

 

Attached, in PDF, is the monthly business survey report for June. Just as last month, the local economy remains strong, and worries persist over the slump  in auto sales.  Bus so far, the reduced auto sales have had little impact on our local auto parts suppliers.  With thousand of cars due to come off lease in the next few months, I see no way that we cannot expect more declines in auto sales.  So far, the decline remains orderly, and the supply chain is adjusting.  If the pace of decline accelerates, that picture could change.

 

2017 RECOVERY PROGRESS:  THE GREAT RECESSION

The second PDF is an analysis of our progress in the recovery from the Great Recession. As you will see, the recovery is VERY uneven. 


Methodology:  For each of our reporting units, you will see three columns of raw numbers reflecting (1) the May 2017 net employment, (2) the April 2007 net employment, which constitutes the approximate high point before the recession began, and (3) January 2010, the approximate employment low point in the Great Recession.  The next column reflects the percentage difference between column 2 and column 3, i.e., the drop in employment resulting from the recession. The last column compares 2007 to 2017, i.e, where we now stand given that the recession is supposed to be over. For the State of Michigan, the raw employment number dropped by 11.3% in 2010, but as of May 2017, employment is now up 1.1% higher than April 2007.  Not great, but still positive.

Good news.  As you can see, Grand Rapids, the second largest city in the State, took an employment hit of 14.3%, but is now 5.8% better off.  The 10-year gain for jobs in Ottawa County came in at a whopping 20.0%, Kent County added 14.8%, and Allegan County gained 15.5%. 

Bad news. Van Buren County took a 13.8% hit in the Great Recession, and never recovered.  The raw “total employment” number for Van Buren County in May is now 8.9% below ten years earlier. The cities of Kalamazoo and Portage also lost employment over the same 10-year time period. 

If you have any comments, or if you would like some further analysis, let me know.

 
Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 870-0428

 

Greater Grand Rapids, May 2017
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

As you will see, the local economy remains strong, but worries persist over the slump  in auto sales. As I note in the report, reduced production by our local auto parts suppliers will not by itself drive Michigan into a recession.  In may slow the economy to a crawl, but none of our other cyclical industries are currently expecting any slowdown in business activity.  Furthermore, the decline in auto sales has been fairly orderly, which makes readjustment much more orderly.

Here is a  breakdown of the Paris Accord to reduce greenhouse gasses. Along with the explanation below, I hope you will be able to see why it is not in the best interest of the U.S. to attempt to meet the goals set forth by the agreement. 

 

 



Greater Grand Rapids, April 2017
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

Attached, in PDF, is the West Michigan report for the month ended March 31, 2017.  Our index of NEW ORDERS index backtracked a little, but most of the other statistics continue to be strong.  In particular, our index of EMPLOYMENT rose to a two year high.  ISM’s national EMPLOYMENT index rose to a six year high.

 

Although there is a lag factor between when our employment survey upticks and the jobs are finally recorded at the state level, this month’s bad news, such as it is, comes from our state and local unemployment numbers recently reported by the Michigan Department of Technology, Management and Budget. Until about a year ago, we had seen a steady progression of falling unemployment rates throughout West Michigan and the State as a whole.  But the statewide total employment fell by a seasonally adjusted 8,000 in January.  If you look at the raw numbers between December and January, the gap is much worse.  All of this has resulted in a significant increase in the UNADJUSTED unemployment rates for most of our West Michigan reporting units. For Kent County unemployment, our most recent low was 2.7% in November of 2015.  We are now at 3.6%.  Another factor:  About 3,000 Kent County people reentered the labor force between December and January.  People reentering the workforce is another reason for the higher unemployment rate. 

 

Full employment? When I went to school a half century ago, we were taught that an unemployment rate of 3% should be considered “full employment.” This “3%” rate was formally called “frictional” unemployment, and was based on people changing jobs, factories closing while waiting for others to open, and people moving from one state to another. Historically, our national unemployment rate ran well below 3% for much of 1951-1953.  Part of this boom was the buildup for the Korean War.  Part of it was still related to post-WWII demand. Because most of Europe and the rest of the industrial world had still not recovered from WWII, there was a boom in exports.  The term “foreign competition” was not yet part of our daily vocabulary. This is not politically correct to say, but part our low unemployment was related to the fact the immigration for most of the 50’s was severely restricted from all countries. The reason: Politicians wanted to force firms to hire American workers. Last but not least, part of the low unemployment was the limited scope of safety nets available.  If you didn’t work, you didn’t eat.

 

Almost all of the other domestic statistics as well as statistics from around the world are improving.  Although the proverbial rising tide floats all boats, it also means that there is no world-wide recession on the horizon. Warning:  One major terrorist attack and all bets are off.

 

As always, if you have any comments, let me know.

 

Thanks again for your interest in the business survey!




Greater Grand Rapids, March 2017
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

Attached is the ISM-Greater Grand Rapids report for the month ended February 28, 2017.  As you will see, we have again been blessed with a significant improvement in our statistics, and our index of NEW ORDERS is now at its highest level in nearly three years.   Almost every day, the news media refers to the records in the stock averages as the "Trump Rally."  Fortunately for us, at least some of this optimism has carried over to the industrial market. For the industrial markets, the main driving factor continues to be the possibility of a significant cut in the statutory 35% corporate tax rate.  If this tax cut does come to pass, the impact will be huge. Here's why.  We are all aware that many our manufacturers compete will the rest of the world.  What few pundits have noticed is that MOST of the industrial world has been cutting corporate taxes  at a SIGNIFICANT pace over the past twenty years or so. For the U.S., the rate has REMAINED at 35%. The current average for other countries is about 25%, down from over 50% in 1989. Even though many of these countries are run by socialist governments, they nonetheless recognize that lower taxes result in lower unemployment, and lower taxes encourages exports. In the U.S., our firms are often at a "total cost" disadvantage when competing firms around the world have a tax rate about 10% or so below ours. As a reminder, the average profitability for the S&P 500 is around 5%, so some of our firms can't even begin to compete with their foreign counterparts. If the corporate tax rate was cut to 15% or even 20%, we could see a boom like we have not seen in decades.

On another note, almost all of the other domestic statistics as well as statistics from around the world are improving.  Although the proverbial rising tide floats all boats, it also means that there is no world-wide recession on the horizon. 

Auto sales.  Yes, sales have now been down for the past two months, but the decline so far has been very orderly. Furthermore, at least some of our local auto parts firms can claim that they are competitive with the entire world market. This bodes well for the future.

As always, if you have any comments, let me know.  Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 870-0428




Greater Grand Rapids, February 2017
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

January is usually a "back to work" month, and this year is no exception.

For most of the recovery from the Great Recession, West Michigan outpaced the rest of the nation.  Going forward, this is probably not going to be the case. I'm expecting a lot of our reports for the coming months to be less robust. In recent months, we have often reported that West Michigan was doing better than the rest of the state, and even the rest of the country. For this month, the opposite seems to be true. Part of the problem gets back to two of our cyclical industries, namely automotive and office furniture.  Both of these industries appear to have topped out, at least for the time being.  For many months we have talked about saturation for the auto market, and that event has now arrived. At best, the auto industry can hope to maintain the current level of sales for 2017.  More than likely, the U.S. dealers will sell somewhat fewer cars in 2017 than in 2016.  The margin will of course depend on the rest of the economy, which now appears to be gaining strength going into the first quarter of 2017.

Just like last month, the National ISM index for January posted one of its best gains ever. Other indexes from the nation and around the world are also posting significant gains. If there is a recession lurking out there waiting to hatch, we can't see it now. So we should see clear sailing for the next few months for sure.

As always, if you have any comments, let me know. Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359




Greater Grand Rapids, January 2017
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

Attached, in PDF, is the business survey report for the month ended December 31, 2016.  As you will see, I have described this month's report as "seasonally flat," because December is one of those months that some firms take a lot of "down" time.  It also is one of those months that it is hard to get everyone together to make a decision, partially because of the many distractions of the holidays.  January is more of a "back-to-work" month, so we should expect our numbers to turn back to positive.

In recent months, we have often reported that West Michigan was doing better than the rest of the state, and even the rest of the country. For this month, the opposite seems to be true.  Part of the problem gets back to two of our cyclical industries, namely automotive and office furniture.  Both of these industries appear to have topped out, at least for the time being.  For many months we have talked about saturation for the auto market, and that event has now arrived.  At best, the auto industry can hope to maintain the current level of sales for 2017.  More than likely, the U.S. dealers will sell somewhat fewer cars in 2017 than in 2016.  The margin will of course depend on the rest of the economy, which now appears to be gaining strength going into the first quarter.

In our report one year ago, we were observing numerous signal that the economy was sagging.  Even the stock market opened 2016 with a sharp downturn. ISM's indexes turned negative, and the European economic reports continued to sag.  The PMI for China turned negative, and there was fear that China was slipping into a recession-- and that we would be drawn in with it.

This is a very different year.  The National ISM index for December posted one of its best gains in the past three years. If we can believer the numbers, the PMI for China has flipped back to positive. Even the stock market has shot up fro the end of the year.  Although the November election created an aura of uncertainty, it now appears that the business community like what they are seeing as the Trump administration takes control.  With consumer confidence now at a 15 year high, retail sales have picked up.

What happened to the recession that had us so worried last year at this time?  Several things.  First, there is often some kind of a bubble that broke.  In the case of the Great Recession, it was the collapse of the housing market.  In the case of the "dot-com" bust, it was the recognition that the market was occupied by too many players.

Another factor.  Recessions occur when there is a major paradigm shift.  The Arab Oil Embargo doubled the cost of energy and caused almost every firm and every household to  reconfigure there financial plans. The readjustment was huge.  In today's world, a major terrorist act could produce a similar catastrophe.

Although there may be a "trigger" event that breaks the bubble and heralds the beginning of a recession, there are  other factors which accelerates a recession.  For lack of a better term, we may call the "mini-bubbles," and takes the form of many industries and retailers expanding too rapidly for the markets they are serving. It may be the builder that build one too many spec houses, or it may be the retailer that doubles his space in anticipation that business will continue to boom.  IN THE RECOVERY FROM THE GREAT RECESSION, THIS DID NOT HAPPEN.  In fact, because of the very slow recover,  business people did NOT rapidly over-expand.  In short, if there had been a bubble that broke, there would have been very few mini-bubbles that would have followed.  

Anyway, that's a few of my thoughts. If there is a recession lurking out there waiting to hatch, we can't see it now. As always, if you have any comments, let me know.  Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359





Greater Grand Rapids, August  2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

Attached, in PDF, is the survey report for the month ended July 31, 2016.  Overall, the report is good.  We are back to double-digit positive, and the anecdotal comments are generally optimistic.

▪ The storm clouds from earlier in the years have temporary dissipated.

▪ The Brexit is shaking out to be a non-event.  Our July PMI stats from Europe are virtually unchanged, although the PMI for the U.K. took a sharp hit.

▪  Assuming the government has not fudged the numbers, the industrial PMI for China has flipped back to positive. This reduces the fear the China could draw the world into a recession.

▪ The Markit.com PMI survey for the U.S. is headed back in a more positive direction, and the chief economist is now less pessimistic.

▪  We are hoping that all of this is not the proverbial calm before the storm.

As always, if you have any comments, let me know. Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M. 
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

 

Greater Grand Rapids, July 2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

As you will see, the slight softness that we observed last month has not morphed into a downturn,  and may have been the result of a few seasonal factors that popped up in May.  In short, from the standpoint of our survey, there is no evidence that we are about to slide into a recession, even though there are plenty of anecdotal signals that project a possible end to the current (although anemic) expansion.  Just as a reminder, our survey data turned positive in April of 2009, and most economists peg June of 2009 as the end of the Great Recession.  Of course, June 2009 is really just the beginning of digging out of a very deep hole, because it has only been in the last few months that we have declared that West Michigan may now be back to full employment.  And of course, we are now constantly reminded that the U.S. economy has regularly slipped into a recession about every seven years.  Fine.  That's historical.  But every recession has also had a cause. In the 1950's, it was inventory problems.  In 2000, it was the dot-com bust. In 2009, it was the housing finance crisis.  Very often, it is things we don't necessarily see at the time. 

In addition, for every downturn, there is also a historical trigger "event." In the case of the Great Depression, it was the stock market crash, although things did not get really bad for several more years. In the case of the Great Recession, the landmark "event" was the collapse at Lehman Brothers.  My uneasy fear at the moment is that the ensuing panic by some people over the Brexit could be that trigger.  As I mention in the report, there is no ECONOMIC reason for a panic.  Any changes that are made will not take effect for two more years, and there is no real reason that the parties on both sides of the English Channel should not work out new agreements that are very similar to the status quo.   However, if the PSYCHOLOGY of the people turns negative, all bets are off.  We are already hearing stories of various parties halting further business until the new agreements are in place. It may be just "talk," but if it becomes evident that large amounts of business are being put on hold, most of Europe that is not already in a recession will falter. What is frustrating is that the U.S. has done nothing wrong, and that the U.S. has almost nothing it can do to keep Europe from sliding if things do turn negative.

All I can say at the moment is that I hope wiser minds prevail.   As always, if you have any comments, let me know. 

Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359 



Greater Grand Rapids, June 2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

As you will see, after several positive months, the West Michigan economy has turned back to flat. Part of the problem is a refection of the weak automotive report that came out a few days ago. And part of the problem is that the industrial economy can only go just so far in terms of expanding the economy.  Indeed, it is possible that the order of "slow growth" that we have experienced for many month may give way to a pattern of "flat growth."

Otherwise, the recap of the unemployment stats from the State shows that West Michigan unemployment continue to fall.  Given that our survey's EMPLOYMENT  index is still double-digit positive, we can expect unemployment to fall even further over the next several months. However, we should remember that employment is always an economic laggard.  If our index of NEW ORDERS flips to negative or even remains flat, new hiring will soon stop. .

As always, if you have any comments, let me know.  Thanks again for your participation in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

 


Greater Grand Rapids, May 2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

In general, the fears of an immediate recession are fading, even though many of the core problems remain.  Locally, the "slow growth" numbers look about the same as they have for the last seven years.  The cyclical industries like office furniture, auto parts, and aerospace are still on track, so it stand to reason that local economy continues to thrive.

It is worth mentioning that economic instability in China still poses a major threat to the world economy.  On March 1, under the pretense of "dumping," under the our government slapped a 266% tariff on certain grades of steel coming from China.  Prices for steel have now come up considerably, and the Chinese have virtuously lost their market in the U.S.  Fine. But what if they retaliate? We could find ourselves in a trade war.

Aside from a plethora of bad real estate loans, many of the statistics in China that the government can't control are declining.  For instance, exports to German are down 14% in just one year. But the GDP number that the government is reporting do not reflect any significant slowdown.  

The purchasing manager's report from China WAS conducted by HSBC bank for many years.  As of about four months ago, the government has taken control of the survey, presumably to manipulate the numbers.  A recent WSJ article implies that any journalist reporting bad economic news, even if it is the truth, can be subject to the wrath of the Chinese government. Bottom line:  The Chinese are hoping that they can fix there economic problems before reality catch up with them.  Unlike the western countries, China has not had a recession the over 30 years. We'll see if they can put everything back on track this time.

Anyway, those are a few thoughts for this month. Let me know if you have any additional thoughts. Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359



Greater Grand Rapids, April 2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report




Greater Grand Rapids, March 2016
ISM  National Manufacturing Report
ISM National Non-Manufacturing Report

As you will see, we had a little bit of an uptick for the month, largely because all of our key industries are still on track.

Another reason for the cautious optimism  is the recovery of the prices of most of the major industrial commodities, including oil. The commodity rebound has largely been triggered by a few optimistic projections coming from China, the world's largest user of almost all industrial commodities.  Granted, lower prices for copper, tin, steel, and aluminum have helped the bottom line for many firms on the "buying side" for the past few months, but over the longer term, it means fewer suppliers will remain when the markets rebound.  In West Michigan, we have not seen the closure of mines and steel mills all over the world which have resulted in major pockets of unemployment for the local mining communities.

Otherwise, our key industries remain on track, and we should still have plenty of momentum to carry us forward for the next few months. However, the best we can hope for is continued slow growth.  And as I mention in the report, it is possible that the slow growth may get even slower.

 Anyway, let me know if you have any additional thoughts.  Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

 

Greater Grand Rapids, February 2016
ISM Manufacturing Report
ISM Non-Manufacturing Report

Attach, in PDF, is this month's survey report for the month of January.  As you may recall, the December report was slightly negative, although Christmas vacations and scheduled plant closures often result in softer numbers. But January is a back-to-work month, but as you will see, the report did not come in as strong as we would have liked.  Hence, I decided to call this month' results "meekly positive." 

The bright spot continues to be falling unemployment.  For our survey, the index of EMPLOYMENT has been very positive for the past two years, and ultimately has spilled over into the official numbers reported by the State.  In general, 2015 saw the unemployment rate fall in West Michigan by a full percentage point over the past calendar year.  For Kent and Ottawa Counties, the unadjusted rate now stands at 2.7% and 2.6%, respectively. It isn't going to get a lot better than this.  However, if you look at the "comment" section of this month's report, you will again see that companies are having a hard time finding skilled workers.  And yes, at least SOME of the new jobs created over the past few years are low paying compared to the past. Some are also part time. Some are not the jobs that a given jobholder really likes.  And some of our excellent numbers are the result of workers dropping out of the workforce and no longer being counted as unemployed.  Another Economics 101 reminder:  Employment is a LAGGARD, so just because the current numbers are strong doesn't mean that we have nothing to worry about.

The ISM national survey has turned negative, largely because falling commodity prices have resulted in massive layoffs in the extractive industries. We don't see these layoffs it West Michigan, because our three cyclical industries, namely automotive, office furniture, and aerospace, are still very positive.  This could change in a few months, but for right now, we should have enough momentum to carry us forward. 

Let me know if you have any comments.


Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

 



Greater Grand Rapids, January 2016
ISM Manufacturing Report
ISM Non-Manufacturing Report

Attached in PDF is the "Current Business Trends" for December of 2015.  As you will see, we ended the year on a soft note, although December is frequently a fairly slow time of the year for many firms.  The national report from ISM is MUCH weaker than expected.  As you will see in both reports, most commodity prices continue to fall.  In particular, the steel industry continues to struggle with overcapacity.  The softening economy in China has resulted in lower demand for just about everything, resulting cut-rate steel and cut-rate machine tools being dumped on the world markets.  The situation in China is beginning to worry many of us, and we may be in for a few more stock market downticks as news leaks out about the real nature of the Chinese economy. 

For our survey, the recovery from the Great Recession began in April of 2009.  That's almost seven years ago. Most everyone agrees that the recovery has been very slow, and like most recessions, all economic segments have still not recovered.  But some are now saying that the recovery itself is growing "long in the tooth," and another correction (we don't want to use the "R" word) may be on the way.  For this month's Economics Perspective, I look a some of the issues that are on the minds of the financial markets  -- The Grinch of 2016.

As always, let me know if you have any thoughts of your own. 

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359 


Greater Grand Rapids, December 2015 
ISM Manufacturing Report
ISM Non-Manufacturing Report

As you, will see, there are no surprises.  Just the same slow growth we've been seeing for the past six years.  What's good is that the EMPLOYMENT index came back up to double digits.  It seems like a cliche, but we ARE doing it right in West Michigan.  Many of our local firms can now compete in the WORLDWIDE market.    Also, take note of the unemployment recap.  Many of our local units are now in the 3% range.  Granted, 3% does not tell the full story, but the trend is obviously positive.  From a statistical standpoint, unemployment has fallen more in 2015 that the past five years.   

For this month's soap box rant, which I now call an "Economics Perspective," you will see a short article I wrote about the recently passed legislation to fix the roads -- The Road Tax Miracle

Otherwise, let me know if you have any other thoughts!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

 




Greater Grand Rapids, August 2015 
ISM Manufacturing Report
ISM Non-Manufacturing Report

As you will see, our rate of growth has returned to the stronger performance of the spring season, and remains much stronger than the rest of the nation and the world.   As we have for several months, we need to watch the economic situation in China, the world's second largest economy.  The government continues to pretend that everything is fine, but the independent reports coming out of the country are much more cautious.  If the Chinese PMI begins to slide any further, it is probably a good indication that the Chinese economy may be on the brink of a serious recession. 

In the space below, I have added a new “Economics Perspective” about the government trying to improve employment with tax incentives.   It is sometimes called "crony capitalism" when tax incentives are offered to businesses in order to get them to open a new plant or expand existing facilities.  However, SOMETIMES tax incentives actually pay off well-- when they are based on economic principles.  Other times it is crony capitalism.    

Otherwise, the economic outlook for the rest of the summer looks fine!

Jobs and The Slippery Slope of Tax Incentives



Greater Grand Rapids, March 2015
 
ISM Manufacturing Report
ISM Non-Manufacturing Report

As you will see by the report, we have experienced a nice uptick in most of our statistics.  NEW ORDERS are on the rise, and the index of EMPLOYMENT is also giving hope to those that are still unemployed.  Granted, the official unemployment numbers are not an absolute representation of the total unemployment picture, but the fact that some of our local numbers are now near 17 year lows tells us that at least some things are getting better.  Also, it is noteworthy that our index we call the "Short Term Business Outlook" took a nice jump as well. 

For this month's "Economic Perspective,  " I have addressed a very controversial issue coming up on the May 5 election ballot. 
Proposal 1: Half Baked

I may not be 100% with everything I have said, but this is my best recollection of how we got to this place in legislative history.  Election begin what they are, the proposal may pass, and we will move forward.  However, the current polling is running against passage. 

Assume that the polls are right  and the Proposal does not pass.  In general, what I advocate is a compromise between the two positions that have emerged, meaning that neither side will necessarily agree on the solution I advocate.   Nor do I have detailed numbers of exactly how much revenue will be generated by the various aspects of the proposal.  Again, this is just a framework for compromise.   

Thanks again for your interest in the business survey.





Greater Grand Rapids, February 2015
 
ISM Manufacturing Report
ISM Non-Manufacturing Report

Attached, in PDF, is the latest survey report for the month ended February 28.  The report remains positive, but if you read the comments, there are some participants that are increasingly concerned about the future.

Like me, some participant are worried about the falling prices for industrial commodities.  Short run, it is great to have the lower priced.  As I noted last month, the ISM index of PRICES fell sharply in January to -30, and February also came in at -30.  Also as I mentioned last month, I have ISM's data for the national survey all the way back to 1948-- a total of 806 reports, and only 22 of those reports have an index of PRICES at -30 or below.  Many economists are quick to point out the problems of consumer deflation, but few seem to be concerned with Industrial deflation. 

If it were 30 years ago, this kind of an across-the-board drop in purchase prices would almost certainly generated a recession.  But it is now 2015, and ALL of the world's supply chains are different.  As I said last month, we are in uncharted territory.  In fact, there are so many variables that NO economist can accurately predict the future with 100% accuracy. 

What should we do? For right now, we need to remain vigilant. 

Thanks again for your interest in the survey!

Brian G. Long, Ph.D, C.P.M.
Grand Valley State University
(269) 323-2359

 

Greater Grand Rapids, January 2015
ISM Manufacturing Report
ISM Non-Manufacturing Report

Attached is the latest survey report for the month ended January 31.  The report remains positive, but just like the ISM national report, the pace of growth seems to have slowed.

Many of you have noted lower prices for quite a number of key commodities.  Part these price cuts relate to falling price of oil.  Part of these cuts relate to slack worldwide demand.  Part of these cuts relate to overcapacity, such as in the steel industry.  And part of these cuts are created by the rise of the U.S. dollar, making imported commodities cheaper.  All of these are good reasons for price cuts.  I'm worried that there are just too many cuts.  The best analogy I can think of is weight loss.  If you were to lose 10 pounds in a month, most doctors would consider the weight loss to be very good.  However, if you were to lose, say, 60 pounds in a month, almost no doctor would call that weight loss positive.

As I note in the report, the ISM index of PRICES fell sharply in January to -30.  I have ISM's data for the national survey all the way back to 1948-- a total of 805 reports, and only 21 of those reports have an index of PRICES at -30 or below.  Many economists are quick to point out the problems of consumer deflation, but few seem to be concerned with Industrial deflation.  At this time, it would be imprudent to assume that industrial deflation will lead us into a recession.  However, with the slowdown in the supply chains for many products all over the world, it would be correct to say that the fall in virtually all commodity prices will almost certainly slow the pace of the world economy even further than it has already been slowed.

Here's the problem of industrial deflation.  Because of falling prices, firms tend to buy only what is needed immediately, because the prices next month are apt to be lower.  The slack demand results in more price cuts.  Suppliers at the front end of the supply chain start shutting down capacity, such as we now see with oil exploration projects being cancelled and copper mines closing.  Because of slack demand, machinery and equipment prices start to fall.  All of this inhibits business expansion.  For the oil industry in particular, some of the exploration was finance with borrowed money, and halting the project is not an option, even if the venture only breaks even.  Another problem seen in countries like China is that some commodities are hoarded in hopes that rising value of the commodity will outpace the negligible interest rates paid by the banks.  In fact, copper is sold in 10 kilo ingots, and called "red gold" by some.

On another note, take a look at the unemployment rates in the report.  Kent County is now at a 17 year low, and other unemployment numbers are looking very positive for West Michigan

Anyway, that's what I'm think about right now.  This is uncharted territory, so we need to remain vigilant.

Thanks again for your interest in the survey!

Brian G. Long, Ph.D, C.P.M., Grand Valley State University, (269) 323-2359 

 

Greater Grand Rapids, December 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report

For the month, there no real surprises.  A lot of activities slow down for the holidays, and January always becomes a back-to-work month. 

Oil prices, as well as gas prices, are much lower than they were a few weeks ago.  As you will see in the report, there is an upside and a down side to lower oil prices. 

For this month's "Economics Perspective," I discuss Federal Reserve Policy.  Unfortunately, this is a convoluted topic, and may not appear a straight forward as other topics I have written.  My main point is that the Federal Reserve tried to hold interest rates too low for too long, and has now addicted the economic system to low interest rates.  The Feds were trying to lower the unemployment rates, but they were not considering the indirect connection between interest rates and employment.  When the Fed does try to bring rates back to normal, there may be some painful problems with interest -rate sensitive industries like housing and commercial construction.

As always, let me know if you have any additional thoughts.  Thanks again for your interest in the business survey!

Greater Grand Rapids, November 2014 
ISM Manufacturing Report  
ISM Non-Manufacturing Report

Whereas the numbers are not quite as strong as those we reported in September and October, they still reflect the same slow but steady growth pattern we have seen for the past five years.   

We have now survived Back Friday, as well as Gray Thursday, Small Businesses Saturday, and Cyber Monday.  This years’ retail numbers did not look as strong because some of the discounting has been going on for many days before the actual sales.  But consumer still have plenty of liquidity because of falling gas prices and a slowly improving economy, so Christmas sales will still be fine.

It was good to see Kent County back in first place.  First place, that is, for the lowest unemployment rate among all of Michigan’s 83 counties.  At 4.0% rate, the county is doing better than both the state and the nation by a considerable margin.

In the report, you will see that our main concerns continue to be the economies of the rest of the world.  The ENTIRE western world shares one MAJOR long term problem:  Unfunded or underfunded pension liabilities that the world’s baby boomers are now starting to tap.  

Last month, I wrote about politicians and job creation.  For this month’s “Economics Perspective,” I analyzed ten fallacies associated with jobs and where they come from.  Ten Fallacies of the Jobs Market

Anyway, let me know if you have any additional thoughts.

Thanks again for your interest in the business survey!

 

Greater Grand Rapids, October 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report

As you will see, it is one of the better reports we have recently filed.  In particular, the EMPLOYMENT index hit a three year high, and new business coming into the firms, our index of NEW ORDERS, was also strong.

In the paragraphs below you will find my latest "Economics Perspective," which this month deals with the growth and recovery from the Great Recession we have been experiencing in the past few years.  Why Companies are Moving to West Michigan.
Anyway, let me know if you have any additional thoughts.

Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359 


Greater Grand Rapids, September 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report

The results are still positive, but the pace slowed a little, much as it has for outer Augusts in the past few years.     However, at the national level, BOTH of the major survey we follow came in very.  Because of the geopolitical  mess, the European economic posted some negative numbers for GDP, and the purchasing manager's surveys are flattening in some countries.  For all the purchasing manager's reports, Ireland came in the strongest.   

I'm back on the soap box again, but from now on, I am going to call it an "Economics Perspective."  This month's topic is world hunger.  Obviously, tons of books have been written on the subject, so I am trying to summarize a current economic perspective.
The Economics of World Hunger 

Let me know if you have any comments. Thanks again for your interest!   Brian  




Greater Grand Rapids, August 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report

Honestly, it is getting difficult to report much of anything new at the local level.  We still have the same steady growth that we have been having for the past five years or so.  However, at the national and international level, there are lots of things happening. 

I'm back on the soap box again, so the second attachment is an op-ed I have submitted for publication, which must conform to the typical "400 word limit."   We'll see if it gets picked up.  I'm trying to add an economic perspective to what has become a political issue.   I had a lot more than 400 words to say, so the full version is printed here,  Kids at the Border.  

Let me know if you have any comments.  Thanks gain for your interest!



Greater Grand Rapids, July 2014

ISM Manufacturing Report
ISM Non-Manufacturing Report
As you will see, we are still in a pattern of slow (but fairly steady) growth for the month of June.  As usual, I have reported the most recent unemployment numbers from the various websites, and they continue to slowly improve.  Yes, the numbers are up in some regions for the month, but that is because the local numbers are NOT seasonally adjusted.  The sample size is also very small when you get down to the local level, and so the month-to-month statistics will jump around a little more.  In the report, I also commented on the 2.9% GDP drop, which causes us to question how the number is calculated in the first place. 

Next, I have another one of my "Soap Box" pieces about the controversy of how to fix the roads.  Let me know if you have any additional comments.    Fixing the Michigan Roads

Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359 




Greater Grand Rapids, June 2014

ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing
J.P. Morgan Global Report on Services

 

Growth returned to the normal level of "slow growth" in May, but growth is still growth is still growth.  The unemployment situation also continues to improve,  BUT we still have a long way to go to get back to having unemployment as low as it should be.

I did not have time this month to finish my usual "soap box" piece, so thought I would attach one that I wrote five years ago about the auto industry.  The Rise and Fall of the American Auto Industry:  A Brief History   I was one of the people that favored the bail-out of the auto industry largely for the sake of the State of Michigan. Indeed, the argument that GM an Chrysler should have gone through a "normal" bankruptcy seemed to make sense UNTIL we took into account the impact on the supply chain.  Yes, the auto companies would have downsized and return to the market, albeit at a smaller size, and with no taxpayer expense.    However, MANY of  the Michigan auto parts suppliers that were heavily tied in to GM, Ford, and Chrysler would NOT have weathered the storm.  Hence, we would now be looking a MUCH higher levels of unemployment in Michigan than we now have. Anyway, many of my other thoughts from five years ago are still relevant, and yes, some are not.  Hindsight is always great. Thanks again for your interest in the business survey!



Greater Grand Rapids, May 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturinga
J.P. Morgan Global Report on Services

Attached in PDF if this month's report on the West Michigan Economy.  Growth picked up April, partially because of the lousy winter.  The unemployment situation continues to improve, and Michigan is now back to the same level as March 2008-- six years ago.   West Michigan is even stronger, BUT we still have a long way to go to get back to having unemployment as low as it should be.

Just like last month, I have added attachments.  The first is an article on the impact of climate change harming the economy that will probably appear  in tomorrow's Wall Street Journal.  A second attachment which summarizes a study done on climate change.  Must everyone agrees that the world climate is changing, but no one agrees on the causes.  

Furthermore, there is little agreement on the IMPACT of climate change, and what, if anything, can be done. Unfortunately, what should have been a SCIENTIFIC issue has now turned out to be POLITICAL issue.  A brochure on a CLIMATE CHANGE conference in Denver in July accompanied this pamphlet, where many of the authors of this study will be speaking.  Let me know if you want the details.

Many, many years ago, I participated in high school debate.  I was a swing debater, i.e., one that could take either side of a complex issue and make a solid, fact supported case for or against the same basic issue.  In later years, this became one of my main take-aways from that experience:  You can make a very good case for or against just about anything, and back it up with authoritative references. Thirty years later, you finally figure out that about 90% of the arguments on both sides were distorted, biased, or based on inaccurate assumptions or data. Obviously, that leaves 10% in a massive augment from both sides that weathers the test of time. Hind sight is always 20/20, and the 10% is easy to figure out many years later.  The problem I have TODAY is trying to figure out the 10% on climate change that is accurate.

Thanks again for your interest in the business survey!

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

Greater Grand Rapids, April 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing
J.P. Morgan Global Report on Services

Attached in PDF if this month's report on the West Michigan Economy.  Growth picked up a little in March, and as we recover from the winter, growth should look good going into the summer.   Office furniture is mixed, with some firms dong better than others, even though most firms are profitable. Automotive continues to show signs of topping out, but this is good. 

In addition to the report, I have attached the text portion of an article from the Economist magazine, a British publication, about the future of democracy.  What it points out is that our democracy has survived because we have been successful in readjusting to the times over these last 230 years.  It was not the barbarians from the north that destroyed the Holy Roman Empire, it was the destruction of the country's currency and an elitist government that  lost track of the principles of democracy.  The barbarians sacked the country because the Romans destroyed the value of their currency and could not longer field an army.  Anyway, this article left me with some things to think about, and I hope it will interest your as well. 



 

 


Greater Grand Rapids, March 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

We are still on a steady slow growth path.  Automotive show signs of topping out at the present level, which would not be all bad given that the auto companies are profitable and the suppliers, for the most part, are profitable.  Office furniture is in a little bit of a seasonal slump, although some firms are doing great.  Everyone is hoping for a early spring.

Below you will find another one of my "Soap Box" topics.  This one deals with business taxes.
Who REALLY Pays Business Taxes?



Greater Grand Rapids, February 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Locally, our survey looks pretty good.  Slow growth continues.  However, the ISM national survey and a couple of other surveys around the world don't look so peachy.  Also, I'm still concerned that the auto industry pundits are expecting TOO MUCH additional growth from the auto industry.



Greater Grand Rapids, January 2014
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

As we wrap up 2013, there are no  real surprises.  The pattern of slow growth continues, and will probably continue into 2014.  This slow growth pattern will probably continue for at least the first half of the year.

Otherwise, I have attached another one of my "soap box" topics.  I have gotten a couple of calls about an "economic perspective" on the minimum wage, so I have written up an economist's viewpoint on the subject.  As usual, the political rhetoric on  subject oversimplifies a complicated subject. 

Thanks again for your interest in the business survey!

Greater Grand Rapids, November 2013

ISM Manufacturing Report
ISM Non-Manufacturing Report

J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services
As you will see, after a slight dip last month, slow growth has returned.  


Greater Grand Rapids, October 2013

ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services



Greater Grand Rapids, Sept 2013
Brian Long's Comments
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services


Greater Grand Rapids, July 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services


Greater Grand Rapids, June 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Attached is the latest report on the West Michigan industrial economy for the month ended May 31, 2013.  As clearly noted in the headline, this is the strongest report we have filed in about two years.  However, this is NOT the case with the reports from ISM at the national level or the other reports around the world.

As always, this report contains participant comments.   One of this month's comments was a little too long for the report itself, but still very well written and insightful.  Hence, I am placing it here:

“Economy continues to improve. Our industry traditionally has a much higher personnel turnover rate.  The work is hard, physical, often cold, dirty, etc. Generally in hard economic times, turnover declines; in better times it increases. We continue to see a trend of increasing turnover at our plant. It must be a sign of improvement if we have to compete more to retain workers. Also, a personal observation: In the Information Age where everything is 'instant' and sound bites are rampant, public mood overall is greatly influenced by the steady stream of crisis. My observation is that barring any actual factual and real catastrophic event, news of impending doom (Europe collapse, Japan devaluation, China slow down, etc.) Americans as a whole have decided to become somewhat numb to the threats. This coupled with less political hysteria and bickering which Americans seem to have had more than their fill.  Over and over I hear frustration about the lack of any cooperative working.  People seem to have adjusted, and are planning and living their lives again. Perhaps slow long term recovery will be the best. Perhaps more permanent change in expectations and slower pace will yield the best results. However business must let go of some of the profits and re-invest. There continues to be a squeeze to get more from employees for less.”

Thanks again for your interest in the business survey!  Here's my contact info if you have any comment:

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359


Greater Grand Rapids, May 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Attached is this month's industrial business survey report for West Michigan.  As you will see, this is one of the better reports we have filed lately.  The old saying that a rising tide floats all boats probably applies, but is is still automotive that garners the credit for our recent good fortune.  In fact, the auto parts industry is stronger than we had expected because of stronger than expected auto sales.  Er, make that auto AND light truck sales. Much of this month's uptick was credited to the sale of pickups, which drew a lot of market resistance last year when gas prices were higher.  It appears that the buying public is getting used to gasoline near $4.00 per gallon, and prefers size rather than fuel economy.

However, at the national level as well as the international level, there is evidence of an upcoming  slowdown.  In fact, the average forecast is for second quarter GDP growth to fall below 1%. The ISM national survey is still positive, but less robust than it was just a couple of months ago.  At the international level, most of the continued slowdown still relates to to the ongoing sovereign debt crisis which impacts all of the western countries that have made unsustainable commitments to retirees. 

One principle of all democracies is that retirees vote at a much higher rate than non-retirees and youth.  All of these countries are now faced with the daunting task of telling these senior voters that they are not going to receive ALL of the money and benefits that were promised to them by previous politicians.  The problem is that redefining new (and lesser) retirement  benefits while still trying to refinance the present debt. is very difficult.  As the saying goes, some people work for a living, and others vote for a living.   All of this creates political uncertainty and financial uncertainty, especially in countries that unlike the U.S. can still get away painting money.  In the case of Greece, the residents have been plummeted with seemingly endless pension and benefit cuts, layoff, and continued economic decline.  However, the Greece Manufacturing Purchasing Manager's Index actually quit sliding so fast in the Markit.com report released on May 2.  That said, Greek unemployment is still near 30%, and 25% of the countries GDP has been wiped out. With well over half of the goods-producing factories closed, it could easily take two generations for the Greek economy to claw its way back to 2005.

Anyway, enough "soap box" for this month.  Let me know if you have any thoughts


Greater Grand Rapids, April 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Attached is the latest "Current Business Trends" report for the month ended March 31, 2013.  As you will see, this is one of the better reports we have filed in recent months.  The auto industry is doing well, so it is no surprise that West Michigan is doing well. We don't have any major problems with inflation, so many of our local industrial firm are now nicely profitable.  The latest auto sales numbers were again positive, and we still expect automotive to top out at the current SAAR rate of about 15 million vehicles per year.  We are currently right in line with the estimated growth rate of 3% for 2013.  At this level, the auto firms AND their suppliers are profitable.

In the report, you will see that the index of EMPLOYMENT is now on the rise again.  The unemployment statistics for February have just been released, and there is little doubt that West Michigan is the place to be.  There are 83 counties in Michigan, and both Barry and Kent County are tied for number two in the state for LOWEST unemployment.  Ottawa County came in as #6, and Kalamazoo County was #7.  Counties on the east side of the state like Lapeer still have double the unemployment rates of West Michigan.  Granted, 6.3% unemployment for Kent County and 6.7% for Kalamazoo County are still not great unemployment numbers, although there are pockets in West Michigan where unemployment is much lower. 

For instance, the Holland-Zeeland "High Productivity Corridor" unemployment came in at 3.1%, and Plainfield Township posted 4.1% unemployed.  However, the High Productivity Corridor boasts unemployment rate of .9% (9 tenths of one percent) for a 20 year low, bring it close to the lowest unemployment rate recorded anywhere in the entire United States! Our current problem is  that we are defining a new "norm" for unemployment at a higher level.

In my opinion, the current unemployment number are good, but there is still plenty of room for improvement.

If you are interested in the press releases from MARKIT, a firm that surveys countries all over the world, you can check them out at:  www.markiteconomics.com/Survey/Page.mvc/PressReleases



Greater Grand Rapids, Mar 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Attached is this month's "Current Business Trends" for the Month ended February 28, 2013.  As you will see, this month's report posted a modest uptick after several months of lackluster performance.
A couple of our  Tier I and Tier II automotive parts suppliers reported a slight improvement in business, largely because the nameplates they have been supplying are selling a little better than expected.  The industrial distributors as a group had a better month than usual.  Some of our capital equipment firms had a very good month.  Office furniture seems to be stabilizing at the current level, which is good for underpinning the local economy.


Greater Grand Rapids, Feb 2013
ISM Manufacturing Report
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Attached is the latest edition of " Current Business Trends."  There is a change in this month's data base that makes this report a little different.  Beginning this month, the surveys for both Southwestern Michigan and Greater Grand Rapids have been combined, and I will begin referring to the results as applying to all of West Michigan.  Both surveys roughly tracked each other, so there is is little, if any, significant statistical shift.  However, the number of respondents for Southwestern Michigan has become too small to report as a separate group, so we will combine them into one report.  The Grand Rapids report is 25 years old, but the Southwestern Michigan report dated back to February of 1979.  I am of course sorry to see it go, but the local association, N.A.P.M. Southwestern Michigan, will also cease to operate independently after June 30.  This association was formed in 1928, and lasted for 85 years.  On July 1, the remaining members will become part of ISM-Greater Grand Rapids.   

Now, regarding this month's report, you will see that it is flat.  However, the ISM national report saw a significant bounce.  However, the best indications are that slow growth will probably continue for much of 2013, barring surprises. 

If you want to get in touch with me, here is my official contact information:

Brian G. Long, Ph.D, C.P.M.
Director, Supply Management Research
Grand Valley State University
(269) 323-2359

With all the snow fall and probably too much time on my hands, I have another one of my soapbox topics.  Here goes:   The Growing Gap Between Rich and Poor. 

Rich people vs. poor people.  It’s been that way for thousands of years.  Even the Bible is full of illustrations.  Today, many pundits have written about the growing income gap between the people at the top and the people at the bottom.  This is, of course, a huge political talking point.  However, in the modern world of multiple channels of mass communication, separating POLITICAL opinion from ECONOMIC opinion is difficult. So here are some ECONOMIC points:

1.  Is the gap between the top and bottom really growing?  Answer:  Yes.

2.   Where is this income gap growing?  In virtually the ENTIRE industrialized world, especially in countries like Russia and China.  And yes, it is growing the United States as well. 

3.  What factors are causing the gap to growth?  Several.  One of the biggest problems is the technology gap.  Technology has gotten ahead of the skill level of many people in the workforce.   There used to lots of jobs for people with little education.  But in today’s world, they simply can’t meet the new job requirements.  Because of the computer, computer literacy is absolutely essential in almost all white collar jobs and almost every GOOD PAYING blue collar job from CNC operator to auto mechanic.   It follows that high school dropouts are hit the hardest.   By the way, in Kalamazoo there are auto mechanics, technicians, and CNC operations without college degrees making $70,000-$80,000 per year.    That’s about three times what a starting teacher gets.  Another “by the way.”  This is another one of those things that is a WORLDWIDE problem among almost all of the industrialized nations.  Simple, manual labor jobs in factories are being replaced by robotics.  On the farm, harvesting is done by massive machines that grow bigger ever year.   And this includes a lot of “third world” countries as well.  This is good for the price of food, but not for employment. 

4.  Another cause is the decline of on-the-job mentoring and training.  Everyone seems to be asked to do “more” with ”less,” and coaxing a new employee along for several months or even several years is just not what many managers want to do.  Furthermore, some managers complain that about the time they get a new person fully trained, they jump ship and go to work for a competitor.   The old-fashioned training programs and the old-fashioned “work your way up in the company” to a higher paying job is not what it used to be.  As a result, workers are not as loyal as they once were to their companies, and companies are certainly not as loyal to their employees as they were fifty years ago.  Bottom line:  Companies want to hire people who are already trained, already have experience, and can hit the ground running.    This is another strike against the high school dropout; because it used to be that SOME of them did work their way up in companies and some even went on to get college degrees.  This path is not nearly as open as it used to be.   Partial solution, and somewhat simple solution:  The junior colleges can play a MAJOR role in closing this gap, but that’s another topic by itself. 

5.  Tax policy is also a factor.  In the past forty years, almost the entire world has cut both personal and business taxes to encourage capital formation and economic growth.  The up side:  Worldwide economic growth has exploded.  The down side:  It has increased the gap between the top and bottom income earners.  That’s another story as well.   

6.  The housing crisis has impacted the entire economy, but one problem that seems to be getting little or no attention is the cost of housing.    For people with good incomes and good credit, when combined with the low interest rates, buying a house in today’s market is a super deal.  For higher income people, this is good. But the greeting sign at the mortgage offices of today might as well as not read, “Low Income People Need Not Apply.”   Altogether too many low income people will not even qualify for a mortgage in today’s market at a decent rate of interest, and are therefore forced to rent.     The aftermath of the housing crisis has now forced SOME would-be buyers to rent rather than buy, and the demand for rental properties has skyrocketed in many areas.  Hence, many low income renters have seen their rents rise by as much as 30%.  Even duel income minimum wage earners are having a very difficult time keeping up with the rent increases.   What does this leave for groceries?  Again, that’s another story for another day.

7.   Credit addiction. One of my pet peeves ACCELERATING the gap between rich and poor is the misuse of credit.  In the case of the recent housing crisis, we found out what happens when mortgage credit is misused, and many of these ills have hopefully been corrected.  But in the last forty years, the misuse of the credit and especially credit cards has gotten out of hand.   We used to have a “usury” statute that limited interest rates of all sorts to something around 11%.  But this is state law, and most financing is now regulated at the federal level.   Given any kind of a loan there are borrowers and there are lenders.  Business loans are a separate category by themselves.   In the broadest sense at the CONSUMER level, the borrowers are the poor people and the lenders are the rich people.  Put another way, In the BROADEST sense, where does the money come from to be loaned out?   The rich people.   Who do they loan it to?  The poor people, at rates often as high as 25% in today’s   ”low-interest” market.  Unlucky poor people may pay as high as 500%, but that’s another story.   Of course, all of this is convoluted by the entire process being handles by a complex series of financial institutions.   Even some people in organized crime have complained that their previously profitable “Juice loan” business has been taken over by the financial institutions.  Of course, the financial institutions are quick to point out that they need the high rates of interest to cover the default rate, and low credit scores require high rates of interest.  So the people in financial trouble, who can least afford it, pay the highest rates of interest.  In fact, credit counselors routinely find many low income people have now been found to be paying as much as 10%-15% of their entire incomes in credit interest.    Conclusion:  Today’s credit system has institutionalized the growing income gap.  We have institutionalized that the rich get richer and the poor get poorer.

Time to go shovel snow.  Hope this gave you a few things to think about.  I don't necessarily want to start a blog, but if you have any thoughts, send them to me and I will post them with next month's report.





Greater Grand Rapids, Jan 2013 
ISM Manufacturing Report 
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

In general the surveys for this month turned flat and ended the year with a lot of uncertainty.
Next month, the reports will be combined into one report, so there will be the Greater Grand Rapids Report with the note that it now includes the respondents fro Southwestern Michigan.


Greater Grand Rapids, Dec 2012
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing
J.P. Morgan Global Report on Services

Attached is the current business survey report for the month ended November 30, 2012.  As you will quickly see, Grand Rapids (and Southwest Michigan) reports came in much better than expected.

Yes, this is a little bit of a surprise, given that the national industrial economy, according to ISM, is now slightly contracting.  However, a lot of the so-called business cycle in Michigan is related to automobile sales, and the recent automotive sales reports have been very strong.  To a lesser degree, the west side of Michigan is also influenced by the sale of office furniture, and the office furniture sales have been stronger than expected, at least for some firms. 

From here, we have to keep our eye on the "Fiscal Cliff."  By the time of our next report, the issue will probably be resolved, one way or another.  That issue, among others, will be some of the critical issues facing us in 2013.


Greater Grand Rapids, Nov 2012
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing & Services
J.P. Morgan Global Report on Services
Time for me to get on the soap box again.  The big election is next week, and I have an ECONOMIST'S view of some things you ought to think about before you vote.  Here goes:

First, does your candidate understand basic economics?  Most say they do, but they really don’t.  We live in economy that is based on markets, many of which are seldom static.  Locally, we have seen gasoline at the pump range from $1.36 to $4.56 in just the past four years.  When governments tried to control the prices like they did back in the 1970’s, we ended up with long lines of cars at the pumps, and chronic shortages.  Our national productivity fell dramatically, and eventually, no one thought they were better off letting the government try to regulate prices.   Beware of any candidate that thinks they are going to “regulate” the market.

For another stretch, does your potential candidate understand GLOBAL economics?  Ever since the widespread use of steamships in the mid-1800’s, America markets have been progressively influenced more and more by foreign markets.  Especially in the past fifty years, the growth of foreign trade has been huge.  Foreign trade now impacts our economy ALL THE WAY DOWN TO THE LOCAL LEVEL.

Do they think two dimensional or three dimensional?  Two dimensional economic thinking worked great when America dominated the world markets in the years following WWII.  Passing laws had few global repercussions.  But today, we live in a THREE dimensional worlds.  We now no longer control the international markets.   A simple example:  Blocking trade from China sounds like a good idea to some people, but China has been the biggest financier of our international debt.  What if it resulted in China dumping our debt on the open market?  Such an action would drive our dollar down, interest rates up, inflation up, and run our unemployment rate up to 20%.  To paraphrase Isaac Newton, to every force or action there are often SEVERAL reactions.

Do they understand the basic math of taxation?  The tax effectiveness factor (TEF) measures the difference between the projected amount that taxes are raised verses the NET contribution to the bottom line.  If the tax is relatively small like putting coins in a parking meter, most people will pay it.  But when the taxes are large, they hire accountants and tax attorneys to minimize taxes.  In recent years, we have seen dozens of examples of states, municipalities, and other government units posting significant tax hikes only to find that it drove taxpayers away in droves resulting in NO gain in total revenue.

Do they understand debt?  Our country, as well as most of the western world, has become obsessed with debt.  Running up balances on credit cards has become the national norm for about 64% of the American population.  Interest and penalties on these unpaid balances my run as high as 35%.  However, about 5% of the adult population still does not use credit cards, and 31% pay them off every month and carry no balances.   Taking into account the whole economic system, where does the money come from for the 64% to borrow?  Obviously, most it comes for the aforementioned 31%, aka, the “rich” people.  In fact, credit cards are one of the best examples there is of REVERSE income redistribution.  The rich people loan the money to the 64% of the population addicted to overspending.  In the form of interest payments, some low income people may actually be transferring 10% of their income back to the people that already have lots of money.  At the international level, we are transferring our wealth to the Chinese so that they will become richer. 

Do their claims or promises match their office?  An extreme example would be a county commissioner candidate promising to do something about the bridge to Canada.  The roles of 82 of the 83 county commissions have very little or nothing to do with the bridge to Canada.  

What is THERE vision of the role of government as it relates to economics?  There is little controversy that successful economies require successful governments.  Indeed, it can easily be argued that the success of our democratic form of government is responsible for our economic success.  The perpetual question is often HOW MUCH government do we need to maintain a successful economy.   Paul Samulson, author of the most successful economic book in history, referred to the trade-off of “guns and butter” to pose the problem of resource allocation between the public and private sectors.  So far, we have done a pretty good job of balancing the role of government to maximize economic growth.  But keep in mind that governments run on taxes, and expensive projects require taking money away from the private sector.   The same is true of government workers.  In most cases, it takes the taxes from several taxpayers to pay for just one government worker.  Governments can also become entrepreneurs and try to run the business themselves.  In many countries, the government owns or controls the oil industry.  They are rarely successful in discovering new sources of oil, but owning the oil refining and distribution system is good for balancing the budget.   Hence, the price of gas in Europe is now about $10 to $12 per gallon.   Years ago, Kalamazoo was in the business of generating electric power.  Tired of trying to manage a business that they knew little about, the city council decided that it would be better to sell the business to Consumers Power, our major local power company regulated by the state.  The city of Lansing, on the other hand, still owns the local power company.  However, OUTSOURCING of government work to the private sector has save the taxpayers billions.

Jobs.  If I hear this word one more time in a campaign ad, I think I will scream.  My point is simple:  Does your politician really have any idea of what it takes to CREATE jobs?  What does it REALLY take to get companies and firms to hire more people?  How do you attract new employers to the area, given that every other state and city is trying to do the same thing?  Along those same lines, do they know how to keep from LOSING jobs?  The jobs we have lost in Michigan in recent years have largely gone to other states, NOT to China or Mexico.  The local jobs we have gained in recent months in Michigan have come from the firms that have survived the Great Recession, as well as the successful recruiting efforts of The Right Place and Southwest Michigan First.

A few other things relate to the qualifications of the candidates themselves.  First, do they know anything about their elected job?  Some years ago, one candidate for a county board admitted that he had never so much as attended a county board meeting.  Can you imagine electing a treasurer with NO background in accounting?  Or put another way, would you elect someone to a higher government office with no background in working for the government or in passing or reviewing legislation?  Remember that the road to hell is paved with good intentions.   Almost every politician in history has believed that their own intentions are good, but many have failed.

Can they govern, or just recite party line rhetoric??  Candidates elected by successfully taunting one or two major issues are often poorly equipped or unwilling to do the job of governing.  Any legislator at the state, local or federal level will tell you that well over half of the issues they deal with have little or no partisan component.  We live in a changing world, and the people who are elected are expected to deal with new issues like windmill generators and get rid of programs and regulations that don’t work in current times.  One clue is the candidate’s voting record.  If they seldom show up for committee meetings or non-partisan issue votes, chances are that they think their job is limited to one or two issues.   

Can they MANAGE government?  At the state and national levels, the candidate must have some kind of a background that shows experience and talent for hiring staff, and then in turn managing that staff.  Their role is usually to set policy, leaving the implementation to staffs to carry it out.  Unlike many countries around the world that use government jobs as a patronage tool, we hire some of the best workers our nation has to offer to run many of our government functions.   The overwhelming majority of these government workers bust their fannies to do the best possible job they can.   This requires that our elected officials know how to manage these people.   It also assumes that they know how to hire the best possible people.  Ronald Reagan was successful because of his ability to hire good staff people, not because he possessed any kind of a super intellect.  

OK, this is probably too much information, i.e., TMI.  But those are my thoughts.  I’ll get off the soap box. Thanks again for your interest in the business survey!

the reports are flat.  So far, all we have is an economic slowdown, not a recession..


Greater Grand Rapids, Oct 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing
J.P. Morgan Global Report on Services
The report  is flat.  So far, all we have is an economic slowdown, not a recession.


Greater Grand Rapids, Sept 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services
For Grand Rapids, the report is flat.  Again, all we have so far is an economic slowdown, not a recession.  Because of the new-found strength in SOME segments of the economy such as real estate and housing, I am still hoping that we can bounce back an forth across the zero line for a few months and not just sink. However, the situation in the European economy continues to worsen.  The basic problem is still the lack of confidence brought on by the sovereign debt crisis, so nothing is really new. Domestically, we are all waiting for two months from today when the election to be over.  The political air is poison, and at least we won't have to listen to the TV and radio ads in another 60 days.  We may be able to proceed with more certainty after the election is over, but even that remains to be seen. As always, the link below is to the ISM national report.  This is the THIRD negative report from ISM in the past three years at the national level.
For Grand Rapids, the report is flat.  Again, all we have so far is an economic slowdown, not a recession.  Because of the new-found strength in SOME segments of the economy such as real estate and housing, I am still hoping that we can bounce back an forth across the zero line for a few months and not just sink. However, the situation in the European economy continues to worsen.  The basic problem is still the lack of confidence brought on by the sovereign debt crisis, so nothing is really new. Domestically, we are all waiting for two months from today when the election to be over.  The political air is poison, and at least we won't have to listen to the TV and radio ads in another 60 days.  We may be able to proceed with more certainty after the election is over, but even that remains to be seen. As always, the link below is to the ISM national report.  This is the THIRD negative report from ISM in the past three years at the national level.

If you are interested in the press releases from MARKIT, a firm that surveys countries all over the world, you can check them out at: http://www.markiteconomics.com/Survey/Page.mvc/PressReleases





Greater Grand Rapids, June 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services
To no one's surprise, it is positive automotive sales that is still driving our economy on the west side of the state.  

As I mentioned in the report, we  would probably be looking at some very strong numbers right now if it were not for the debt situation in Europe.  As a result of the uncertainty of the debt situation, most of Europe is sliding into a recession.  What is really frustrating is that there is very little the US can do to help the Europeans out of their situation.  We just have to wait and see.  The June 17 election in Greece could tell us a lot.

I don't mention it in the report, but I am concerned that commodity prices are falling.  Normally, you would think that falling prices would be good.  Unfortunately, when too many prices for too many commodities are falling, it is usually because economic conditions are worsening. 

There is little doubt that the whole world economy is slowing.  The question remains about how much we will be drawn into the slowdown.  If things get really bad in Europe, we will get drawn into their recession.  Thanks for your continued interest!

Greater Grand Rapids, May 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

As you will see, these reports remained positive be went in opposite directions.  Southwestern Michigan was considerably slower, but the Greater Grand Rapids area picked up steam.  The ISM national report was also stronger, as was the J.P. Morgan's international report.  Europe continues to weaken, but so far the world statistics between the U.S., BRICS countries, Canada, and a few other pockets of strength have kept the international numbers modestly positive.  As far as the U.S. economy, I am still more concerned with Europe drawing us into their troubles.

Greater Grand Rapids, April 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

In general, there are no surprises. Overall, we are still in a slow, gradual  (almost boring) growth pattern.  The office furniture business has already topped out, and I still hold to the projection that automotive will top out over the next few months.  In short, we are approaching the upper limit of what the industrial sector can contribute to the current recovery.  Whereas there is evidence that home prices have stabilized, we are a long way from the home construction sector making a contribution to the current recovery.

Outside of the geopolitical factors that could upset the whole world order, my biggest concern remains the Europe debt crisis.  I'm afraid that we are in for months of mini-scares every time a bond auction goes poorly, such as it did in Spain a couple of days ago.  The Greek elections are coming up, and I fear that too many Greek voters don't understand the economics of their situation and are unwilling to accept the austerity measures that are now in place.  Furthermore, projections that I have seen regarding their GDP growth for the future are overly optimistic.  This will require MORE austerity measures, and will probably mean more  turmoil.

Greater Grand Rapids, March 2012  
ISM Manufacturing Report
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

In general, the economic recovery has picked up a little pace.

Greater Grand Rapids, February 2012  
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

As you will see in this month's report, I think we would have a pretty good 2012 if it were not for Europe.  If things go bad in Europe, they could suck us and the rest of the world into another recession. 

Unfortunately, I do not believe that there is a sole on this earth that can accurately predict how everything is going to turn out.  We know that we have European countries in financial trouble both in and out of the Eurozone, and that every one of them has a slightly different problem.  The main problem that they all have in common is that they have over promised their retirees more benefits than they can possible deliver, and now they are all looking for someone to bail them out.  The German, who hold most of the spare cash, are insisting they they go back to their present and future retirees and tell them they will have to make do with less.  This the the so-called austerity program.  The Germans also want to take over the Greek checkbook in exchange for badly needed cash.  As you can imagine, this went over with the Greek people like the proverbial lead zeppelin.   They are acting kind of like the

American cities that have spent themselves into bankruptcy and then want their state governments to bail them out  --  without the state appointing a financial manager.  Furthermore, this is still just Greece.  Portugal is up next on the list, and we still have Italy, Ireland, Spain and possible France to go.  There are so many countries, so many player, so many political parties, so many egos, and so little time to figure this all out.  Will "wiser minds" prevail???      This is why no one can predict what is going to happen.  

All for now.  Thanks for your continued interest.

Greater Grand Rapids, January 2012  
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

The Greater Grand Rapids report came in slightly more positive than the previous month.  Most of the most recent domestic statistics continue to show modest improvement as well. The ISM purchasing managers’ report for the US is marginally positive.  Maybe the best news is that J.P. Morgan's international report flipped back to positive after incrementally sliding for the better part of five months.

Last month, I reminded everyone that like or not, China as a country is our third biggest customer.  Fortunately, the report of business conditions in China has again turned POSITIVE. This is another good sign. In fact, if it wasn't for Europe, I would be very positive about the outlook. The numbers coming out of Europe still point to a mild recession, largely brought on over anxiety about the sovereign debt situation among various countries. Right now, it appears that they have temporarily kicked the can down the road to make everyone temporarily happy, but avoided taking the necessary steps for a long term solution. 

As various countries run into problems refinancing bonds, the crisis is apt to reappear throughout 2012. It will spook the stock market for a day or two, followed by another short-term fix, and then attention will be directed back to our own positive numbers.  My contention is worth repeating that the current problems  in Europe can be attributed to the money managers  he world waking up to the fact that governments all over the world have over promised retirees what they can deliver over the long term. Furthermore, there so many players involved that the final outcome defies prediction. If someone or some country makes a wrong move, the European slowdown or recession could draw us into an economic mess that was not our fault.

Anyway, back to the United States. In summary, we have started the year on a good footing, but we will still be plagued by the housing crisis and high unemployment for all of 2012.

Greater Grand Rapids, December 2011  
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services 

The report for Southwestern Michigan turned flat, but the Greater Grand Rapids report was a bit more optimistic this month. Most of the domestic statistics showed some modest improvement as well.  The ISM purchasing mangers report for  the US is flat, but the other reports from around the world are turning  negative.  Over the weekend, the Italians came up with an austerity program that MAY form a pattern for other countries in financial trouble. This, of course, assumes that the austerity measures are actually adapted, and that the union protesters don't burn Rome to protest the cuts.

In the mean time, keep a eye on China. Pundits are now talking that recent attempts to slow the economy and halt inflation may result in a "hard landing."  Like or not, China as a country is our third biggest customer. A serious recession would have an impact on us.

And then there is Europe.  As  noted in the attached report, the OECD flat-out predicts that the first two quarters of 2012 will be a recession for the Eurozone.  Pundits on both sides of the Atlantic contend that Europe is already in a recession. You may have already heard that Standard & Poor's is examining the credit rating of all 17 eurozone countries.   My problem is assessing the amount of exposure the US has to Europe. As a unit, the Eurozone is a bigger customer than China.  A recession, even if it is mild, will undoubtedly cost the US some business.  What I don't know is if the US recovery still has enough momentum to rise above it.  In part this may depend on how deep the European recession turns out to be.  If the new austerity plans in Greece and Italy begin to stick, the recession could be very shallow -- or possible not materialize at all.  I still contend that almost all of the current problems  in Europe can be attributed to the money managers the world waking up to the fact that governments all over the world have over promised retirees what they can deliver over the long term.

In fact, the world's obsession with debt at both the governmental and personal levels is  one of the factors causing "the rich to get richer and the poor to get poorer."  When poor people are given access to credit, they find it hard to resist. Governments have the same problem.  In both cases, the easier the availability of credit, the more it appeals as a solution to every short-term problem.  So poor people are enticed (No money down!  No payments until 2014!  Bad Credit? Come to us!) to buy on credit at exorbitant interest rates, and end up with 10% of their already-meager incomes going to interest and penalties.  So poor people borrow the money, and pay the interest.  Directly or indirectly, who do they borrow it from?  The RICH PEOPLE.  Hence, they institutionalize that the rich get perpetually richer, and the poor get perpetually poorer.  Altogether too often, the poor eventually run out of rope, and end up in bankruptcy.  So do countries.

Back at the international level, we need to watch the nature of the austerity program in Greece, Italy, Spain, and the other countries that have overrun their debt.  Why?  Because some day, the US will face the same music.  I am 65 years old, so it may not be in my generation that the proverbial chickens come home to roost .  But the higher we run the national debt, the harder will be the fall.  Greece and Spain have both awakened to mornings when the world would no longer accept their debt at low rates of interest. In the resulting austerity programs, many, many people in these countries are stunned that their checks from their government have been slashed.   In the long run, that day is waiting for us too, UNLESS we start fixing the problem now.

OK, time to get off my soap box again.  As always, let me know if you have any comments.  Thanks again for your support  for the survey!

Greater Grand Rapids, November 2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 

J.P. Morgan Global Report on Services 
Our local reports still looks fine, and I am just a little bit more optimistic this month.  Of the dozens of statistics coming daily from governmental organizations and trade group all over the world,  some of them showed some modest improvement.  The purchasing mangers reports form both the US and around the world are still flat, but the decline seems to have halted.   However, the European bail-out situation seems to change on almost a daily basis.  As I noted  in this month's report, Greece is simply the canary in the proverbial  mine shaft.   The fact remains that the ENTIRE western world has awakened to the fact that politicians have vastly over-promised pensions and as well as benefits to the baby boomers that are unfunded and unsustainable.   The precedent set by Greece will form the pattern for all of the other fixes.   Some of the Greek people know that the promises made to them are unsustainable, but they hope that the Greek  government will continue to give in to the rioters and somehow force the rest of Europe to pony up money to keep the euro from collapsing.   In short, this crisis is far from over,  and we may see a lot of sideways markets  until it is resolved.

Greater Grand Rapids, October 2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
|J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

Just as last month, our local reports still looks fine. In fact, even the US report is flat, and not declining.  It's the rest of the world that's a problem.  JP Morgan's international report of purchasing managers for 30 countries (86% of the global manufacturing output) continues to slide further into negative territory. Over the past month, I have been watching the Greek debt situation closely.   They appear to be edging closer to a solution, but they still have a long way to go in order to get their creditors (mainly the Germans) to fork up the money and avoid bankruptcy.  Right now, 75% of the Germans oppose committing more money to the European Rescue Fund, and 44% would like to drop out of the Euro altogether and go back to the Mark.  If Europe can't work this problem out, the whole thing could get messy. Unfortunately, with the world economy tied together like it is today, we will get drawn into the financial mess.  We just won't feel it as bad.

Another country that I am keeping an eye on is China. Housing and real estate prices have doubled in the last few years. Sound familiar?  With the numbers that are starting to creep out of the country, I am worried that China could be headed for a real recession, i.e., a serious negative GDP. There has never been a recorded recession in China's Communist history, partially because their record keeping doesn't go back very far. Before that time, the Communist government refused to acknowledge that there could ever be a recession under such a wonderful form of government.  Again, a real recession in China would be a problem for us.  We often forget that they are our third best customer in the world market.

In a CNN poll released September 30, a full 90% of Americans say that economic conditions are poor.   That' up from 81% when the same poll was conducted in in June.  What is remarkable is that people are still buying at a steady rate despite their misgivings about the future.

If we do slide into a recession, I am going to peg the beginning date as August 3, 2011. The debt wrangle in Washington came to a head about then.  Prior to this time, Europe had been unable to come up with a solution  to their  debt problem.  I think that they hoped that we might come up with a solution the could form a pattern for nations everywhere.  With our highly publicized political wrangling, it became obvious that the U.S. was not going to provide any leadership.  This is when businesspeople around the world began to worry, and perhaps rightly so.  The whole western world has the same problem:  The governments have promised more than they can deliver to past and future retirees in the form of virtually unlimited medical care, pensions, social security, etc.  Hence, the problem and the crisis is worldwide.

Time to get off my soap box.  As always, let me know if you have any comments.  Thanks again for your support  for the survey!

Greater Grand Rapids, September 2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services 

Fortunately, our local reports are still doing fine.  It's the rest of the world that we have to worry about. In the report you will see that I have raised the odds of reentering a recession at 70%. The big problem is that virtually the ENTIRE WESTERN WORLD has awakened to the fact that governments have created huge UNFUNDED benefit packages for their citizens and public employees under the apparent hope that the world economy would always grow fast enough to pay the retirees. Since Greece was the first country to hit the wall, I had hoped that the creditors (primarily Germany)  would force a realistic solution of cutting the heretofore overly generous retirement packages to a manageable level. So far, that has not happened.  Since the US has the same problem, I think that Europe was watching us very closely during our recent debt debate to see if we were any better at solving our own debt problem. The world often looks at us for leadership, and they were very disappointed. Hence, if we enter another recession, the trigger will probably be that the entire world has just now finally realized that most countries in western world have promised retirement programs and entitlements that are running out of money--- and no one is there to bail them out.  In fact, the only way out is to downsize and reorganize the programs, and this will  be very painful.  In both Europe and the US, the citizenry has an unrealistic notion that somehow some other segment of the economy can be sacrificed to keep their income stream going.

Otherwise, our local reports are still strong, primarily thanks to automotive. However, almost all of the government and trade statistics that came out this month were downticks, culminating with last month's employment growth of zero.  Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, August  2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 

For Grand Rapids, the results are regrettably less than last month.  Kalamazoo backtracked, but the results are still fairly positive.  The good news is that both surveys are doing better than the national survey (ISM) and the JP Morgan international surveys.   For the rest of the world, the economy is turning fairly flat.  Not good.

Greater Grand Rapids, July 2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing 

 The results are better than expected.

Greater Grand Rapids, June 2011    
ISM Manufacturing Report 
ISM Non-Manufacturing Report
J.P. Morgan Global Report on Manufacturing

As you will see, 2011 is still on track, but we ARE starting to slow.  Last month we talked about industrial inflation, and noted that steel prices MAY be starting to stabilize or decline.  For many firms, this is the case for this month.

This is also the month that the Japanese disaster finally hit our supply chain.  Locally, the impact has been minimal.  And the projections are that we only have a couple more months to go.

We are still assessing the impact of Dodd-Frank, but the fact remains that banks have been forced to adopt much stricter lending rules, and demand much larger down payments.  Despite low mortgage rates, this is restricting lending to homeowners, and more importantly, small businesses.  Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, May 2011
ISM Manufacturing Report  
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing  

For most respondents, industrial inflation is still a HUGE problem.  Our indexes in this report hardly moved.   However, the JPM index of prices posted a significant drop.  Furthermore, a whole bunch of basic commodities are now down in price just over the past few months.  There is evidence that steel may have topped out at the present level.  All of this should start to help our inflation numbers for the month of May.  I guess we'll see....

Barring some unforeseen event, I still don't see a recession on the horizon.  Some of the major commodity prices are starting to come down, and as long as this progresses in an ORDERLY manner, we will not have a repeat of 2008.  That said, falling prices do result in inventory liquidation.  Inventory liquidation means fewer orders.  Again, right now, it appears that this inventory liquidation will be orderly.  If it happens all at once and across all commodity line, then we have a problem.

I am more uncertain about what will happen in June after QE-II expires. We know that interest rates will drift higher, but how much higher is still unknown.  We are in uncharted waters. Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, April 2011
ISM Manufacturing Report  
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing  

Last month we talked about industrial inflation, which is clearly getting out of hand with no end in sight.  In March, the problem only got worse. We know that the US economy is going to take a small hit from the Japanese disaster, but we still have not figured out how much of a hit because of the convoluted supply chains.  One of the econometric organizations came up with a guess of 0.2% of GDP for the third a fourth quarters of 2011.  I don't know how they calculated this number, but it seems as good as any  guess I've heard so far.  I'm concerned because a lot of the hit is going to fall on automotive.

Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, March 2011
ISM Manufacturing Report  
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 

The problem for this month is industrial inflation, which is clearly getting out of hand.  We are all aware that the housing collapse was a major cause of the 2007-2009 recession.  However, rampaging speculation in the commodity markets played a role as well.  HUGE inventories were built on the basis of speculation  by investors all over the world. Industrial firms built inventories in anticipation of still higher prices as well as potential shortages.  When the bubble broke in 2008, the speculators dumped their inventories, and  firms stopped ordering. They used their already bloated warehouse stocks  for the next several months.  Mines were shut down all over the world.  Trillions of dollars were pulled out of the economy overnight.   As the recover finally began, inventories were low, and at least some of the initial strong numbers resulted from rebuilding inventories.   However, low interest rates now appear to have spawned another round of commodity speculation.  If this gets out of hand, it could easily spell the end of the current recovery.  Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, February 2011
ISM Manufacturing Report  
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

2011 is off to a good start. In the report, I have mention that  many businesses have become more optimistic.  They are again starting to hire, and will soon begin investing in new plant and equipment.  Unemployment will edge down SLOWLY.

The down side is industrial inflation.  As of today, we have set a record price for copper.  Steel is going higher, and not much can stop it.  Since a lot of these increases in raw materials cannot be passed along, profits will be squeezed. 

Let me know if you have any comments.  Thanks again for your support!

Greater Grand Rapids, January 2011
ISM Manufacturing Report  
ISM Non-Manufacturing Report 
J.P. Morgan Global Report on Manufacturing 
J.P. Morgan Global Report on Services

We had a good finish to 2010, and 2011 seems to be getting off to a good start.