Indicators show struggling Michigan economy starting to recover, but no quick upswing in sight

Shaky Michigan economy slowly starting to recover

ROCHESTER, Mich. — Andy Sakmar has been selling real estate for 35 years, and despite an economic downturn that has hobbled sales and left one in every 36 Oakland County homes in foreclosure, he’s optimistic.

“The real estate market in the past 90 days has been fantastic,” he said recently from his office in a converted fire station in downtown Rochester, about 20 miles north of Detroit. “I think we’re coming out of the trough.”

Signs of improvement are welcome as business and political leaders look for ways to get Michigan’s economy rolling again during the annual Detroit Regional Chamber Mackinac Policy Conference. The three-day event starts Wednesday on Mackinac Island.

The state no longer is on the steep downward slide that began when the national financial crisis hit in fall 2008, although it’s a long way from climbing back to the level of economic activity it saw as recently as five years ago. Auto sales are rising after dropping to their lowest level in 50 years, and the three domestic automakers could see their share of the U.S. market rise this year after years of decline, University of Michigan economist George Fulton said.

Michigan’s unemployment rate still leads the nation after peaking at 14.5 percent in December, ending a year in which 285,600 jobs disappeared, including close to a fifth of the auto jobs present in 2007. Job losses so far this year have been far fewer, allowing unemployment to ease down to 14 percent.

Fulton forecasts the state may begin gaining more jobs than it loses in the fourth quarter, a trend he expects to continue through 2011, when he expects the state to have a net gain of about 18,000 jobs. He expects Michigan workers will see more money in their pockets this year, with personal income growing around 2 percent compared to a 3 percent drop in 2009.

“The economy has stabilized in the last few months,” Fulton told state officials earlier in mid-May. “2009 is now in the rearview mirror, and Michigan has survived.”

The Michigan Association of Homebuilders announced in April that it was seeing a modest recovery and expects permits to build single-family homes will be up 35 percent through October compared to a year ago.

Among existing homes, Sakmar said houses that used to get no interest from buyers now are getting several offers. The competition for homes costing $600,000 or less is growing.

Other business owners also are becoming cautiously optimistic, said Rich Studley, Michigan Chamber of Commerce president and CEO.

Starting about two months ago, “All across the state people were coming up with a smile on their face saying, ‘I think we’ve hit the bottom,’” he said. “What they were saying was, ‘We’ve stopped losing money, we’re going to survive, we’re confident that the worst is behind us.’”

Many residents are still discouraged about Michigan’s economic future, however. A full quarter of the 600 likely voters questioned in a recent poll said they think Michigan’s economy will get worse. Among the 73 percent who think the economy has bottomed out, only 35 percent think it’s starting to improve, while the rest feel it isn’t getting any better.

The May 22-26 poll was conducted by Lansing-based EPIC-MRA for the Detroit Free Press and television stations WXYZ, WOOD, WJRT and WILX. The margin of sampling error was plus or minus 4 percentage points.

On Rochester’s tidy Main Street, the empty storefronts sprinkled among the upscale restaurants, clothing stores and a well-stocked bike shop show the Michigan economy remains on shaky ground.

Although the local real estate market may be picking up, Jeanette Rahaim isn’t sure the bad times are over. The 61-year-old lost her Rochester home to foreclosure three years ago after going through a divorce and now watches her money carefully.

She carried an armful of clothes to try on recently at Boutique Angelique in downtown Rochester — though she planned to return most to the rack.

“I used to buy a lot, but I don’t spend money like I used to,” she said. “Once something like that happens to you, you’re afraid to spend.”