Detroit’s economic picture continues to improve though gains tempered by income challenges

Detroit's payroll jobs and the number of employed residents are expected to continue to climb during the next few years along with sustained real wage growth, according to University of Michigan economists.

Still, positive trends are tempered by challenges that include more than three-fifths of Detroiters living in lower-income households-more than twice the national average.

The Detroit Economic Outlook for 2023-29, released Friday, estimates the count of payroll jobs within the city's boundaries recovered from the COVID-19 pandemic in the second quarter 2024-one year after the number of employed residents did so. Both are expected to keep rising through the end of the forecast: Payroll employment to 4.7% above its pre-pandemic level and employed residents to 6.2% higher.

Economists say the progress comes despite high interest rates, with the Detroit economy shaking off the effects of last year's strikes at Blue Cross Blue Shield of Michigan, the Detroit Three automakers and the city's three casinos.

"The Detroit economy has displayed encouraging resilience in the face of a challenging economic environment over the past couple of years," said Gabriel Ehrlich, director of the university's Research Seminar in Quantitative Economics and a co-author of the report. "We expect lower interest rates ahead to offer some relief to the auto and mortgage industries, which should spur continued economic growth in Detroit through 2029."

Ehrlich and colleagues say the city's unemployment rate is expected to edge upward-from 7.5% last year to 7.8% this year-then tick downward to 6.9% by 2028-29. The short-term increase reflects a rising number of Detroit residents officially in the labor force who are actively looking for work.

The economists project Detroit Consumer Price Index inflation to decelerate from 5.4% last year to 2.7%-2.8% this year and next before cooling to an average pace of 2.5% per year from 2025-29.

In another positive trend, ongoing wage growth and slower inflation combine to bring average real household income per capita 6.1% higher by 2029 than it stood a decade earlier.

The economists say the generally positive dynamics should not obscure the city's still high number of lower-income households, where four out of five Detroit children live.

They also highlight large disparities in the distribution of economic prosperity: Detroit's Hispanic and non-Hispanic Black populations are less than half as likely to live in upper-middle or higher-income households than non-Hispanic white residents.

The report notes higher educational attainment continues to provide a path to prosperity: Only a quarter of the city's residents with a bachelor's degree or higher lived in lower-income households in 2022, versus 55% of all residents at least 25 years old.

The researchers say there are some encouraging signs in the data: The share of residents living in lower-income households decreased slightly and the circumstances of children improved more quickly than nationwide in recent years.

"We caution that there is substantial uncertainty surrounding our forecast, which does not include a recession or major changes to federal policy following the November elections," the economists write in the report. "Nonetheless, we expect our forecast of continued employment growth, falling unemployment and growing real incomes to translate into ongoing, if gradual, progress toward more inclusive prosperity for Detroit residents over the next five years."

The forecast was produced as part of the City of Detroit-University Economic Analysis Partnership between U-M, the city of Detroit, Michigan State University and Wayne State University.

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