What We Heard in Michigan Last Week
Author: Greg Valliere
July 29, 2019
BEYOND THE BELTWAY: It’s always illuminating to spend time with investors, ordinary voters and old friends who live outside of the infamous Washington Beltway. We were at a conference in suburban Detroit last week and got an earful, as we summarize below: . . .
RUNNING OUT OF WORKERS: With an unemployment rate of 4.4% (down from nearly 12% eight years ago), Michigan has run out of skilled labor. Everyone we talked with said the economy could be even stronger if there were more workers; some business leaders asked why there’s no H1-B visa reform, which would ease restrictions on immigrant workers.
A WHIFF OF INFLATION: No one likes the tariff wars; business uncertainty is rising. But we heard one surprising complaint — inflation may begin to rise because Michigan manufacturers are paying more for component parts made in China. That issue — plus intense competition for workers — could begin to re-kindle inflation, according to several business officials we spoke with.
DISGUST OVER THE SPENDING BILL: There was widespread astonishment over the budget pig-out that cleared the House last week and should pass in the Senate in a few days. Both parties — and President Trump — get roughly equal blame.
LITTLE SUPPORT FOR TARIFF WARS: Not even the auto industry favors tariffs on foreign autos, and while there’s agreement that China doesn’t play fair, there’s a strong sentiment in Michigan that Trump’s trade wars are keeping the economy from growing even faster.
NO ONE CARES ABOUT IMPEACHMENT: There’s no great affection for Trump, even among Republicans, but there’s virtually no support for impeachment. Most people we talked with agreed that it would be a waste of time, and extremely divisive, with no prospect of conviction in the Senate.
BUT TRUMP IS IN TROUBLE: Trump won Michigan by 0.23% in 2016, a razor thin margin in this crucial state, which has 16 electoral votes. Virtually everyone we talked with said Trump currently is the underdog in Michigan; there’s “Trump fatigue” as his tweets become increasingly divisive. There’s over 15 months to go, so much can change — but this sentiment is important; if Trump loses Michigan, Pennsylvania and Wisconsin, he might fall just short of 270 electoral votes, despite the solid economy.
IT’S QUITE A STORY: Michigan was flat on its back a decade ago, and now Detroit is on its feet and the state is growing solidly — so the boom is not confined solely to the Sun Belt. Does this tight-labor climate warrant a Fed rate cut on Wednesday? We don’t think Michigan needs one, but more stimulus — fiscal and monetary — is coming whether the economy needs it or not.
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