Economist agrees that Michigan’s economy is strong, but inflation worries persist

Published: Jul. 2, 2021 at 5:58 PM EDT
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FLINT, Mich. (WJRT) - Gov. Gretchen Whitmer announced Friday that Michigan’s credit rating outlook has improved from negative to stable.

Whitmer called it a sign of growing confidence in the state’s communities and small businesses. A University of Michigan-Flint economist shares that confidence, but with one caveat about inflation.

“The economy’s reopening, the economy’s improving,” said U of M-Flint economics professor Chris Douglas. “A decent jobs report today, 850,000 new jobs created in the U.S. Probably new jobs were created in Michigan as well.”

He said the state’s improving economic outlook means an increase in tax revenue, which makes it easier for the state to pay back what it borrowed. That naturally results in the improved credit rating announced Friday.

“We haven’t seen cuts like we did years ago with the Great Recession,” Douglas said. “If you remember back in 2009, we saw big cuts to K-12 education, cuts in state services, furloughs. I believe state patrols were reduced back then to save money. And you haven’t seen that with the last recession or this recession just because federal dollars have been so generous.”

He isn’t at all surprised with how healthy the state’s economy is and how quickly it’s bounced back.

“People have been cooped up for 16 months since the coronavirus hit, and I think with the vaccines being widely deployed, people are eager to get on with their lives, get back to traveling and getting back to eating out,” Douglas said.

But he shares one particular concern with inflation.

“Those dollars have kept state and local governments afloat, kept individuals afloat with enhanced unemployment benefits. But all of that has been borrowed, and largely that money’s been financed by printing money,” Douglas said. “So the concern is -- will that result in inflation kicking in in the long run, so that we return to the 1970s over the next few years?”

He pointed out that the Federal Reserve has indicated that inflation is expected to stay relatively low in the coming years.

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