Saturday, April 30, 2011

Michigan Economy Doing Better Than California?!

For the six months starting last August and continuing through March of this year, the jobless rate in Michigan has been lower than California's rate (see chart above).  That follows 88 straight months going back to March 2003 when Michigan's jobless rate was above California's.  How interesting that Michigan, the "basket-case" state with the highest jobless rate in the country during most of the last recession, now has a jobless rate almost two points below the "unionacracy" of California.  

And who would have thought we'd ever see this happening - some companies are now relocating from California to Michigan!  According to this report from Joe Vranich, 70 companies left California from January 1 through April 15 of this year, and the #3 destination behind Texas (14) and Arizona (6) was Michigan, with four relocations (tied with Nevada).  And just last Thursday an Irving-based company (Blackford Capital) announced that it's the fifth California company heading this year for greener and more business-friendly pastures in Grand Rapids, Michigan.  That's "disinvestment event #78" so far this year according to Vranich, who regularly tracks the companies moving out of California.  

Here's something else: According to current U-Haul rates, it's 35% more expensive to rent a one-way truck from Los Angeles to Grand Rapids ($2,673), than from Grand Rapids to Los Angeles ($1,980), implying a higher relative demand for trucks from California to Michigan than vice-versa, i.e., a net out-migration of people moving from California to Michigan. 

20 Comments:

At 4/30/2011 10:39 PM, Blogger Bill said...

Mark: What in your view accounts for the sudden resurgence of the Michigan economy as compared with that of California?

 
At 4/30/2011 11:28 PM, Blogger PeakTrader said...

California has many advantages, e.g. rich in natural resources (including the Sacramento Valley), nice weather, beautiful scenery, a booming tourism industry, a booming high-tech industry, attracts top talent from around the world, who don't mind the high cost of living, including high taxes, because of even higher incomes, etc.

Without those advantages, most people in California would either flee to any other state or overthrow the California government.

 
At 5/01/2011 12:21 AM, Blogger Jason said...

Peak, Michigan has a number of advantages as well, weather not included. And something The People's Republic of California doesn't have: Water.

Regardless, I am surprised by this data.

 
At 5/01/2011 1:19 AM, Blogger PeakTrader said...

Jason, you shouldn't be surprised by the data. In the recession and slow recovery, California has been squeezing as much money out of its residents as possible, e.g. increasing the sales tax rate, doubling traffic fines; a parking ticket rampage; raising college tuition, higher vehicle registration fees, and increases in other fees, fares, tolls, etc.

 
At 5/01/2011 7:29 AM, Blogger Bernie Ecch said...

Maybe Michigan is enjoying the benefits of the green energy/good paying jobs policies of Jennifer Granholm as opposed to California suffering from the policies of the Ronald Reagan-admiring Arnold Schwarzenegger.

 
At 5/01/2011 8:28 AM, Blogger Jason said...

Bernie, Michigan is not benefiting from anything from the Granholm era. It is benefiting in spite of her FAILED governorship. Her eight years were a tale of dysfunction, decision by polls and indecision in general.

She and her coattail husband couldn't move out of Michigan fast enough once her final term was completed. She knew she was an epic failure. As a matter of fact, I think you could measure the time she stayed in minutes. And by the way, she moved to California with the rest of the fruits and nuts.

That eight years will be known as a stain on this state.

 
At 5/01/2011 9:07 AM, Blogger PeakTrader said...

Bernie, spending $250,000 for a $50,000 job is part of the problem.

 
At 5/01/2011 11:53 AM, Blogger Ron H. said...

Jason

You might be surprised to learn that California DOES have water, it's just not always in the right place. A great deal of redistribution is necessary. :)

 
At 5/01/2011 12:07 PM, Blogger Benjamin said...

All that, and Michigan has the Detroit Lions of the NFL too.

How do you top Michigan?

 
At 5/01/2011 12:46 PM, Blogger Tom said...

Just to clarify, the Michigan economy is still in very dire condition, and Mark's cheerleading rings pretty hollow.

But then when you are a government employee with a guaranteed job it is easy to be optimistic.

Sort of like saying if the Lions win 8 games this year it will be a major success - all relative.

 
At 5/01/2011 12:52 PM, Blogger Thomas said...

I just wanted to comment that the analysis of the uhaul trucks seems a bit misguided.

I analyzed that set of facts to mean that it is cheaper to go from michigan to california because uhaul knows they will be able to rent them easier in california as opposed to michigan where the trucks will probably have a longer lag time as well as a farther distance to travel to be utilized.

I do like this blog but that was a bit of a reach by the professor.

 
At 5/01/2011 1:26 PM, Blogger Ron H. said...

Thomas

"I just wanted to comment that the analysis of the uhaul trucks seems a bit misguided."

If more people move from CA to MI than from MI to CA, the supply of trucks in CA will diminish, while the supply in MI will increase. U-haul will need to return some of these empty trucks at their own expense to CA to correct this supply imbalance. The rates they charge are a good indicator that this is, in fact, what is happening, and that more people are moving in one direction than the other.

I don't know about now, but many years ago, job oportunities, or at least free travel, existed for people willing to drive rental trucks from one place to another.

 
At 5/01/2011 2:49 PM, Blogger Ron H. said...

Hmm. Wasn't there a major change in the Michigan Governor's office earlier this year? Perhaps that perceived improvement has caused "irrational exuberance".

On the other hand, a similar change in California may be viewed as either making no substantial difference, or as a negative.

 
At 5/01/2011 8:55 PM, Blogger Angela said...

I suspect the falling Michigan unemployment rate only means that people are falling off the unemployment rolls and/or leaving the state. I know Mark is a green shoots kind of guy, but I'm just not seeing it here in my blue collar Detroit 'burb.

 
At 5/02/2011 9:46 AM, Blogger Eric H said...

"Just to clarify, the Michigan economy is still in very dire condition, and Mark's cheerleading rings pretty hollow."

Reminds me a lot of public school comparisons between states...My "F" is higher than yours!

 
At 5/02/2011 7:32 PM, Blogger Jason said...

but I'm just not seeing it here in my blue collar Detroit 'burb.

Angela, I'm seeing some positive signs, and some negative signs. For instance on the positive side, professionals are finding jobs at a faster rate than in the last previous years. And on the negative side, housing prices continue to fail to find a bottom.

It's hard to say whether this is a real recovery or not. But as I remember from the mid-90s, it was hard to see the boom until it was plainly obvious.

 
At 5/02/2011 10:37 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Water in CA is expensive, and the supply is unreliable -- especially for commercial operations. No company that needs a significant supply of water would move to CA.

CA electricity likely is even worse:
California residential electricity costs an average of 30.1% more than the national average. For industrial use, CA electricity is 60.8% higher than the national average (June, 2010).
http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html

And then there is AB 32, our Draconian CA environmental Disneyland law that will drive up the price of everything -- starting with a 30% to 60% increase in our sky-high electricity rates. If this law is not suspended or repealed, the damage starts this year. Then next year we'll see the start of a CA out-migration to rival the Okies leaving the dust bowl in the 1930's.

The only thing holding many people here is a hope that their depressed-value homes will recover sufficiently to allow the owners to sell them, rather than abandon them.

 
At 5/02/2011 10:41 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Breaking Bad: California vs. the Other States
by Richard Rider,
Chairman, San Diego Tax Fighters
Version 1.760
Revised 22 April, 2011
Updated version online at: www.RiderBlog.NotLong.com Phone: 858-530-3027
Email:
RRider@san.rr.com

Here’s a depressing but documented comparison of California taxes and economic climate with the rest of the states. The news is breaking bad, and getting worse (I keep updating this fact sheet):

California has the 3rd worst state income tax in the nation. 9.3% tax bracket starts at $46,766 for people filing as individuals. 10.3% tax starts at $1,000,000 http://www.taxfoundation.org/files/bp59_es.pdf (election later this year to again raise these rates)

By far the highest state sales tax rate in the nation. 8.25%. 7% is next highest (does not include local sales taxes)
http://www.taxfoundation.org/files/bp60.pdf Table #15

California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. http://www.taxfoundation.org/files/bp59.pdf Table #8 -- we are 8th highest nationwide.

California’s 2011 Business Tax Climate ranks 2nd worst in the nation. http://www.taxfoundation.org/news/show/26806.html

Fourth highest capital gains tax 9.3% http://www.thereibrain.com/realestate-blog/capital-gains-tax-rates-state-by-state/109/

Highest gasoline tax (averaging 66.1 cents/gallon) in the nation, (January, 2011).
http://www.api.org/statistics/fueltaxes/ (also highest diesel tax – 76 cents/gallon)

California is ranked 14th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But CA property taxes per home were the 10th highest in the nation in 2008.
http://www.taxfoundation.org/taxdata/show/251.html and http://www.taxfoundation.org/taxdata/show/1913.html

One of the highest state vehicle license car taxes. 1.15% per year on value of vehicle, up from 0.65% in 2008.
http://tinyurl.com/lrvmtd

California’s 2011 “Tax Freedom Day” (the day the average taxpayer stops working for government and starts working for himself) is the 6th worst date in the nation – up from 28th worst in 1994, but down from 4th worst in 2009. CA “improved” only because of our state’s soaring unemployment rate – the new tax dodge! http://www.taxfoundation.org/research/show/387.html

In 2009, 24 states raised their taxes at least 1% to collect $28.6 billion. California’s taxes went up about $11 billion – thus we were responsible for about 38.5% of all the state tax increases in the nation. http://tinyurl.com/2009-CA-Tax-Increase-rank

California has the 2nd highest state unemployment rate. (March, 2011) 12.0%. National unemployment rate 8.8%. http://www.bls.gov/news.release/laus.nr0.htm

California needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average for the states is 92. http://cssrc.us/publications.aspx?id=7707

For the 2007-08 school year, the Los Angeles Unified School District spent $29,780 per student. The district also has the country’s second lowest graduation rate of 40.6%. http://www.calwatchdog.com/2010/08/20/lausd-spends-30k-per-student/

CA public school teachers the 2nd highest paid in the nation after NY. The average 2008-09 CA educator salary was $68,093 – 5.7% higher than the previous year’s $64,424 average. http://www.nea.org/assets/docs/010rankings.pdf Page 21, table C-18

 
At 5/02/2011 10:42 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

HERE'S MORE:

1 in 5 in Los Angeles County receiving public aid. http://www.latimes.com/news/local/la-me-welfare22-2009feb22,0,4377048.story

California has 12% of the nation’s population, but 36% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA. http://weblog.signonsandiego.com/weblogs/afb/archives/034662.html

California prison guards highest paid in the nation. http://www.caltax.org/caltaxletter/2008/101708_fraud1.htm

For every dollar California pays to D.C., we get back 78 cents. We rank 43rd worst. http://www.taxfoundation.org/research/show/266.html

California is the worst ranked state for tax administration – another anti-business factor.
http://www.sacbee.com/static/weblogs/capitolalertlatest/2010/03/cal-rated-worst.html

California now has the lowest bond ratings of any state, edging out Louisiana. http://tinyurl.com/CA-worst-bond-rating

The American Tort Reform Association ranks CA the second worst “judicial hellhole” – extremely anti-business.
http://tinyurl.com/CA-2nd-worst-judicial-hellhole

America’s top 600 CEO’s rank California “the worst place in which to do business” for the fifth straight year (3/2010). But here’s the interesting part – they think California is a great state to live (primarily for the great climate) – they just won’t bring their businesses here because of the oppressive tax and regulatory climate.
Consider this quote from the survey (a conclusion reflected in the rankings of the characteristics of the state): “California has huge advantages with its size, quality of work force, particularly in high tech, as well as the quality of life and climate advantages of the state. However, it is an absolute regulatory and tax disaster.” http://tinyurl.com/CEO-states-rank-2010

California, a destitute state, still gives away college education at fire sale prices. Our community college tuition is by far the lowest in the nation. How low? Nationwide, the average community college tuition is almost four times higher than California CC’s. This ridiculously low tuition devalues education to students – resulting in a 30+% drop rate for class completion. In addition, 2/3 of California CC students pay no tuition at all – filling out a simple unverified “hardship” form that exempts them from any tuition payment, or receiving grants and tax credits for their full tuition. http://tinyurl.com/ygqz9ls

On top of that, California offers thousands of absolutely free adult continuing education classes – a sop to the upper middle class. In San Diego, over 1,000 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense. http://www.sdce.edu

Protests about increased UC student fees ignore one crucial point -- all poor and most middle class students don't pay the “fees” (our state’s euphemism for tuition). There are no fees for California families with under $70K income ($80K starting in 9/2011). Moreover, Pell Grants and federal tuition tax credits cover the total 2009-10 fee increases for nearly 3/4 of all undergraduates with household incomes below $180K. http://www.universityofcalifornia.edu/blueandgold/ and www.universityofcalifornia.edu/news/article/22415

 
At 5/02/2011 10:42 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

AND IN CONCLUSION:

California residential electricity costs an average of 30.1% more than the national average (far higher in San Diego County). For industrial use, CA electricity is 60.8% higher than the national average (June, 2010).
http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html

It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state. http://tinyurl.com/llussb

Consider California’s net domestic migration (migration between states). From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET 1.4 million people. The departures slowed in 2008 only because people couldn’t sell their homes. In 2010 we lost “only” 72,000 net people to domestic migration. http://www.mdp.state.md.us/msdc/Pop_estimate/Estimate_08/table5.pdf and http://tinyurl.com/2010-CA-lost-72000
These are not welfare kings and queens departing. They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their pensions provide more bang for the buck. Some of these departing seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions. And once they move out of California, our state can no longer tax their California-paid pensions.

As taxes rise and jobs disappear, we lose our tax base, continuing California’s state and local fiscal death spiral. This downward spiral must stop NOW.

NOTE: To see the latest version of this “Breaking Bad” column, plus other taxpayer items of interest, go to my blog at www.RiderBlog.NotLong.com. There is an “RSS Feed” button to have notices of blog updates sent to you automatically. This fact sheet also is available upon request as a 2 page Word file for printing.

 

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