DETROIT

– Job growth in the Detroit metro area is moderately above the U.S. average

through the first three months of 2015. On a year-ago basis, Detroit added jobs

at a 2.4 percent rate in March, while the U.S. as a whole added jobs at a 2.2

percent rate, Comerica reported.

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key support to job growth in Detroit has been the manufacturing sector.

Employment in De-troit area manufacturing is up a strong 4.8 percent over the

past year, significantly above the U.S. average of 1.6 percent growth. The

employment component of the Southeast Michigan Purchasing Managers Index was

very strong at 76.3 in April.

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key question for Detroit is how sustainable is the strong performance in manufacturing

employment? We believe that manufacturing employment will stabilize in the

area, and that job gains for Detroit will ultimately be driven by

non-manufacturing industries. Since peaking in July 2000 at 397,000, the

Detroit MSA has lost 148,000 manufacturing jobs.

Michigan

manufacturing employment faces headwinds. First, U.S. auto sales are already

near the cyclical peak of the previous expansion cycle. In April, U.S. light

vehicle sales dipped to a 16.5 million unit annual rate, after posting a 17 million

unit sales pace in March. These rates are already very close to the 16.9

million units sold in 2005, so there is only limited upside potential for more

auto sales. Second, a strong U.S. dollar suggests that less U.S. manufactured

goods will be sold overseas, and more foreign manufactured goods will be sold

in the U.S. Third, as the business cycle matures, it becomes more difficult to

sustain corporate profits. Labor costs are a huge part of total business costs

and so hiring typically slows in the late stages of the business cycle.

Detroit’s

role as a key gateway for U.S./Canada trade is slated to expand in 2020 with

the completion of the $2.1 billion, 6-lane Gordie Howe International Bridge

over the Detroit River, funded almost entirely by Canada. Because of the

lopsided funding for the bridge, we expect relatively little of the economic

benefit of construction to land on the Detroit side.