Detroit’s Economic Outlook Reveals New Trends as U.S. Dollar Climbs in Price  

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What is the U.S. dollar worth today?   

Economy experts note that the dollar bill is $1.14 due to inflation and the value of the dollar over time has weakened– the dollar was worth exactly $1 in 2020.  

The dollar had an average inflation rate of 6.97% per year between 2020 and today, producing a cumulative price increase of 14.43%, according to in2013dollars.com.  

“This means that today’s prices are 1.14 times higher than average prices since 2020, according to the Bureau of Labor Statistics consumer price index,” per the article. “A dollar today only buys 87.719% of what it could buy back then.”  

The present inflation rate compared to last year is now 8.26%, and if the number holds, $1 today will be equivalent in buying power to $1.08 next year, according to the article.   

Between inflation and the recession, the dollar is not a dollar anymore. 

Recession risks have risen sharply with Russia’s invasion of Ukraine and the bigger question is whether the economy will enter a recession over the upcoming year, and if so, what it would mean for Detroit.   

The 2021-2027 City of Detroit Economic Outlook recently posted how the buoyant economic landscape from the past winter has turned the tide over this summer.   

The Economic Outlook tracks two measures of Detroit employment to assess the city’s labor market.   

The first is payroll employment at Detroit’s establishments. The data for that measure currently extends through September 2021.   

Through that time, payroll employment in the city had recovered approximately two-thirds of its initial pandemic job losses, and its recovery was continuing steadily.   

The second measure they track is employment among Detroit residents, including self-employment. The resident employment measure currently extends through May 2022. It had recovered nearly 95 percent of its initial pandemic losses by March, but it dropped by 3,100 residents or 1.4 percent from then through May.   

“We do not believe that those declines represent a reversal in the underlying trend, but they are not what we were hoping to see,” according to the Economic Outlook.  

The city’s unemployment rate ticked up from 10.4 percent at the end of 2021 to 12.7 percent this February before falling back to 10.6 percent in May. We are forecasting Detroit to add 11,300 payroll jobs within its boundaries this year and another 6,100 next year. Payroll employment in the city recovers to its pre-pandemic level by early 2023. Job growth slows to an average of roughly 2,500 jobs per year in 2024 and 2025, according to the Economic Outlook.   

“While we expect the U.S. economy to avoid recession, we recognize that the risks of a recession have risen sharply,” according to the Economic Outlook. “We see two different scenarios as potentially triggering a U.S. recession. The first scenario is an escalation of Russia’s war in Ukraine. If Russia were to cut off natural gas supplies to Europe completely, the spillovers to U.S. manufacturing supply chains would likely be significant. It is possible that it would force the Detroit Three auto manufacturers to halt production in this scenario, with large ramifications for Detroit’s economy. Unfortunately, the timing and magnitude of any such disruptions are difficult to assess at this point in time.”  

The second recession scenario that is being watched is the possibility that the Federal Reserve goes too far in its efforts to bring inflation under control.   

“The auto and construction sectors, which historically have been interest rate-sensitive industries, currently face large backlogs of demand,” according to the Economic Outlook. “We expect that those backlogs would sustain employment in those sectors in this second recession scenario. We judge that the early-1990s recession, which also featured a spike in oil prices and monetary tightening, could be an appropriate historical parallel for this recession scenario. If Detroit were to experience a similar recession today, its resident employment count would fall by roughly 6,600 people. We would expect a recession in this scenario to be relatively brief, with recovery beginning as the Fed eases up after bringing inflation under control. We are cautiously optimistic that neither of these recession scenarios will come to pass, and that the U.S. economy will enter a period of moderate but sustainable growth and more tolerable price inflation in the years to come. Detroit’s economy has room to prosper in that scenario, which remains our baseline forecast.”  

NBC News reported that financial experts note that inflation is caused by three main factors: quickly rising labor costs, high energy prices, and interest rates.     

Despite the challenges, 70% of executives say their business is doing better than before the pandemic. In addition, 55% of executives say the Michigan economy will stay the same, 22% say it will improve and 24% say it will get worse in the next six-to-12 months; 43% say the U.S. economy will stay the same, 28% say it will improve and 28% expect it to get worse.       

Market veteran and financial journalist Dylan Ratigan said in a recent interview with the National Newspaper Publishers Association (NNPA) that Americans are being buffeted by rising prices and extremely volatile markets.  

“Inflation is at its highest level since the 1970s. Higher interest rates are affecting mortgages, credit cards, and double costs, especially in housing,” said Ratigan, co-host of ‘Truth and Skepticism.’ “Oil and energy costs for transportation and manufacturing has doubled. Large institutions, trucking companies, and airlines had budgets of fuel costs to fly, drive and run factories. Those numbers are wrong – a lot has happened fast.” 

 

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