Possible signs of a double dip recession for Michigan
FLINT -- Chris Douglas is an economics professor at U of M Flint. He says the over 1100 point stock market correction of Thursday through Monday may be more than just a response to S&Ps downgrade of US debt. the nearly 2 trillion dollar investment loss may have a hidden cause. Since investors had already factored in much of the debt situation and the possible downgrade, he says, and lying in the wings could be a much bigger problem, Europe's escalating financial crisis.
"The problem right now is that the recovery is pretty weak so even if what happens in Europe trickles over here it is not going to take that much to result in a double dip if we're already growing at 1% right now," says Douglas. "Whatever happens in Europe is going to affect us, whatever happens in China is going to affect us," he says. The biggest thing to watch right now? The ongoing debt crisis in Greece. If Greece defaults on it's debt the reverberations could spook investors and consumers across the Atlantic, and Michigan could be one of the places where you first see it because we are heavily reliant on manufacturing. "Michigan's economy is always amplified by the national economy because manufacturing is the most important sector," he says. "When the economy goes south buying a new car is the first thing people cut back on".
We visited two auto dealerships in Genesee County and they tell us so far they don't see signs of skittishness among consumers. At Patsy Lou in Flint Township a customer said "I might as well buy a car rather than lose the money in the stock market." At Applegate in Flint, General Sales Manager Pete Wills says, "a few customers have mentioned it in passing but last night we actually had some of the best traffic we've seen in here in a long time.
Panicked calls to Retirement Resources in Flint Township were answered with reassurance today and yesterday, says Jake Boike, a retirement advisor there. He says there have been many stock market corrections like this in the last decade including the big one in 2008 and the strategy remains the same, to structure client's portfolios so one day in the the stock market means very little if anything to their savings. "that's the goal, if you're interested properly the last day or two days in the market...obviously you're concerned overall about the economy but as far as your retirement money you shouldn't be as concerned."
Douglas says that even though Ford and GM stock lost over 6% of their value the impact of the market correction on Michigan may not be known for a while. "It certainly doesn't help, the question is how much does it hurt it is probably too soon to tell."
"
