Several thousand years ago, massive glaciers helped to create the Great Lakes of Erie, Huron, Michigan, Ontario and Superior. Today, they account for more than 4,500 miles of coastline and supply drinking water to 10% of the U.S. population — including the states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin.
Although none of the states in the Great Lakes Region were part of the original 13 colonies, all six achieved statehood prior to the Civil War. Twelve of the NFL’s 14 founding franchises were based in this region. The nation’s first soda pop was created in Michigan. And Ohio is the birthplace of seven U.S. presidents, second only to Virginia.
In terms of gross domestic product (GDP), or the sum of all goods and services produced, each of these states ranked in the top half of the nation at the end of 2020. With an output of $863.5 billion, Illinois had the region’s largest economy and the fifth largest in the U.S., while Ohio ($675 billion) ranked seventh and Michigan ($515.9 billion) was 14th.
The U.S. economy shrank by 3.5% year over year in 2020 and the losses were even larger across much of the Great Lakes Region. Only Indiana, with a GDP decline of 3.1%, performed better than the national average.
The COVID-19 pandemic has taken a toll on this region in terms of job losses. From February 2020 to March 2021, the total number of nonfarm jobs dropped across the Great Lakes region, declining anywhere from 4.2% to 7.2% depending upon the state. Illinois shed 413,000 jobs during this time to lead the region while Indiana had the fewest at 132,000.
Still, positive signs are emerging. At 3.8%, Wisconsin had the nation’s ninth-lowest unemployment rate this past March, and jobless claims in the Badger State had fallen to a pandemic-era low at that time, according to University of Wisconsin economists. Although Indiana isn’t expecting a full economic recovery until the latter portion of 2022, certain business sectors such as health care, utilities and professional services weren’t impacted as heavily and are forecast to have moderate growth through next year.
Michigan relies heavily on the auto industry, which is expected to rebound this year. U.S. auto sales are forecast to increase by 7% to 10% in 2021, although a shortage of semiconductor chips earlier this year was contributing to lost business for manufacturers such as Ford, General Motors and Stellantis.
The pandemic-driven economic downturn in Minnesota, meanwhile, may not be as deep or as lengthy as previously projected. State budget officials reported collecting 20.3% more revenue this past February and March than anticipated. Gov. Tim Walz, however, is lobbying for tax hikes on high-income households, saying that Minnesota’s current budget surplus is tied to temporary federal relief. ●
Home-price growth in the Great Lakes Region has been strong during the COVID-19 pandemic, although Ohio (12.6% annualized appreciation) was the only one of these states to exceed the U.S. growth rate of 11.6% this past April, Zillow reported. At that time, however, four Great Lakes states recorded double-digit price growth. Minnesota (9.4% yearly growth) and Illinois (8.9%) were the exceptions.
As of this past January, none of the Great Lakes states ranked highly for mortgage delinquency rates (loans at least 30 days past due), CoreLogic reported. In the Chicago metro area, however, 4.3% of all loans were seriously delinquent (at least 90 days overdue), which exceeded the U.S. rate of 3.8%.
According to data from the National Association of Realtors, a typical U.S. home sale in 2020 had an economic impact of $93,800. This figure includes such things as the value of new-home construction, real estate commissions and moving expenses. All of the Great Lakes states had rates below the U.S. average, with the typical home sale in this region generating anywhere from $61,500 in Ohio to $91,100 in Minnesota.
Employment in the Great Lakes Region has evolved in recent decades. According to the U.S. Bureau of Labor Statistics, manufacturing was the largest job sector in each of the Great Lakes states in 1990. By 2015, however, health care and social assistance took over as the No. 1 sector in Minnesota, Illinois and Ohio.
Still, manufacturers are responsible for sizable economic impacts in this region. Wisconsin had some 475,000 jobs tied to more than 9,400 manufacturing companies as of 2018. At that time, the Badger State ranked No. 1 in the U.S. with the highest concentrations of jobs in paper, metal product and electrical equipment manufacturing.
In Michigan, about 735,000 people are employed by some 13,000 manufacturers. The largest of these companies include Fiat Chrysler Automobiles, electronics specialist Gentex Corp. and home products supplier Access Business Group. Indiana is home to large-scale manufacturers such as Subaru, Toyota, pharmaceutical titan Eli Lilly and Co., and auto parts provider Lippert Components. Indianapolis ranked 10th among all U.S. cities with more than 67,000 manufacturing jobs in 2020.
What the locals say
“Michigan housing has been fairly affordable for a long period of time. So, even though we’re seeing price per square foot going up, it’s still far less than the cost to build, and it’s still far less than other areas in the United States. If you just compare us to Minnesota or parts of Illinois, we’re still considerably less for price per square foot. It’s just a little bit of a catch-up game now that we’ve played. I don’t see a big burst in the bubble happening here. Maybe a leveling out, but I don’t see a big [downturn] like 2008 or ’09 happening.”
Mortgage loan officer and vice president,
The State Bank
3 Cities to Watch
The Windy City has a highly diversified economy in which no business sector is responsible for more than 12% of local jobs. At $698 billion, Chicago has a larger economic output than that of Poland, Thailand or Sweden. A University of Illinois report indicated brisk housing-market activity this past March, with the Chicago metro area’s $295,000 median sales price up 13.5% year over year and for-sale supply at 1.3 months. Further growth was forecast for the remainder of the spring.
The ongoing pandemic continues to trouble this Ohio city of 380,000 on the shores of Lake Erie. This past February, employment across the five-county Cleveland metro area was down 7.4% year over year and average weekly wages trailed that of the U.S. as a whole. Hospitality and retail businesses were expected to get a boost this past spring as the NFL Draft took place in Cleveland. The Cleveland Clinic, which has pioneered numerous medical advances, is Ohio’s largest employer with about 50,000 workers.
Minneapolis and neighboring St. Paul had an unemployment rate of 4.7% at the end of 2020, one of the lowest jobless rates among the nation’s major cities. The Twin Cities may be better weathering the pandemic due to a diverse economy, a large share of remote-capable workers and little reliance on tourism. Minneapolis has ended zoning exclusive to single-family homes in an attempt to increase density and affordability. The metro-area population of about 3.6 million was expected to grow by 12% from 2015 to 2035.
Sources: 50States.com; Cleveland Clinic; Cleveland.com; CNBC; CoreLogic; Encyclopedia Britannica; Greater MSP Partnership; Indianapolis Business Journal; IndustrySelect; Minneapolis/St. Paul Business Journal; MinnPost; MLive.com; National Association of Realtors; National Oceanic and Atmospheric Administration; The Century Foundation; University of Illinois; University of New Hampshire; University of Wisconsin; U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; U.S. Census Bureau; U.S. News & World Report; Wisconsin Economic Development Corp.; WKYC-TV; World Business Chicago; Zillow