Business Leaders Optimistic About State’s Economic Outlook

In an economic climate that could always use some good news, Michigan may have just gotten some, if the results of a survey conducted by Ann Arbor-based Baker Strategy Group are any indication.

Results of the survey, unveiled Tuesday at the Detroit Economic Club’s annual economic outlook meeting, showed that business leaders surveyed displayed a positive outlook for the state’s economy, at least in the short term.

The survey showed increasing confidence in the economy, with 50 percent of the respondents showing a positive view (up from 36 percent last year), compared to 30 percent who had a negative view (down from 38 percent in 2024).

In addition, the view of the state as a business-friendly environment were also up from a year ago. The 2025 survey showed 44 percent held that view, while 33 percent held a less-optimistic view.

David Baker, the group’s managing partner, noted the survey results were mixed, with a good amount of positivity and some skepticism built in.

“There seems to be a bit of optimism in early 2025 with an improvement,” Baker said.  “But there’s still a great deal of uncertainty about overall economic conditions.”

Casting some concern over the state’s economic outlook are the potential policies of the incoming administration of President Donald Trump, inaugurated on Monday.

It’s far too soon to know what effects his plans may have, although the tariffs he’s discussed on goods from both Mexico and Canada could have a negative effect.

Survey results show that only 41 percent of respondents have a positive view of Trump’s potential policies, while 43 percent have a negative opinion.

Gabriel Ehrlich, the director of research seminar in quantitative economics at the University of Michigan who took part in a roundtable economic discussion at Tuesday’s meeting, said it’s simply too soon to judge, particularly since no policies have been enacted.

“It’s the early days (of the Trump administration) and we will see what the actual policies will end up being,” Ehrlich said. “What I would say is, at the end of the day, there’s a negotiation happening. We see the public statements, but we don’t necessarily see what’s happening behind closed doors.”

Ehrlich also said the Michigan economy is doing pretty well considering the state has had to battle a tough year for the economy nationally. The manufacturing sector, he said, has been in contraction for two years (nationally), which is “going to be tough for Michigan.”

Additionally, he pointed out, interest rates have been high, making things difficult for the local mortgage industry.

“That being said, Michigan’s economy has continued to grow,” he said. “We did add jobs last year. We had a little bit of a growth bubble in the middle of the year last year. The last couple of reports have been very positive, though we’re expecting growth to continue this year.

“But I think that when you put those trends together, you can see why there’s a little bit of a mixed reaction in the survey data,” he added. “Listen, we’ve been facing a tough environment for Michigan. We do expect to get some relief going forward. We expect growth to continue, but we also expect it to slow down as we continue to put the pandemic in the rear view.”

Michigan Treasurer Rachael Eubanks, who joined Ehrlich and Michigan Economic Development Corporation CEO Quentin Messer in the panel discussion moderated by The Detroit News senior business editor Daniel Howes, remained upbeat despite those pain points, pointing out, for instance, that sales tax revenues have flattened and not fallen since peaking during the pandemic.

While the administration’s policies aren’t yet clear, Eubanks said she recently attended the state’s revenue sharing estimating conference, where not only were the possible new policies considered, but also the tax cut and jobs act from Trump’s first administration.

“I think we certainly want to see the policy initiatives that do come forward … being 24 hours into the new administration, it’s difficult to know what are those policy initiatives are,” she said. “We did make some assumptions related to the expiring tax cut and Jobs act because in addition there’s been a lot of conversations about tariffs and other policies, but I mean clearly the core of the tax plan will be revisited because it’s expiring.

“Making some sort of assumptions … we had to do that to come up with an economic forecast,” she added. “But generally the state is coming at it from a very strong and stable economy. That allows us to be nimble and I think reactive in a way that perhaps in other times of uncertainty we have not had that ability.”

Noting the improving impression of Michigan as a business-friendly state, Howes asked Messer if he agreed with that assessment. Messer said he “absolutely” agrees, citing legislation Gov. Gretchen Whitmer recently signed into law designed to attract new investments and ramp up business creation and including a new research-and-development tax credit, and grants from a new innovation fund to support venture capital firms to invest in Michigan entrepreneurs.

“I think the bipartisan expansion of the tool box that we have here … is going to spur entrepreneurship and innovation,” Messer said. “I think business leaders here are much more conscious of their roles as ambassadors maybe in a way that previously it wasn’t front-of-brain.

“The last thing is I think that we have made important investment in becoming a state of lifelong learners,” he added. “There’s work that we need to do in pre-K through 12, but we have incredible two- and four-year institutions and I think we’ve begun to better harmonize the efforts of that sector with the broader economic development and policy efforts.”