The chart above shows manufacturing employment in Southeastern Michigan compared to the Nation from 1990 to the present (the data begins in 1990 for Detroit metro area). Except for a few years in the late 1990s, manufacturing employment locally tracked the national trend through the end of the latest recession. The correlation from 1990 through June 2009 is .96. Southeastern Michigan and the Nation, from 2000 through the latest recession, experienced steady declines in manufacturing employment. Productivity increases and outsourcing are the reasons for the decrease.
Since the end of the recession in June 2009 manufacturing employment in Southeastern Michigan has accelerated at a faster pace than that experienced in the Nation, a five-year period of sustained outperformance not seen previously (since local data availability). Two factors behind the renaissance are the desire by GM, Ford and Chrysler to move suppliers and production closer to corporate headquarters and the growing importance of research and development (R&D) to the automotive industry. Southeastern Michigan is the epicenter of automotive R&D in the U.S. that spans advanced electronics and IT components, electric and hybrid vehicle technologies, and automatic guidance systems. Innovation in these realms has the possibility to cross over into other industries generating more economic growth in the region.
New research by Agrawal et al. in the Journal of Urban Economics (2014) demonstrates that in regions dominated by large firm research (automotive industry in Southeastern Michigan), the presence of a sizeable population of small firms significantly increases innovation. Policies designed to cultivate new ventures will be most effective in Southeastern Michigan. Growth happens when the potential for commercialization exists outside of the large firms. Entrepreneurial firms like Sakti3, an Ann Arbor start up in battery technology, is an example. They are working on technology for vehicles and for wearable electronics, crossing over to industries other than automotive.