Mark Sanchez: The University of Michigan, of course, the economists, they're putting out their outlooks every quarter for the U.S. economy, and they put out a couple of year updated outlook for the Michigan economy. And the one that just came out this month looks good. Basically, on the national level, U of M does not see recession occurring this year. Slow growth, but no recession. That's what you're seeing in a lot of economic outlooks lately. A year ago, back in the second half of last year, you were seeing a lot of outlooks saying maybe a mild recession. But now you're beginning to see people more point more to that soft landing that everybody wants and a cut in interest rates in the second half of the year. But for the state here in Michigan, the U of M outlook came out a little more than a week ago. Looks good. The state's looking at about 38,000 more payroll jobs that it will add in 2024, then maybe another 57,000 in 2025. That would increase the state to about 2.2% above the pre-pandemic employment level, and that would occur by the end of 2025. And the other interesting aspect in the U of M outlook is that we've heard so much coming out of the pandemic that the labor participation rate was down. A lot of folks did not return to the workforce. Well, we've seen that going up in the last several months. In fact, U of M call said it's sharply rising. It's gone up from about 59.8% a year ago to above 62%. So that's more people in the workforce and hopefully perhaps easing some of this tight labor market we've been experiencing for a long time. But bottom line, the latest outlook, at least from the state level, from the University of Michigan looks solid. It looks okay. And they think the state should avoid any type of a downturn and the U.S. economy should avoid a downturn as well.
Patrick Center: Does U of M give reason for why we're seeing the increase in that labor participation?
Mark Sanchez: It didn't go into the depth of that in the outlook that came out here a little bit ago. It didn't go into the depth of that. It just tracks the data and looks at that. But what we know is that there is a population issue and that's why they call it in the outlook kind of a pleasant surprise to see that labor participation force increase in the participation rate because we know the boomers are retiring. There's not as many people coming out of college or going into the workforce and Michigan also has the out-migration issue. We're losing our population is stagnant or declining and projected to do so for a really long time. So, it didn't go depth into that, but when they put out that report a little bit ago, they're pretty pleased to see that increase in that percentage.
Patrick Center: How much does the anticipation of interest rates being cut play into this?
Mark Sanchez: Boy, that's something a lot of folks are waiting to see. A lot of outlooks say second half of the year, maybe, maybe the first quarter point decline in May when the Federal Reserve Open Market Committee meets in May, but that should, with the rates start coming down, that should generate a little bit, maybe a little bit more business investment, not a lot. It's not going to be a big decline or rapid decline in rates. We may get three this year. That's a general consensus in a lot of the outlooks I take a look at. But it all plays into that equation. Why would the Fed start bringing down rates? Well, the economy looks solid, looks okay, relatively. Especially when you compare it to what was being forecast six months ago or a year ago. Inflation has been moderating, getting a little under control. So, the general idea is that it's time for the Fed to start bringing those interest rates down.
Patrick Center: The February Supply Management Institute Research Survey has been released from Grand Valley State University's Seidman College of Business. What are we seeing there as we discuss that long-term forecast from U of M and then what we're seeing month to month?
Mark Sanchez: Yeah, this of course comes out from Brian Long, there at GVSU every month, and boy, the February data that came out this week looks again solid. He says he found some optimism in short-term, long-term optimism about the West Michigan economy. Some of those key metrics he follows all showed improvement. A few of them are still in negative territory, but they're doing better. They did better in February over January. He was fairly optimistic that we were going to again, same as what the U of M outlook was saying, that we're probably going to avoid a downturn and there's some optimism out there.
Patrick Center: We're talking with Crain's Grand Rapids Business Senior Writer Mark Sanchez. You've written a piece, the title here is, State lawmakers take up bills aiming to “revolutionize the insulin market.”
Mark Sanchez: Yeah, this is an interesting piece of legislation beginning to make its way through the legislature. It's one of the sponsors, the gentleman, Representative Curtis VanderWall. He's a conservative Republican from Ludington, very pro-business, not big on state intervention or government intervention or interference in the free markets. Yet he's proposing this legislation that in a nutshell would require the state to develop an insulin production program and offer a $150 million incentive to help develop a manufacturing facility. Why? Because the price of insulin over the last decade plus has been skyrocketing. In a legislature hearing before a committee here a couple weeks ago, there was one woman testifying. She showed some receipts from Walgreens where she paid $650 a month out-of-pocket for her insulin to control her diabetes and she has health insurance. That was her out of pocket costs. We've seen this price escalate for years for insulin to the point where a lot of people are not taking it, they can't afford it, or they're rationing their doses to make that vial go longer. And both of those scenarios can create a whole host of problems for people, health problems, if their diabetes gets out of control. And that, of course, in the long run, just simply adds to cost. So, what the governor first kind of pitched, maybe about a year, year and a half ago, within the executive order is this notion, concept of the state partnering with a private sector producer. It was included in her budget proposal a year ago for the present fiscal year, did not make the cut through the legislature. And then Representative VanderWall and another representative out of the Detroit area came together in a bipartisan way and proposed this legislation. It had its hearing this month before the Health House Policy Committee. There is opposition from the pharma industry, but there is some support from some of your trade groups in Lansing. Michigan manufacturers, your Association of Health Plans and groups like that are saying this is an idea that we need to look at and perhaps go forward with. So, it's going to get much more scrutiny. There's going to be more hearings, I'm sure, and we'll see where it goes. But it's really pitched as a way to bring down the cost of insulin for diabetes patients without artificial price caps. Because there have been efforts, there's been bills passed, there's been federal and state efforts to cap that cost of that vial of insulin at $35 a month or so. That's good, that helps the consumer with the out-of-pocket cost, but it doesn't necessarily bring the price down. It doesn't bring that cost down. That's still being paid by somebody, usually the insurance company. So, what Representative VanderWall is really pitching this and Representative Jennifer Conlin out of Washtenaw County, says this is a way to bring competition to the market and competition brings costs down. And just in case folks were wondering can this really be done? There's an outfit called Civica Rx. It was formed 4 or 5 years ago by a number of large health systems. Spectrum Health then, now Corwell Health, and Trinity Health at the time were among the investors. As was Blue Cross Blue Shield of Michigan. It was formed by about a dozen large health systems and some philanthropic groups as a not-for-profit maker of generic drugs. And there's a gentleman from Civica Rx that testified at this legislative committee meeting two weeks ago that said, our raw materials that we use to make generic insulin is produced offshore outside the U.S. Boy, they'd love to bring that back to the U.S. And if this were to pass, this is something this organization, Civica Rx, is definitely interested in. I say all that to say there's some traction for this in Lansing. And we'll see over the spring and the summer where this legislation goes.
Patrick Center: All right, from Lansing to Alabama, there's been a challenge to the Corporate Transparency Act. You might have to explain that to our listeners and then what this all means.
Mark Sanchez: Yeah, I wrote about this a couple of times, first the most recently last week and then before that back in December when the rules took effect for the Corporate Transparency Act. In a nutshell, if you are a legally, illegal entity or a business registered with your state, you must report to the U.S. Department of Treasuries. It's called the Financial Crimes Enforcement Network, or FinCEN. You must report your beneficial ownership for the owners of that business, who are the partners, including outside equity owners, including folks who have a substantial interest or control over the business, such as your directors, board of directors, your corporate executives and officers of the company. The idea for this is to cut down and go after shell companies that are used for financing terrorism, for money laundering, for drug sales, for tax fraud, for a lot of illicit illegal activities. Bottom line for business, it's one more regulatory burden. The National Association of Small Businesses representing a small business owner in Alabama filed suit. And on March 1st, a federal judge in Alabama, Judge Liles Burke, basically ruled the law unconstitutional. That this exceeds Congress's authority to regulate commerce. Interesting aspect of this is the ruling right now only applies if you are a member of the National Small Business Association. That's about a 65,000-member organization nationwide. So, it doesn't apply uniformly. This will obviously get appealed. It’s highly anticipated that the federal government will appeal the ruling. Ultimately, and the folks I talked to for the story last week on Crain’s Grand Rapids, is that this will ultimately get decided by the U.S. Supreme Court. But if you're a business owner out there, if you're an executive with a corporation, something to pay attention to because this is really now in quite a flux and ultimately it will get through the court system and get decided that way.
Patrick Center: Crain’s Grand Rapids Business, senior writer Mark Sanchez, thank you so much.
Mark Sanchez: Thank you, Patrick.