Conventional wisdom was that one of the big challenges Michigan (and American) manufacturers were facing was a strong dollar, which hurts companies that rely on exports for their market share as it increases the cost for foreign buyers of American-manufactured goods. As NPR’s Marketplace points out, however, even with a weaker dollar, American manufacturers are still in trouble. That’s bad news, especially for a state that relies as heavily on manufacturing as Michigan does.

Today’s report from the Institute for Supply Management notes that after a ten months of growth, the American manufacturing sector ended the year down, with production and new orders expanding at the slowest rate in four-and-a-half years. As I’ve noted previously, Michigan’s so-called “one state recession” is more accurately a “one industry recession.” Either way, however, today’s news isn’t positive.

Tomorrow’s numbers on December sales from the Big Three will illustrate whether these general trends have had any immediate effect on Michigan manufacturing, but early indications don’t look good. Moreover, with oil hitting (however briefly) $100 a barrel earlier today, the news out of Detroit could get still worse.

To her credit, Governor Granholm has begun to take serious steps towards diversifying Michigan’s economy, an essential action too long ignored by politicians of both political parties. And, as Public Policy Associates noted just before the 2006 election, the ”New Economy” sectors in Michigan have actually been doing quite well, despite the continuing job losses in traditional manufacturing. But as today’s reports suggest (and preliminary reports from the Big Three seem to confirm), we have a long way to go to turn our economy around. As such, we need leaders who both understand the challenges we face and can bring positive solutions rooted in the real world to the tasks at hand.