Have you updated from 12 to 12.1 via the Help Menu/Update? If not, please do so whether or not it turns out to be involved in the issue that you present.
What is the brand and type of microphone that you are using for the Premiere Elements 12 Mac Narration Tool? Classically USB microphones do not work with Premiere Elements (any version). Let us stay with the non USB type for the purposes of the troubleshooting.
Is the microphone not recognized in the Narration Tool dialog as well as in Edit Menu/Preferences/Audio Hardward ASIO Input?
Do you have access to any other microphone (plug-in type)?
Thanks for the great news of "problem solved".
The follow up about the update contribution to the solution is most helpful to all.