Detroiters faced a challenging 2024 as resident employment declined, but the city is expected to return to growth this year as monetary policy eases and interest rates moderate, according to University of Michigan economists.
Wages also are expected to grow for residents this year and in the next few years, narrowing a still-large disparity in wage levels between Detroiters and jobs in the city.
Rear the forecast
Those are among the findings of the Detroit Economic Outlook for 2024-29, produced as part of the City of Detroit-University Economic Analysis Partnership among U-M, the city of Detroit, Michigan State University and Wayne State University.
The economists caution that the overall forecast comes with great uncertainty, particularly regarding the Trump administration’s policy changes, such as tariffs, as well as the pace of inflation and the Federal Reserve’s response.
Economists note the city’s unemployment rate dropped considerably from the early days of the COVID-19 pandemic to 2023. April of that year reached 5.7%, the lowest reading since monthly data started in 1990. However, last year was much more volatile: The rate ranged from 7.4% in April to nearly 14% in July.
The forecast says the recent run-up in joblessness likely “reflects partly statistical noise and partly a true cooldown in the local labor market.” It adds researchers “expect the city’s unemployment rate to decline in the months to come.”
Another upside from the findings: The unemployment rate gap between the city and the state has significantly narrowed from roughly 12 percentage points in 2010 to 3.6 percentage points in 2023. The researchers expect the gap to stabilize at about 4 percentage points — aligned with some of the stronger economic periods in recent history.
Wage growth also decelerated last year for payroll jobs within the city and for Detroit residents, though they are projected to grow over the next five years: 3.4% annually for the first category and 3.8% for the second. Wage growth for city residents, in fact, is expected to outstrip the average growth at jobs located in the city and state.
By 2029, the economists forecast, Detroiters’ average wages rise to 53.3% of the average wage earned at jobs in the city. That’s still a large disparity, but the smallest since they started compiling these data sets in 2010.
“Last year was a challenging one for Detroit’s labor market, as high interest rates and sluggish vehicle sales weighed on the city’s economy,” said Gabriel Ehrlich, the report’s co-author and director of U-M’s Research Seminar in Quantitative Economics. “Fortunately, we project the elevated inflation and high interest rates of recent history to give way to modest but steady gains in employment and real incomes.”
Ehrlich’s co-authors are Jacob Burton, Don Grimes, Daniil Manaenkov, Michael McWilliams and Yinuo Zhang.
