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Michigan's economy expected to grow amid political uncertainty

November 18, 2016

Michigan's economy expected to grow amid political uncertainty

The Michigan economy starts its eighth year of post-recession recovery with continuing job growth on the horizon for the next two years, say University of Michigan economists.

In their annual November forecast of Michigan's economy, George Fulton and colleagues Gabriel Ehrlich, Donald Grimes and Michael McWilliams say the state will add an average of 45,800 jobs per year in 2017 and 2018. That rate, however, is slowing from an average pace of roughly 70,000 jobs per year from 2014 to 2016.

"Slowing growth in Detroit light vehicle sales and manufacturing employment this year has led some observers to wonder whether the Michigan economy's momentum is fading," said Fulton, director of U-M's Research Seminar in Quantitative Economics. "We expect two more years of employment growth for the Michigan economy, albeit at a slower pace."

In all, Michigan will have gained more than 605,700 jobs during the economic recovery from summer 2009 through the end of 2018 — returning the job count to levels posted in spring 2003 and recouping seven out of 10 jobs lost since mid-2000.

The U-M economists predict employment gains of 41,600 jobs during 2017 and 50,000 jobs in 2018. So while the recent election results have introduced substantial uncertainty regarding the future direction of national economic policy, it's unlikely to push Michigan into an employment downturn in the next two years.

What could spell trouble for the state are potential disruptions in international trading policies.

"It's imperative to be clear that a full-blown trade war would be a disaster for the Michigan economy," said Ehrlich, associate director of RSQE.

Top job producers over the next two years will be in the professional and business services sector, construction, leisure and hospitality, and trade, transportation and utilities. A small decline in manufacturing jobs is anticipated.

The construction industry will add 21,900 jobs over the next two years, professional and business services will add 16,400 jobs in each of 2017 and 2018, and manufacturing is expected to shed about 10,000 jobs during that time.

"The downshift reflects the more mature stages of the recovery overall, flat Detroit Three vehicle sales, and weakening vehicle output moving forward combined with further productivity gains," McWilliams said.

Overall, Fulton and colleagues say that Michigan's sustained recovery will help the state's unemployment rate hold steady around 4.6 percent through 2018.

As it enters its eighth year of recovery, Michigan's economy is posting unemployment rates last seen in 2000. Personal income growth is expected to accelerate from 3.5 percent in 2016 to 4.3 percent in 2018. Inflation remains manageable, holding around 2 percent.

"We remain upbeat about the Michigan economy," Grimes said. "We expect the U.S. business cycle expansion to continue as cautious monetary policy, relatively benign financial conditions and a housing sector with room to run combine to support growth."

Comments

Gregory whiten
on 11/21/16 at 2:10 pm

With all the uncertainty in the business world the projected forecast has promise as move into the unstable Presidency year to come. thanks looking forward to more up-dates in 2017

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