State’s economy to keep growing in next two years, economists say


The Michigan economy has grown every year since it bottomed out six years ago, and the next two years will be no different, say University of Michigan economists.

In their annual November forecast of Michigan’s economy, George Fulton and colleagues Joan Crary, Gabriel Ehrlich and Donald Grimes say the state will add about 126,000 jobs in the next two years.

In all, Michigan will have gained more than 586,000 jobs during the economic recovery from summer 2009 through the end of 2017 — returning the job count to levels posted in spring 2003 and recouping more than two-thirds of the jobs lost since mid-2000.

“From the perspective of how the economy has been performing overall in growing out of the prior severe recession, things are looking pretty good. The environment has stabilized and progress has been fairly impressive,” said Fulton, director of U-M’s Research Seminar in Quantitative Economics.

“By several of the headline barometers of economic health such as growth in employment, growth in per capita income and growth in per capita GDP, as well as declines in the unemployment rate, the Michigan economy has been on a bit of a roll for the past five or six years. And the state appears to be poised to continue the ride for a while longer, although perhaps not at the same pace.”

The U-M economists predict employment gains of 61,100 jobs during 2016 and 64,800 jobs in 2017 — down from projected job gains of 84,600 this year.

“Those are smaller job additions than what we’ve seen recently, but they still amount to solid gains, running at 1.5 percent per year over the two-year period compared with the slightly higher 1.6 percent per year we are forecasting for the nation,” said Ehrlich, associate director of RSQE.

“The continuing recovery in Michigan is consistent with sustained expansion of the U.S. economy, a recovering local housing sector and increasing Detroit Three vehicle sales.”

About 32,000 job gains over the next two years will be in the professional and business services sector, which contains professional, scientific and technical services; management of companies; and administrative support services, including temporary help.

“Six in 10 of the sector’s job additions over the next two years originate in the knowledge-based professional, scientific, and technical subcategory, with most of the rest emanating from the administrative support subgroup,” Crary said. “Growth in the sector is supported by a continuing favorable commercial environment locally and further expansion of the manufacturing sector.”

The trade, transportation and utilities sector — which includes wholesale and retail trade, transportation, warehousing and public utilities — will account for 22,000 job gains through 2017. About 60 percent will be in retail trade.

The construction industry will add 22,000 jobs over the next two years, leisure and hospitality will see gains of about 20,000 jobs, and manufacturing is expected to gain only about 10,000 jobs during that time — down from an annual average of about 20,000 job gains over the previous four years.

“The deceleration in manufacturing job growth reflects the more mature stages of the recovery overall and slower growth in vehicle output moving forward,” Grimes said. “However, almost half of the manufacturing job additions from the end of 2015 to year-end 2017 are directly attributable to the auto industry, and many of the rest derive from auto-related industries.”

Overall, Fulton and colleagues say that Michigan’s sustained recovery will help lower the state’s unemployment rate from the current 5 percent to 4.8 percent at the end of next year and 4.5 percent at the end of 2017.

While their forecast is cause for optimism, the U-M economists caution that Michigan ranks “closer to the caboose than to the engine” in important economic measures such as the level of per capita income, per capita GDP, the employment-to-population ratio and educational attainment.

“When the perspective is the absolute level of some key economic indicators, rather than the change in their values, the story is not as upbeat,” Fulton said. “What this tells us is that although we’ve made a fair amount of progress recently, we have a ways yet to go.”


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