GRAND RAPIDS — West Michigan’s comparatively strong economic performance this year can be traced back to its long-term strength in manufacturing.
That's the analysis from George Erickcek, senior regional analyst at the W.E. Upjohn Institute for Employment Research, who spoke Thursday at the annual Economic Outlook event sponsored by The Right Place Inc.
Since the recession ended, the region’s employers have created 5,000 net new jobs after losing about 32,000 in the Great Recession, Erickcek said. Manufacturers contributed about 40 percent of that net total, adding around 2,000 jobs, according to data Erickcek tracks.
But he cautioned that number fails to tell the whole story because the numbers for new people in manufacturing who are working for placement firms or temporary worker agencies is counted under the professional and technical classification.
“In manufacturing, we’re doing just as good as the nation,” Erickcek said. “Not surprisingly, if we look at the most current data we have ... transportation, including auto suppliers, really is the engine of growth in the Grand Rapids area. So, again we’re hearing the story about the importance of auto and the importance of manufacturing in driving the economy of West Michigan and of Grand Rapids.”
Driven by that growth engine in the goods producing sector as well as gains in the service sector, Erickcek forecasts 1.2 percent overall job growth in 2013 and 1.6 percent growth in 2014. The numbers are tempered by government employment, which he projects to lose ground in 2013 and stagnate in the following year.
Manufacturing growth also contributes to Grand Rapids currently experiencing about 6 percent unemployment, with unemployment consistently trending down from a high of nearly 12 percent in 2010, Erickcek said. This trend is going to continue in 2013 and 2014, Erickcek said, again, largely driven by growth in the manufacturing sector.
“We’re below the target (the Federal Reserve) is shooting for the nation,” Erickcek said, referring to the area’s unemployment rate. “We have climbed off the mountain and are starting to get back to within the levels before the recession.”
The University of Michigan forecast is for the state’s employers to add 37,500 jobs overall in 2013 followed by a growth of 57,600 jobs in 2014.
While the construction industry has been flat recently, Erickcek noted that there has been a slight uptick in activity toward the end of 2012. Construction permits issued in Grand Rapids remain well below pre-recession levels, but are trending slightly upward.
“I call that hope,” Erickcek said of the uptick. “We’re starting to see something going on there, which is good news. We’re starting to see some movement, maybe.”
Trends that give Erickcek concern include the gradual softening of the GVSU Purchasing Managers Index as well as the continued slow growth of the national GDP – around 2 percent – that contributes to “boring” economic forecasts.
“It’s a forecast that says, ‘We can do this without expanding employment,’” Erickcek said. “Any manufacturer will tell you … they can grow 2.1, 2.2, 2.3 percent by just working a bit harder, working a little smarter. So, when we look at these (GDP) numbers, it doesn’t generate the numbers we want to see in terms of employment growth.”
While corporate profits are traditionally a leading indicator of employment growth, that relationship has been “divorced” coming out of the recession. Despite all-time record-high corporate profits, companies are not adding a proportional number of new jobs.
That said, job openings are trending upward and the number of job seekers per position is trending downward, both are still far from pre-recession levels, Erickcek said. He predicts similar job creation numbers in 2013 – around 5,000 jobs – as this year, with the potential for a slight increase.