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Sunday, 22 December 2013 21:00

Economic forecast: George Erickcek, Senior Regional Analyst, W.E. Upjohn Institute for Employment Research, Kalamazoo

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The Grand Rapids economy experienced broad-based growth across a range of sectors and performed well against peer regions in 2013, said George Erickcek, senior regional analyst for the Kalamazoo-based W.E. Upjohn Institute for Employment Research. The local economic growth led Erickcek to proclaim that Grand Rapids has fully recovered from the Great Recession, a message he shared at the annual Economic Outlook event sponsored by The Right Place Inc. in mid-December. Erickcek spoke with MiBiz after the event about his outlook for the region’s growth.

Why did the Grand Rapids region exceed expectations in 2013?

2013 was a much better year that we thought it was going to be. We thought it was going to be a growth year economically, but we did not foresee the growth that happened. We actually grew twice as fast as forecasted. We thought we would grow at 1.2 percent, but it was actually 2.4 percent. The other thing we saw that was very unique is the growth we did see was very broad-based. It wasn’t just in manufacturing. It was in manufacturing, but also in leisure and hospitality, it was in business services and it was in health. And so we saw a change in the fabric of the metropolitan area as it’s trying to become more diversified.

So what are the expectations for economic vitality in our region for 2014?

As we move forward, we think that 2014 will be better than 2013. We are predicting 2.6 percent growth in 2014. Not a huge increase, but still strong growth and this growth is causing the unemployment rate to drop and it’s dropping for the right reasons. So the big takeaway is that 2014 should be another good year.

Is it finally possible for people to stop being “cautiously optimistic” and just be optimistic?

I think that cautious optimism faces the fact that nationwide, we’re growing at a slower pace than we have in other recoveries. So when people talk about being cautiously optimistic, they are worried about Washington, D.C. and when agreements will be made. They are cautiously optimistic about the price of gasoline and all these national factors. So it’s really not the local economy. However, it’s important to think of the local economy as a small fishing boat in the sea and what happens in the sea really does hit us in some way. While the Grand Rapids area is a sturdy ship, it’s still just a ship. So people still see some potential threats.

Many groups are worried about the implementation of the Affordable Care Act. What kind of impact do you see it having on the regional economy?

My feelings are that it will not be much of a factor. It’s a mess and it’s unfortunate it turned out this way, but as for an economic impact, it won’t have much.

What other high-level economic challenges raise red flags for you?

It seems as if the whole concern about the national debt has rightly taken a back seat and so that’s good news. However, income inequality is one of those issues we should talk about but clearly has no easy solutions. It’s unique and we haven’t seen this level of income equality since the 1920s.

How does the cost of energy factor in Michigan’s economic equation?

What’s happening with the cost of energy is that we still don’t know what it means to have natural gas prices at all-time lows and what does that mean for changing the way we use gasoline. I think that discussion has been surprisingly quiet. I thought there would be a much bigger movement of fleets converting from gasoline to natural gas because it’s clear that natural gas prices are going to stay low a long time. What I think we’re seeing as the prices for natural gas dropped so quickly is that a lot of producers cut back dramatically. But while prices will stay low, is it low enough and with enough abundance that more new infrastructure to support it will be built?

Talent continues to be a struggle for West Michigan and nationally. Do you a have a prescription for how businesses and institutions can work on this?

I firmly believe that Grand Rapids is doing everything right, but there is a legacy cost we have to get around. I think that Grand Rapids is not thought of by people outside the area as an interesting place or a learning hub. It’s not weird like Austin or Portland and it hasn’t completely sold itself as being unique — and that just takes time. People think of Grand Rapids and they may think of conservative, they think manufacturing, they think office furniture. For many years, Grand Rapids in the data was already very strange. There wasn’t a university presence, and yet it was still doing well. It was the one outlier, and those legacy issues take a long time to get away from, so I think that’s the challenge.

Those same legacy costs are apparent in the state’s relationship with automotive manufacturing now, correct?

While the automotive industry does give the state breathing room in terms of economic drivers, it also gives us a challenge. The auto industry is so strong in terms of wages and the supply network that when things are well, it’s tempting for us to not take this as a breather to develop other opportunities, but to bathe in the brightness and reinvest in that same structure. That can impact the environment of the area and people may say, “Michigan? That’s autos.” As long they’re saying that, it makes our task more difficult for people to say, “Michigan? It’s a lot more than that.”

Interview conducted and condensed by Elijah Brumback

Read 5882 times Last modified on Sunday, 22 December 2013 21:30

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