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Friday, 11 December 2015 10:35

Pace of employment growth to cool slightly in 2016, 2017, economist says

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George Erickcek, senior regional analyst with the Kalamazoo-based W.E. Upjohn Institute for Employment Research George Erickcek, senior regional analyst with the Kalamazoo-based W.E. Upjohn Institute for Employment Research PHOTO COURTESY OF THE RIGHT PLACE

GRAND RAPIDS — West Michigan companies will continue to add workers over the next two years, just not at the rapid pace they have in 2015.

That’s according to George Erickcek, a senior regional analyst with the Kalamazoo-based W.E. Upjohn Institute for Employment Research. Erickcek, who described the conditions this past year as “remarkable,” spoke at the 2016 Economic Outlook for West Michigan hosted by economic development firm The Right Place Inc. in Grand Rapids.

Total employment grew 3.1 percent in 2015, according to data collected by the Upjohn Institute. By comparison, the organization expects employment to grow 2.4 percent in 2016 and 2.5 percent in 2017.

“3.1 percent growth — we can’t reach that again,” Erickcek said. “It’s hard to see where we’d meet that pace again. However, we are going to reach a more sustainable pace.”

In particular, Erickcek expects employment growth in the goods-producing sector to temper the most in the coming years, leveling off from 5.1 percent growth in 2015 to 2.2 percent and 2.4 percent in 2016 and 2017, respectively.

That’s an outlook shared by economists at the University of Michigan’s Research Seminar in Quantitative Economics, who project manufacturing will account for just one in 12 new jobs in the state over the next two years.

While the manufacturing sector has contributed to the majority of employment growth thus far, Erickcek predicts that expansion in the local job market instead will be driven by service-sector jobs.

In a survey of similar metropolitan areas, Grand Rapids service-sector employment growth lagged behind fellow cities including Dallas and Portland, Ore., according to data collected by the Upjohn Institute.

“I think (the service sector) is the new frontier and we’re seeing it already,” Erickcek said. “I think what is the wonder of Grand Rapids is that it shows an area can have an environment where export services can thrive, along with making stuff.”

While the data point to positive momentum domestically, Erickcek expressed caution over the sluggish economic performance in Europe and Asia, and the global uncertainty resulting from terrorists attacks and other security risks. Moreover, Erickcek sees growing income inequality in the U.S. as potentially hampering consumer spending and purchasing power in the future.

Speaking personally and not for the Upjohn Institute or The Right Place, Erickcek also railed against calls for further government austerity and other cutbacks.

“Neither the size of the government nor the deficit is the problem that’s going to slow down the economy,” he said, noting the federal government could very well return to surplus in 2016. “We should learn from Europe, which has been going after austerity. The argument for austerity is that it should improve the business environment, that it should improve the business spirit if the government is under control, but we just haven’t seen that.”

Instead, Erickcek said the government should find ways to “keep the demand up.” Policies like the earned income tax credit — “a very good market-based activity that increases economic activity because those individuals who get it quickly spend it” — and infrastructure and education spending would help encourage that demand, he said.

Yet overall, Erickcek remains optimistic about West Michigan’s economic health in the future.

“It’s highly unlikely that the economy will turn negative in 2016,” he said. “I just don’t see it.”

Read 1541 times Last modified on Wednesday, 16 December 2015 00:01