As the U.S. and Michigan economies remain on solid footing into 2018, economists expect growth rates for personal income in the state to move higher.
The University of Michigan’s new outlook for the state, issued last week, projects personal income growth of 4.4 percent in 2018 and 4.8 percent in 2019. That compares with 3.1 percent rate projected for 2017, and recorded growth of 2.8 percent in 2016.
Comerica Inc. sees a larger increase ahead next year. Comerica’s latest outlook for Michigan projects personal income growth of 4.8 percent in 2018, with this year finishing at 3.5 percent.
Continued economic growth that drives unemployment down and tightens labor markets will push personal incomes higher, said Comerica Chief Economist Robert Dye.
The projections for higher growth in personal income — a combination of wages and other income sources such as investments or rental income — come after data shows increases “have been somewhat subdued in year-over-year growth,” particularly in 2016, Dye said.
He attributes that in part to the ongoing retirement of the baby-boomer generation. As people from the older generation retire, their younger replacements tend to make a lower wage, Dye said.
“So that overall wage bill goes down, and I think that demographic churn right now we’re seeing in the labor force is holding these aggregate wage numbers down,” Dye said. “If you track the individuals through the work force, the individual Millennials, then the wage growth looks higher.”
Data from the U.S. Department of Commerce’s Bureau of Economic Analysis show that personal income in Michigan in 2016, grew just 2.7 percent on a per-capita basis, well off the 5.5 percent rate of 2015.
Personal income growth slowed in every metropolitan statistical area in West Michigan, according to the BEA. The Niles-Benton Harbor MSA led the region with a 4-percent increase in per-capita personal income in 2016, which ranked 15th best nationwide. It was followed by Lansing-East Lansing with a 3.2 percent increase, Muskegon with a 3.1 percent bump and Battle Creek at 3 percent.
In both Grand Rapids-Wyoming and Kalamazoo-Portage, personal income in 2016 grew at a rate less than half of the previous year.
Paul Isely, associate dean and professor of economics at Grand Valley State University’s Seidman College of Business, attributes the 2016 per-capita data to population growth that picked up in West Michigan during the 2015 period. At the same time, manufacturing job growth peaked and lower-paying service jobs became a larger part of the region’s job growth.
“We have more people, so the denominator got bigger, and the mix of jobs added changed to jobs that have slightly lower incomes,” Isely said.
Data on personal per capita income growth looked similar on a county-by-county basis in West Michigan in that income growth slowed last year compared to 2015. Only Ionia County had incomes retreat, shrinking 0.4 percent.
Both U-M and Comerica expect Michigan’s economy to continue to grow in 2018, pushing unemployment lower.
Comerica projects the state to record an unemployment rate of 4.3 percent for 2017, followed by 3.5 percent in 2018.
U-M’s outlook expects a statewide unemployment rate of 4.4 percent with a decline to 4.2 percent in 2018 and 4.1 percent in 2019.