Michigan will largely follow the U.S. economy in 2018, with continued job growth and low unemployment.
Economists say the state will record a ninth straight year of economic growth after bottoming out in 2009, although with slower job gains in an already tight labor market.
“When we’re looking at Michigan’s growth, we’re really looking at a mirror of the nation,” said Jim Robey, the director of regional economic planning at the W.E. Upjohn Institute for Employment Research in Kalamazoo.
Robey predicts job growth in West Michigan will slow next year.
In a recent outlook sponsored by The Right Place Inc., Robey predicted a 0.7-percent growth rate for total employment in the Grand Rapids area for 2018 and 0.4 percent in 2019. That would compare with total job growth in the region of 2.5 percent in 2017.
Robey projects the Gross Regional Product (GRP) for Grand Rapids to expand 1.8 percent in 2018 — nearly half this year’s rate — before ticking up to 2.3 percent in 2019. That’s off from an estimated 3.5 percent GRP for 2017.
Paul Isely, the associate dean and a professor of economics at the Grand Valley State University Seidman College of Business, expects regional economic growth of 2 percent to 2.5 percent in 2018. Employment in the region should grow about 1.2 percent, or half the rate of 2017, Isely said.
The lower predicted rate for employment growth stems from several reasons, Isely said. One is the tight labor market that has employers pursuing alternatives to hiring the new workers they need to handle higher volumes.
Many markets in West Michigan already have unemployment rates of 3 percent to 4 percent, he said.
“There are just no workers. We have nothing really available worker-wise that could get us to the larger growth rates that you would see,” Isely said. “You have a choice. You either have to raise wages to get more workers, or you have to shift to other ways to create growth. So even though we’re seeing the employment growth slowing down, we’re seeing the sales growth speed up.
“What’s happening is (employers) have been deploying some of that capital they’ve been building the last few years, or at least they’re planning on doing that.”
With some business economists predicting the start of a recession for the U.S. around the beginning of 2019, companies likely will tend to avoid growing their workforce too much next year and go into the period overstaffed, Isely said.
Robey at the Upjohn Institute calls the West Michigan labor market “incredibly tight” with just 21,000 people available for work, many of whom may have barriers to employment.
Statewide, University of Michigan economists predict job growth dipping from an estimated 1.2 percent in the latter months of this year to an annualized rate of 0.9 percent in the first half of 2018, then gradually moving back to 1.2 percent by the end of 2019.
“Michigan’s economy has continued to grow in 2017, and we foresee at least two more years of growth ahead,” according to the latest Michigan economic outlook from U-M’s Research Seminar in Quantitative Economics.
The predicted statewide growth should bring Michigan 80 percent of the way back from the “trough” of 2009, economists wrote in their outlook.
“That means that there is plenty of work still to be done in building and sustaining a world-class economy for the 21st century, but it should also serve as a point of pride for Michigan, which has demonstrated impressive resiliency after a very difficult start to the millennium,” according to the outlook. “We believe that the outlook remains favorable for Michigan to continue its comeback story. If our forecast proves correct, Michigan’s economic recovery will extend to over 10 years — among the longest continuous stretches of job growth in the state since the Great Depression.”
U-M predicts North American light vehicle sales will hold steady in 2017 at 17.1 million units, versus the same level in 2017, both down from 17.5 million units last year. They expect sales to dip to 17 million units in 2019.
Unemployment “will continue to be incredibly low across the state,” said Robey, predicting a rate of 4.2 percent next year and 4.1 percent in 2019.
As of October, unemployment in Michigan was 4.2 percent, which compares to 4.5 percent in September and 4.8 percent a year earlier, according to the state Department of Technology, Management & Budget. The agency’s most recent data also show the civilian labor force in October was 4.86 million people, down slightly from a year earlier.
GVSU’s Isely expects the job growth West Michigan experiences in 2018 will likely come from people moving to the area.
“We’re seeing movement into West Michigan that is supporting continued job growth, just not as fast as it was before,” he said.
Service jobs in the Grand Rapids area are forecast to grow at a slightly higher rate than manufacturing.
Robey at the Upjohn Institute projects service-producing jobs in the region to grow by 0.7 percent in 2018 and 0.6 percent in 2019, which compares to an estimated 2.1 percent in 2017.
He predicts goods-producing job growth of 0.5 percent next year and 0.3 percent in 2019, well off the strong 3.9 percent growth rate in 2017.
MiBiz Staff Writer Nick Manes contributed to this report.