Michigan’s economic growth may ease during the third quarter, picking up again in late 2021 and into next year as manufacturers continue to deal with constrained supply chains and labor shortages, according to a new outlook.
Comerica Inc. economists specifically cite a shortage of computer chips that’s resulted in reduced inventories at auto dealers and limited vehicle production in June to a 9.4-million annualized rate.
“Supply chain constraints and difficulty finding workers are still major hurdles for Michigan manufacturers,” economists wrote in an updated economic outlook that Comerica issued today.
“We expect to see state GDP throttled back through the third quarter of this year, and then increase strongly late this year and early next year as production catches up to demand. This will put downward pressure on Michigan’s unemployment rate, potentially tightening it to pre-pandemic levels by the end of 2022,” according to the outlook.
Comerica forecasts a statewide GDP of 4.5 percent in the third quarter, down from 5.7 percent in the second, and 7.5 percent in the first.
State GDP accelerates to a forecasted 9.5 percent for the fourth quarter before registering at 8.5 percent in the first quarter of 2022, according to Comerica. The bank’s economists forecast 7 percent state GDP for 2022, up from a projected 6 percent in 2021.
Comerica expects automakers to increase production later this year and into 2022 as pent-up consumer demand drives sales, although manufacturers overall will “continue to feel labor constraints even as global supply chains renormalize.”
Contributing to the talent shortage is a net migration out of Michigan that’s been occurring for years and a “relatively older population implies a lower birth rate going forward,” according to Comerica’s state outlook.
“The outlook for labor force growth in the state is held in check by weak overall population growth,” economists wrote. “The net result will be little growth in the labor force over the long term. Strong business investment will be needed to keep output growing in a labor constrained environment.”
Michigan’s unemployment rate will decline to 4.5 percent for the third quarter from 5 percent in the second, and to 4.1 percent in the fourth, economists predict. Comerica projects further declines to 3.9 percent for the first quarter to start 2022 and 3.6 percent by the fourth.
Earlier this week, Business Leaders for Michigan reported that a vast majority of members surveyed this summer expect the U.S. and state economies to remain on the current pace or grow over the next six months to a year.