Published in Economic Development

Crystal Ball 2019 Michigan Economic Outlook: Forecasts show continued but slower growth as Michigan nears record period of expansion

BY Sunday, December 23, 2018 03:47pm

Michigan’s economy will see slower economic and employment growth in 2019 amid the ongoing tight labor market and less U.S. economic growth, economists say.

In West Michigan, the W.E. Upjohn Institute for Employment Research expects job growth of 1.2 percent next year and then a “sort of flat” year in 2020, according to Jim Robey, director of regional economic planning services. Job growth in the region is on pace to grow 2.2 percent in 2018.

Jim Robey COURTESY PHOTO

The Upjohn Institute’s outlook for job growth in the region in part reflects the tight labor market and years of strong employment and economic growth, Robey said during a recent economic outlook in Grand Rapids sponsored by The Right Place Inc.

“We just don’t know if there are workers and there is capacity,” he said. “We’re really expecting people to do more with fewer people but probably more technology (and) more capital investment.”

As U.S. economic growth slows, the Upjohn Institute also projects gross regional product expansion of 2.8 percent in 2019 for the Grand Rapids metropolitan statistical area that includes Kent, Ottawa, Barry and Montcalm counties. That’s down from an expected GRP growth of 3.2 percent for 2018.

Michigan and the region’s economy may also feel the effects of an easing automotive sales forecast for 2019, although volumes are “nearing back to trend,” Robey said.

181224upjohninfographic 350pxStatewide, economists at the University of Michigan expect that job growth will continue in the state through 2019, tying and exceeding a record for its longest period of employment gains. However, growth will occur at a slower rate than in the past several years as employers have fewer people to hire.

U-M predicts the state will add 35,800 jobs in 2019 and 39,300 in 2020. That compares with projected employment growth of 55,200 jobs this year and the 53,000 jobs that were added in 2017.

“There’s no question that it’s been slowing down, and we see that continuing as we go into 2019 and 2020,” said Gabriel Ehrlich, director of U-M’s Research Seminar in Quantitative Economics.

“It’s muted but steady job growth in a tight labor market environment,” Ehrlich said. “To us, that’s actually a pretty good picture.”

Among the top growth sectors for Michigan so far in 2018 are construction and professional and business services, which collectively added 11,000 jobs through the third quarter. Health care added another 7,400 jobs and manufacturing grew by 6,900 positions.

U-M projects the construction industry will add another 8,300 jobs over the next two years, and professional and business services will add 13,500 jobs by 2020.

From the fall of 2009, when the state’s economy bottomed out during the Great Recession, to the end of 2020, Michigan will have added more than 683,000 jobs, recouping four out of five positions lost during the mid-2000s, according to U-M.

As the Michigan economy recovered and grew jobs since late 2009, the labor market steadily tightened. Difficulty finding qualified workers ranks among the top concerns of employers today.

The worker shortage now affects projected growth rates in employment, Ehrlich said. He regularly hears the question: “Where are people going to find workers to fill these jobs?”

“Part of the story is there just is not much slack left in the labor market. In an environment like that, it’s just natural the growth is going to slow down just because there’s not a lot of workers on the sidelines who want a job and don’t have one already,” Ehrlich said.

As the economy moved toward the end of 2018, economist Brian Long’s monthly industrial activity index for West Michigan registered the best month of the year in November. Most of the indexes improved slightly from October, including the short- and long-term business outlooks by industrial purchasing managers in Grand Rapids and Kalamazoo, according to Long, the director of supply chain management at the Grand Valley State University Seidman College of Business.

However, Long noted in his December report that an index for the short-term business outlook was sharply down from nine months earlier, an indication of emerging questions about how much further the U.S. economic expansion can go.

“Most of our survey participants have been through at least one recession, and are beginning to worry about how long the current expansion can continue to run,” Long wrote in his December report. “Most of our local firms remain cautiously optimistic, although others continue to cite uncertainty about the impact of the Chinese trade war and the gradual easing of auto sales.”

While several respondents raised concerns about the potential impact of trade tariffs and China, “almost no one is forecasting any type of impending doom,” Long wrote. 

Read 2991 times Last modified on Sunday, 23 December 2018 15:57
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