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Published in Economic Development

University of Michigan economists expect job growth to ease as interest rates continue to rise

BY Thursday, September 08, 2022 12:40pm

Job growth in Michigan will ease through 2023 as the U.S. economy slows as a result of rising interest rates intended to tame inflation.

That’s according to an updated state economic outlook from University of Michigan economists, who project the addition of just 6,600 jobs per quarter by the end of next year “as the national economy enters a stall.”

Michigan’s job growth then improves to add an average of 10,800 jobs per quarter in 2024, as the state returns to pre-pandemic employment levels, according to the new outlook from the university’s Research Seminar in Quantitative Economics.

“Michigan’s blue-collar industries likely hold the key to whether the state can continue to grow over the next year and a half. The construction and manufacturing sectors, in particular, have historically been sensitive to rising interest rate environments such as today’s. We are hoping that backlogs of demand in those industries will cushion employment through the Fed’s tightening cycle,” University of Michigan economists wrote in the updated outlook. “We expect the Fed to succeed in taming inflation eventually; the bigger questions in our mind are the timeframe and the slowdown in real growth that will be required.”

Statewide unemployment will edge up from a projected 4 percent at the end of 2022 to 4.6 percent by the start of 2024 “before edging back down as the Fed takes its foot off the brakes” of the U.S. economy with higher interest rates.

Rising interest rates until then should bring down high inflation, the economists said. They project 8.4 percent inflation for Michigan in 2022, the highest rate since 1981, and then ease to 4.4 percent in 2023. Local inflation should decline further in 2024 to a projected 2.3 percent.

Many corporate executives who participated in the latest outlook survey by Business Leaders for Michigan also expect reduced economic growth and lower inflation ahead.

More than half of survey respondents expect the inflation rate to decline ease over the next six to 12 months and one on five expect the rate to go higher. Nearly two-thirds expect the U.S. economy to decline, while 36 percent expect that it will stay the same or improve.

In Michigan, 46 percent of respondents to the latest Business Leaders for Michigan survey believe that the state’s economy will stay the same or improve in the next six months to a year and 53 percent expect that it will decline.

The survey also found that 84 percent of responding executives said their company struggles to fill open jobs.

“Michigan’s businesses are working every day to maintain and grow jobs in our state, even with inflation and workforce shortages. Making sure they can continue to do so in the future will take smart policies and investments by our state,” Business Leaders for Michigan President and CEO Jeff Donofrio said. “With a softening economic outlook, more than ever, Michigan will need to find ways to upskill its workforce and become more competitive for business and job creation.”

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Read 1013 times Last modified on Thursday, 08 September 2022 12:44
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