fbpx
Published in Economic Development
Randy Thelen Randy Thelen COURTESY PHOTO

West Michigan economy maintains growth despite labor woes, according to outlook

BY Thursday, December 09, 2021 10:50am

West Michigan’s economy remains strong heading for the end of 2021 with expectations for continued growth in 2022, according to a new outlook from The Right Place Inc.

Nearly eight out of 10 companies across an eight-county region reported higher sales in the last year while more than 60 percent of companies said they are expanding through new equipment, technology or growing the business, according to the economic development organization. The Right Place officials met with executives at 422 companies over the course of 2021.

“First and foremost, without question, we are growing,” The Right Place President and CEO Randy Thelen said this morning during an annual economic outlook. “It has been a very cloudy year. It continues to have some challenges, no question, on supply chain and other challenges facing us, but at the end of the day West Michigan has fought through this, we have grown, our companies remain very positive, they remain very resilient, and I expect a very strong 2022.”

Despite the economic difficulty of 2020 and the COVID-19 pandemic creating an “economic headwind that was too much to overcome,” The Right Place has been exceeding goals in a three-year strategic plan that runs through 2022, Thelen said.

Work by The Right Place contributed to 2,494 new and retained jobs and $397 million in new capital investment. The organization’s three-year goal involves creating or retaining 3,400 jobs and generating $500 million in new capital investment.

However, one big worry remains: The lower labor participation rate and worker shortage resulting from the pandemic.

“As we look forward, it really does come down to talent. It’s the consistently top-rated issue our companies share with us, Thelen said.

Nearly 60 percent of employers told The Right Place they have had recruitment challenges, Thelen said.

The region’s labor participation rate remains below pre-COVID levels, at 62.8 percent as of September, versus 66 percent in February 2020. That decline represents about 33,000 people who are no longer in the workforce.

“Our labor force is in a condition it’s never seen before, and our companies are struggling to find their way through,” Thelen said. “We know there are reasons people are not running back into work, but as companies make their decisions about where to grow, where to invest, we have that pool of people. Over the next several months and over all of 2022, frankly, we’re going to need to find ways to invite those folks back into the workforce and engage them.”

“The workforce is there,” he added. “We have to find a way to get them back.”

There are presently more than 51,000 job postings across the region, the highest number ever, Thelen said.

The labor shortage also led to more employers investing in employee training: 52 percent of companies reported doing so in 2021, compared to about 30 percent a year ago. The increased training investment “signals that they understand the labor market has shifted and they need to respond accordingly,” Thelen said.

‘Fly in the soup’

Statewide, the University of Michigan forecasts moderate growth of about 30,000 jobs per quarter in 2022, followed by 21,500 new jobs per quarter in 2023.

University of Michigan economists forecast national Real GDP to average 4 percent growth in 2022, and 3.1 percent growth in 2023. Real GDP should pick up after the first quarter as supply chains improve.

High inflation “is a bit of a problem. It’s sort of a fly in the soup, as someone would say, but mostly we’re in pretty good shape,” Don Grimes, a regional economic specialist at the University of Michigan, said in a presentation at The Right Place’s outlook.

Inflation that’s been running at 30-year highs to end 2021 should ease through next year, according to the university’s outlook that projects a 3.9-percent increase in core Consumer Price Index in 2022, and a 2.7 percent increase in 2023.

Despite the labor issue and higher inflation, “the current economic outlook and the current conditions are good,” Grimes said. “From an economic perspective, things are pretty rosy overall in the state and in the nation, and particularly in the Grand Rapid region.”

An aging workforce could make the present labor shortage more severe over the next decade, “so attracting workers, attracting people to live in this region and increasing their labor force participation rate … is really important,” Grimes said.

Read 1242 times Last modified on Friday, 10 December 2021 08:05
SUBSCRIBE TO MIBIZ TODAY FOR WEST MICHIGAN’S FINEST BUSINESS NEWS REPORTING >