Michigan’s economy and jobs are expected to continue to recover in 2022 from the deep downturn last year resulting from the COVID-19 pandemic.
University of Michigan economists forecast statewide growth averaging 30,000 jobs per quarter in 2022, followed by 21,500 new jobs quarterly in 2023.
Job growth is expected to slow during the year, but the state will still see “a nice pace of recovery” that will put Michigan on track for a nearly full recovery from pandemic-related job losses by the end of 2023, said Gabe Ehrlich, director of the university’s Research Seminar in Quantitative Economics.
“Given how deep the hole was that we started in, I think overall we’re pleased to see the progress we’re making right now toward recovery,” Ehrlich said.
Persistent challenges to the state’s economy are the path of the pandemic, labor shortages, inflation and supply chain issues, Ehrlich said. Inflation should ease somewhat in 2022, while supply chains are expected to open further through the new year, he said.
The labor force may return in Michigan if the pandemic weakens, although cases and hospitalizations have risen across the state through the fourth quarter, Ehrlich said.
“Certainly in the short run, COVID is still very much an economic factor,” Ehrlich said. “When you look at what’s happening, for instance, with the schools, your kid may be home unpredictably and that makes it harder to come in for a job. So, we know that caregiving obligations are still elevated, and there are sections of the economy where people might be hesitant. If you’re a high-risk individual and maybe you need to work in a restaurant or in a bar, you might still feel some hesitancy about working in that environment, especially with COVID cases surging.”
In West Michigan, the economy remains strong at the end of 2021 with expectations for continued growth in 2022, according to an outlook this month from The Right Place Inc.
Nearly eight 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 at an annual economic outlook this month. “It has been a very cloudy year. It continues to have some challenges, no question, on the 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.”
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.
Statewide, the civilian workforce that was 4.75 million people in October remained 96,000 people lower than a year earlier, according to the most recent data from the Michigan Department of Technology, Management and Budget. The labor force in October was still 276,000 people, or 5.8 percent, below February 2020, just prior to the COVID-19 pandemic’s onset in Michigan.
“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 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.
Despite the labor issue and higher inflation, “the current economic outlook and the current conditions are good,” Don Grimes, a regional economic specialist at the University of Michigan, said at The Right Place’s outlook.
“From an economic perspective, things are pretty rosy overall in the state and in the nation, and particularly in the Grand Rapid region,” he said.
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.