Published in Finance

Michigan to continue growing, but at slower rate in 2019

BY Sunday, November 18, 2018 07:00pm

Michigan will maintain job growth through 2019, although at a slower rate than the past several years as employers have fewer people to hire.

That prediction comes from economists at the University of Michigan who expect the state next year to tie and exceed a record for its longest period of job growth.

“That’s the good news,” said Gabriel Ehrlich, director of U-M’s Research Seminar in Quantitative Economics. “The mixed news is that job growth is slowing down as the labor market tightens.”

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

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 of the five lost during the mid-2000s.

Between the first and second quarters of 2018, Michigan’s economy Real GDP grew 5.4 percent. That’s higher than any other state in the Great Lakes region and second nationally to the 6 percent Real GDP growth for the same period in Texas, according to newly released data from the U.S Bureau of Economic Analysis.

As the Michigan economy recovered economically and grew jobs since late 2009, the labor market steadily tightened, with difficulty finding qualified works today ranking among the top concerns of employers.

Michigan’s unemployment rate as of October was 3.9 percent, the lowest since October 2000. U-M expects the state’s unemployment rate to average 3.9 percent for all of 2019.

Given the tight labor market, slower job growth for Michigan was inevitable, Ehrlich said.

“Part of the story is there just is not much slack left in the labor market,” he said. “In an environment like that, it’s just natural the growth is going to slow down. There just are not a lot of people to take the jobs.”

Among the projected 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 8,300 jobs over the next two years, and professional and business services will add 13,500 jobs by 2020.

The auto industry will ease slightly, as sales dip from an estimated 17.1 million units for 2018 to 16.9 million units in each of the next two years.

Nationally, U-M expects the U.S. economy to maintain growth in 2019, although at a slower rate as well. Economists predict U.S. Real GDP to grow at 2.7 percent next year, followed by 1.9 percent in 2020 as benefits taper off from tax reform a year ago and higher federal spending.

Real GDP growth for 2018 is expected to come in at 2.9 percent.

The big uncertainty nationally for 2019 is foreign trade and tariffs, according to economists.

“The budding trade war with China makes it hard to interpret the economy’s recent performance,” U-M economist Daniil Manaenkov said. “It is unclear how much of the jumps in inventory investment and imports were due to producers ramping up imports in anticipation of increased tariffs on Chinese products.”

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