UM forecast: Michigan will add 126,000 jobs by 2018

Brian J. O'Connor
Detroit News Finance Editor

Job gains in Michigan will go from growing faster than the national economy this year to slightly slower than the U.S. next year, but the state should regain all 750,000 jobs lost since 2000 some time after 2020, a University of Michigan economist says.

While anything beyond 2017 isn’t part of his formal projection for the next two years, “It’s just a matter of when,” said George Fulton, who leads UM’s Research Seminar in Quantitative Economics. “We will get all the way back, and I’ve been saying for a while it would be sometime in the early 2020s.”

According to the annual forecast, Michigan is on track to reclaim two-thirds of the jobs lost in the state since 2000 by the end of 2017, as it adds about 126,000 jobs in the next two years. By then, the state will have added a total of 586,000 jobs between 2009 and the end of 2017.

“Even though the growth is a little more moderate over the next couple of years, we’re going to continue to grow,” Fulton said Friday. “If we do that, it will amount to eight consecutive years of recovery. Considering what we went through in the first decade, that’s pretty heartening.”

The UM economists predict that overall job growth in the state will continue to slow down as the economic recovery continues, projecting a gain of 61,100 jobs for 2016 and 64,800 jobs in 2017 — down from estimated gains of 84,600 new jobs by the end of this year. The study — written by Fulton, Joan Crary, Gabriel Ehrlich and Donald Grimes — says those job gains will push the statewide jobless rate down from its current level of 5 percent to 4.8 percent at the end of next year, and 4.5 percent at the end of 2017, moving in tandem with the national jobless rate.

Specific projected job gains by the economists through 2017 include:

■About 32,000 jobs in the professional and business services sector. That includes professional, scientific and technical services; management of companies; and administrative support services, including temporary help. Six out of every 10 jobs in this sector will be in “knowledge-based” positions, with the rest occurring in administrative support.

■About 22,000 jobs in the trade, transportation and utilities sector, including wholesale and retail trade, transportation, warehousing and public utilities, with about 60 percent coming in retail trade.

■Another 22,000 jobs in the hard-hit construction industry.

■20,000 jobs in the leisure and hospitality sector.

■ Only about 10,000 manufacturing jobs — down from an annual average gain of about 20,000 jobs during the last four years.

In a forecast devoted to the national economy released Thursday, UM economists predicted that the U.S. economy will grow at its highest rate in a decade next year, with gross domestic product rising from 2.4 percent last year and this year to 2.6 percent in 2016 and 2.9 percent in 2017.

That growth would drop the annual unemployment rate below 5 percent next year, with the country adding 4.7 million jobs during the next two years.

In the state’s vital auto sector, the UM forecast sees this year’s finally tally of North American light vehicle sales hitting 17.4 million units by the end of the year, a gain of 1 million sales over last year’s figure. Sales are projected to climb to 18 million in 2016 and edge up to 18.1 million during 2017. The economists also forecast that Detroit’s Big Three will take a slightly bigger cut of those sales, going from 43.7 percent this year to 44.2 percent next year and 44.4 percent in 2017. That would take Detroit automakers from selling 7.3 million units in 2014 to 8.1 million in 2017.

While the employment growth and auto sales figures are encouraging, Michigan also will continue several negative economic trends in other important aspects, such as per capita income, per capita GDP, the employment-to-population ratio and educational attainment. By these vital measures of economic success, the UM economists warn, Michigan ranks “closer to the caboose than to the engine,” the study says, adding that there is, “still too much slack in the state economy, and a fair number of residents still need to join the recovery.”

Some of that weakness is evident in where the jobs are coming from, such as temporary help and retail, as opposed to the high-paying auto manufacturing jobs that led the state out of the recession. And even those jobs don’t pay as well as they did at the beginning of the century. Meanwhile, a large number of Michigan residents remains outside of the labor force, neither working nor looking for a job.

Since 2007, nearly 300,000 Michigan workers have given up looking for a job. Workers older than 60 retired early after finding no jobs available after the recession hit. And many of those younger have been staying on the employment sidelines by remaining in school, where they can borrow to cover their tuition. However, others in the peak of their working years lack the education and skills needed for modern jobs after being laid off from unskilled factory jobs. Add them into the unemployment calculations, and the official unemployment rate would more than double.

Although some discouraged workers have started to come back in the labor pool, the number of available workers in the state is down by 16,000 people from January 2014, and has declined by 31,000 workers since just January.

“In the forecast, our story is the continuing recovery of the economy since the bottom of the downturn,” Fulton concluded. “We’ve had some pretty good years and I think the fundamental story is that we think we’re going to have a couple more good years, not growing at quite the pace we have in recent years, but still at a pretty good pace.”

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Associated Press contributed.