Forecast sees more jobs for Michigan in 2017-18

Brian J. O'Connor
Detroit News Finance Editor

Despite huge uncertainty prompted by the bombastic promises of the president-elect, Michigan’s economy is on track for another two years of growth that will add 41,600 jobs during 2017 and 50,000 in 2018 after adding 69,000 jobs this year, according to a new University of Michigan economic forecast released Friday.

UM’s research seminar foresees auto sales fading slightly from the 17.4 million projected for 2016, but a slightly larger Big 3 market share.

The forecast from UM’s Research Seminar in Quantitative Economics sees automotive sales fading from a projected 17.4 million vehicles in the U.S. this year to 17.3 million during 2017 and 17.2 million during 2018. The researchers expect sales for Detroit’s Big Three automakers to climb from a projected 7.4 million vehicles this year to 7.5 million during the next two years.

But only if President-elect Donald Trump doesn’t manage to ignite a trade war.

“It’s just not clear to us what the policy initiatives moving forward are going to be with this administration,” said George Fulton, director of the research seminar. “My insight is, I don’t know, to be honest, so that has to be a risk factor.”

The forecasters included factors such as Trump’s promise to cut federal tax rates on personal and corporate taxes, for example. But their report also notes that other forecasts see Michigan losing up to 5 percent of the state’s private-sector jobs if Trump ignites heated trade disputes.

“We expect then that the federal deficit will rise, and those kinds of economic things we’re fairly comfortable with,” Fulton said. “But in terms of trade policy, we just don’t know. So the reasonable thing for us to do is to say, ‘We think some things will happen but they won’t be draconian,’ and under that scenario Michigan continues to grow.”

Despite the incoming administration’s saber-rattling over trade, the economists say they remain upbeat about the state economy for two reasons: the continued expansion of the U.S. economy, especially with room for expansion in housing, and Michigan’s initial moves to diversify the state economy away from dependence on the home-grown auto industry.

Still, the researchers warn: “The darkest clouds we currently see on the horizon are potential policy errors at the federal level. As long as economic policy remains prudent, we foresee two more years of economic growth in Michigan’s future.”

On the jobs front, the forecast predicts that slowing auto sales after the boom of the recovery will produce a loss of about 10,000 manufacturing jobs in the state during the next two years. Job gains between now and the end of 2018 are projected to include: 22,000 construction jobs; 33,000 jobs in professional and business services; 14,000 jobs in leisure and hospitality; and 18,000 jobs in trade, transportation and utilities, with government hiring nearly flat at 1,000 jobs per year.

The gains in construction jobs would be welcome, but long overdue.

“The question is more, why is it as weak as it has been?” Fulton said. “I expected it to be stronger by now, frankly, but it’s coming. I think we’re seeing some of the strength already. They revise the numbers once a year and I wouldn’t be surprised if it turns out to be stronger than it’s showing right now.”

Even with those gains, the forecasters note, Michigan’s overall payroll employment levels will have regained only part of what was lost in the decade of decline that came before the onslaught of the Great Recession. If the state ends 2018 where the forecasters predict, it will see a total of about 4.4 million payroll jobs. In that case, Michigan will have restored 605,700 of the 858,100 positions lost between early 2000 and the depths of the recession in mid-2009, or 71 percent of the vanished jobs.

The economists see the state adding more men and women to the labor force, with the state edging up from this year’s level of 60.9 percent of working-age men and women holding or looking for a job, to 61 percent in 2017 and 61.2 in 2018. They also see employers adding most of those workers to payrolls, leaving the state annual average jobless rate at 4.6 percent through the end of 2018.

Predicting just how many sidelined workers will feel optimistic enough to jump into job-hunting can be tricky.

“That’s always the unknown,” Fulton said. “If, in fact, fewer people enter the labor force than we expect or the labor force declines, then the unemployment rate would fall more, but we don’t expect that.”

For the past three years, the forecast from the Research Seminar in Quantitative Economics has been spot-on for 2014 and 2015, the economists report, when they predicted job growth of 1.7 and 1.5 percent, respectively. For this year, the seminar forecast under-estimated job growth, forecasting a rate of 1.4 percent when the state is on track to end the year with a job growth rate of 2 percent.


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