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Mich. businesses' economic outlook positive for 2020

Breana Noble
The Detroit News
Grant Thornton chief economist Diane Swonk answers a question as Jeff Donofrio, left, director of the Michigan Director of the Department of Labor and Economic Opportunity, listens.

Detroit — Michigan businesses are more optimistic about the economy in 2020 than they were in 2019, according to the Detroit Economic Club's survey results released Tuesday.

The results come as unemployment rates fall to their lowest level in 50 years and amid hopes for a trade agreement later this month with China. Meanwhile, Michigan is seen as a strong place to start and run a business, though education and available talent remain challenges, according to the survey respondents.

The results are dissonant to the feelings of top executives nationally, who may be more concerned than Michigan respondents about foreign affairs, said Diane Swonk, chief economist for Chicago's Grant Thornton and an adviser to the Federal Reserve. Swonk had predicted a recession would occur in 2020 but since has reduced her forecast from 55% to 35% as trade relations appear to ease.

"The national surveys are actually in recession territory," Swonk said during a Detroit Economic Club panel on Tuesday. "The number of people on the Business Roundtable that (JPMorgan Chase & Co. CEO) Jamie Dimon runs now out of Washington, the majority of businesses say they are going to hold the line on hiring or decline."

Rachel Pawluszka, 25, of Warren says she sees that happening. She returned to Michigan in 2017 after attending college in Philadelphia but was laid off from a government contractor in April and has been interviewing since.

"I want to stay in Michigan," she said. "I think people are finding it hard to hire right now."

Jeff Donofrio, director of Michigan’s Labor and Economic Opportunity Department, expects Michigan will see similar economic results to those of last year, when unemployment declined 0.4% and the economy grew 1.4%.

"There are very much bright spots in the economy," Donofrio said, noting the state supported the creation of thousands of automotive jobs in Michigan, though its dependence on the industry also puts it at risk. "We are still very exposed, I think, to recession. ... We have work to do to build out, but then move into those new spaces, particularly IT, technology companies, those service industries that are taking up more of the economy elsewhere, which we've lagged behind a bit."

The economic club's survey included 295 responses from people in the private, public and nonprofit sectors in Michigan, whose 1 to 10 evaluations were translated to scores out of 100. Their yearlong outlook rose two points from 2019 to 81, but remained below the record 83 in 2018 for the eight-year survey. Michiganians also said they were more likely to recommend the state and their region within Michigan as a place to do business.

From raising a family to starting a business, respondents' views of Michigan also ranked higher than the national average in all categories assessed — except for its education system, which consistently has ranked below average. The availability of talent was also flat. Respondents also mentioned the need for investments in infrastructure and roads. 

"Michigan respondents say the outlook for 2020 looks strong," said David Baker, managing partner at Ann Arbor's Baker Strategy Group, which conducted the survey. "Continued efforts to improve education systems in our region are clearly needed."

Jeff Donofrio, Michigan Department of Labor and Economic Opportunity director, left, and Diane Swonk, Grant Thornton chief economist, center, answer questions from moderator Daniel Howes, a columnist and associate business editor at The Detroit News.

Part of it is a historical challenge following the Great Recession, Swonk said.

"We also had a real estate crisis that shrunk the pool of available funds for public schooling," she said. "And it exacerbated the differences between the have and the have-not communities where you have a great school in a very wealthy suburb where they can pay more taxes versus a not-so-great school."

The Whitmer administration has implemented a goal to increase the proportion of Michigan residents with post-secondary degrees to 60% by 2030. The current forecast is that attainment will be 53%, which means the state has to address mass transit, child care and affordability issues to meet that goal, Donofrio said.

"This isn't just about the individual, it's about the competitiveness of this state," he said. "It's about the state's future and economy."

Lower birth rates, higher death rates and immigration to the state being cut in half are contributing to the shortage of talent, Donofrio said. Additionally, recent census results suggest more young people are leaving Michigan.

"They said educated people is our largest export," said Kenneth Rates, a 39-year-old health care manager who lives in South Lyon. "That's kind of scary."

Twitter: @BreanaCNoble