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UM forecast: Detroit to see faster income, job gains than state

Christine Ferretti
The Detroit News

Detroit — A forecast unveiled Monday for the city shows gains in household income and a labor force that will outpace the state of Michigan in the coming years.

An economic outlook released for Detroit by the University of Michigan anticipates the city's workforce will add about 6,700 jobs through 2024 as well as a rise in resident income by 4% to 4.7% per year from 2020 to 2024, outpacing statewide income growth.

Construction workers get ready to position and install the final beam of structural steel as it is lowered by crane to the roof of the paint shop at FCA's Mack Avenue plant in Detroit in December.

The forecast is attributed in part to job opportunities in the pipeline from developments including the Gordie Howe International Bridge and FCA Mack Avenue plant, according to University of Michigan economist Donald Grimes, who projects labor participation will rise from 47.3% to 48.5% between 2018 and 2024. 

Detroit's Chief Operating Officer David Massaron said creating jobs in the city and hiring Detroit residents has been a key priority of the Duggan administration. 

“This independent forecast validates that strategy as we work to ensure Detroiters have opportunities for good jobs," Massaron said in a statement.

The forecast reports a 1.7% growth rate in employment for 2019, exceeding the state's overall rate of growth of 1% in household employment in that time.

According to the forecast, Detroit's unemployment rate will fall to 7.9% by 2023 and 2024. That's down from 8.6% last year and 18.7% in July 2013, when the city filed for municipal bankruptcy.

Most of the employment gains are projected to be in service sector jobs, including financial, leisure and hospitality as well as education and health care.

Manufacturing is projected to remain the city's second-largest sector behind education and health services, making up 16% of overall employment, officials said. 

"One key reason that city resident employment growth has outperformed the state in recent years, and is projected to continue doing so, is the relatively large pool of untapped labor in the city," the report reads.

Detroit’s rate of labor force participation currently lags the state average by almost 14 percentage points, it adds, while the city unemployment rate is more than double that of the state.

"As labor markets continue to tighten, we expect city residents to benefit more than the rest of the state," the report says. 

The forecast was produced by economists at the university's Research Seminar in Quantitative Economics as part of a partnership with the city and economists at Michigan State and Wayne State universities.

"We expect Detroit's ongoing recovery to form a key component of Michigan's economic growth through 2024," said Gabriel Ehrlich, director of Research Seminar in Quantitative Economics.

The findings support positive trends in income tax revenue for Detroit. However, many of the city's major revenue streams, including property tax and state revenue share, will have constrained growth due to state laws.

Detroit has improved its financial position and has amassed a rainy day fund. But despite that, "Detroit's economy continues to face well-known challenges, including an elevated poverty rate and relatively low educational attainment among its residents," said UM economist Daniil Manaenkov.

"Despite those challenges, we are forecasting ongoing increases in Detroit’s household income, residential employment and labor force participation rate over the next several years, combined with a falling unemployment rate," the report says. "We expect Detroit’s ongoing recovery to form a key component of Michigan’s economic growth through 2024."