Michigan economic forecast: Slow, steady growth in jobs for 2013

Posted on January 2, 2013

Led by its resurgent auto industry, Michigan has been climbing out of its deep economic hole over the past two years. Building on that, economists remain generally positive about the prospects for further jobs growth in 2013.

But nobody expects the state to fully make up the devastation of the “Lost Decade” of 2001 through 2010. Michigan lost more than 800,000 jobs during that stretch.

Over the past two years, Michigan has added back about 120,000 jobs, and more job gains are expected over the next two years. But clearly the state still has a long way to go to make up all its lost ground, at least in the labor market.

Charles Ballard, a professor of economics at Michigan State University and author of the book “Michigan’s Economic Future,” said job growth in 2013 in Michigan is “likely to be halfway decent, not gangbusters.”

“The metaphor I like to use is we’re in at least second gear and maybe third gear, but not fourth. That feels a lot better than reverse,” he said.

The expected jobs growth in 2013 — somewhere perhaps in the range of 50,000 new jobs among a range of possibilities — is “better than nothing and better than the losses of the last decade,” Ballard said. “But that would leave a lot of people unemployed or underemployed.”

Jobs are just one measure of economic health. Michigan has enjoyed a fairly good recovery from the Great Recession as measured by the total dollar value of all the state’s output of goods and services. Michigan’s total gross domestic product rose in 2011 to $385 billion, up from a recessionary $351 billion just two years earlier.

Auto manufacturing led the resurgence. Even the long-suffering construction trades, devastated by the housing collapse of recent years, have seen increased output the past couple of years. Meanwhile, the government sector continued to shrink.

However, the state’s roughly 10% gain in gross domestic product resulted in just a 4% increase in jobs, as employers remained cautious about adding workers.

Can the recovery continue? And will it ever post gains solid enough for Michigan to recoup the almost 1 in 5 jobs it lost during its “Lost Decade”?

University of Michigan economists said there’s no easy answer to those questions in the Michigan economic forecast they delivered in November.

“It’s a long haul to crawl out of a deep hole, but at least we’ve stopped digging in deeper,” said economist George Fulton, who, with his U-M colleagues Joan Crary and Donald Grimes, delivered the annual U-M economic outlook for the state.

The U-M forecasters said they see more job growth ahead for the state in 2013 and 2014, at a pace of 37,500 new jobs in 2013 and 57,600 new jobs in 2014.

“The moderate rate of job creation in these two years reflects both our forecast of a slower rate of increase in Detroit Three light-vehicle sales moving forward and, more generally, the continuing below-trend growth forecast for the U.S. economy,” Fulton and his colleagues said in their forecast. “Obviously, if more promising results come to pass in either of these arenas, Michigan’s prospects will improve as well.”

Robert Dye, chief economist for Comerica, agreed in his most recent outlook for metro Detroit that gains in manufacturing will not be as robust going forward as in the recent past. As the auto industry saw sales rebound from a low of about 9 million vehicles a year during the depths of the recession to almost 15 million a year today, the industry has mostly recalled the workers it needs to operate at that level.

“Gains in manufacturing employment are now flattening out,” Dye wrote in his most recent report. “The expected climb in auto sales over the next two years will add far fewer new jobs than did the climb in auto sales over the last two years.”

The U-M economists pointed out that private-sector employers may add more than the net increase in jobs because the overall figure reflects a continual shrinkage of the government sector. They forecast that the private sector will add about 43,000 jobs in Michigan in 2013 and an additional 63,000 in 2014.

Noting the rising number of new jobs expected, the U-M team said, “The pattern is consistent with a U.S. economy that we see accelerating over the next two years, but with growth remaining moderate.”

Added Ballard, “We still have a long way to go.”

John Gallagher, Detroit Free Press.