Michigan's economy expected to continue steady improvement
LANSING, MI — Michigan can expect steady, modest economic improvement in the next few years as employers add jobs, personal incomes rise and more people buy new cars.
That's according to forecasts from economists at the University of Michigan and Senate and House fiscal agencies, presented at the state's biannual revenue estimating conference on Wednesday.
"Michigan is in its third year of recovery after a debilitating recession, the strongest job growth is in the high wage segment," U-M economist George Fulton said Wednesday. "We see a sustained, moderately paced recovery from now through 2014, led by manufacturing, but diffusing into other sectors, particularly professional and business services and health care."
Fulton's department projects Michigan's unemployment rate will improve from 2011's 10.3 percent to 8.4 percent in 2012, 8.1 percent in 2013 and 7.7 percent in 2014. The House Fiscal Agency's forecast is more optimistic, projecting 7.4 percent jobless rate for 2014, while the Senate Fiscal Agency cast a more conservative 8.1 percent for 2014.
The figures are closer to Michigan's average unemployment rate of 7.9 percent from 1970 through 2008, Fulton said.
Michigan unemployment rate (10.3% in 2011)
U-M: 8.4 / 8.1 / 7.7
HFA: 8.4 / 7.8 / 7.4
SFA: 8.6 / 8.3 / 8.1
Michigan personal income growth (5.2% in 2011)
U.S. Light vehicle sales in millions (12.7 million in 2011)
U-M: 14.5 / 15.1 / 15.6
HFA: 14.5 / 15.1 / 15.6
SFA: 14.3 / 14.8 / 15.2
Sources: U-M = University of Michigan; HFA = House Fiscal Agency; SFA = Senate Fiscal Agency
University of Michigan economists George Fulton and Daniil Manaenkov present their economic forecast at Michigan's consensus revenue estimating conference.
"But these remain stubbornly high jobless rates," he said, adding that many residents will not feel invested in the recovery.
And for some even more sobering figures — the state lost 859,000 jobs from spring 2000 through the low point at the end of 2009. Since then, Michigan has gained back 151,000 jobs through the first quarter of 2012, and is expected to create another 133,000 jobs through 2014, according to U-M projections. Those gains only amount to a third of the jobs lost in the downturn.
Much of that growth has been and is expected to continue in high wage industries, with an average 2010 annual wage of about $72,800. Employment in that sector grew by 6.9 percent from the fourth quarter of 2009 to the fourth quarter of 2011, according to U-M's report. Employment in middle-wage industries, which paid an average of $43,200 in 2010, grew 3.8 percent during the time period, while employment in low-wage industries that averaged $19,000 annual pay in 2010 grew by 2.9 percent.
Vehicle sales push a lot of the employment growth.
The U-M and HFA outlooks both project 14.5 million U.S. light vehicle sales this year, up 14 percent from 12.7 million last year. The SFA projects 14.3 million sales.
Some of the increase will come from delayed demand from last year's low inventory of Japanese cars after the earthquake tsunami, said Daniil Manaenkov, an economic researcher at U-M.
There's also pent-up demand that's been accumulating since the beginning of the recession, he said. In 2007 the average age of cars in the United States was less than 10 years, while it's now pushing 11 years, he said.
"People will not be able to delay purchase of new cars too much longer, and we think we are seeing signs of that finally making its way to sales," Manaenkov said.
Personal income needed to afford those car payments should continue to rise, but not as quickly as last year. Michigan experienced a 5.2 percent growth in personal income in 2011. The rate is expected to slow to about 2.6 percent to 3.2 percent, depending on the forecaster. Growth could slow slightly in 2013 before jumping to roughly 4 percent in 2014.
Related: Economists to Michigan lawmakers: Budget revenues may not be as high as originally projected
Email Melissa Anders at manders@mlive.com. Follow her on Twitter: @MelissaDAnders.