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UM: Michigan Economy Will Continue To Add Jobs Slowly

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ANN ARBOR — The Michigan economy appears poised to continue its recovery, although full economic health is still well in the distance, say University of Michigan economists.

Michigan will see employment growth this year of 63,000 total net jobs just two years after losing 245,000 jobs during 2009. The economy will add another 77,000 jobs over the next two years, the economists say.

“For Michigan, 2011 will go down as a year of solid job growth and one that saw the higher-wage segment of the labor market grow more rapidly than the economy overall,” said George Fulton, director of UM’s Research Seminar in Quantitative Economics. “The Michigan economy is two years into a sustained recovery, and its revival has been typical of the early stages of most past recoveries in that job growth was led by manufacturing and has been more robust than the nation’s. What has not been typical is the more subdued pace of recovery this time around compared with past history.”

In their annual November forecast of the Michigan economy, Fulton and colleagues Joan Crary and Donald Grimes say that the state will add nearly 32,000 jobs during 2012 and 45,000 more during 2013.

Unemployment will continue to drift downward from a calendar-year average of 10.7 percent this year to 10.4 percent next year and 10 percent the year after. The state’s unemployment rate has steadily dropped since it reached a high of 14.1 percent in September 2009, declining 19 straight months until this past spring.

Michigan’s signature sector — manufacturing — has led the state’s current recovery, adding 19,000 jobs last year, 25,000 this year and 21,000 more over the next two years, the economists say.

“The source of manufacturing’s revival in Michigan is, of course, the now-profitable-again motor vehicle industry,” Fulton said. “A third of the manufacturing job additions over the next two years are directly attributable to the auto industry and many of the rest derive from auto-related industries. Perhaps the most visible symbol of the local auto industry’s renaissance in the state is the reopening of the Orion Assembly Plant in August of this year to build the Chevrolet Sonic and the Buick Verano.”

In addition to manufacturing, two service-sector industries — professional and business services and health services — are helping to fuel Michigan’s recovery, the economists say.

Professional and business services contributed 26,000 jobs last year to the state economy and 20,000 more this year, thanks to a red-hot temporary help industry. The forecast calls for 10,000 more jobs in professional and business services in both 2012 and 2013.

Health services added 12,000 jobs both last year and this year and is expected to gain 9,000 in each of the next two years.

“This industry has added to employment every year starting in 1999, the only major industry not to decline over the past decade,” Fulton said. “Since we are on the threshold of a surge in the number of people reaching retirement age, the longer-term prospects for the industry are very favorable, as well.”

On the down side of the jobs ledger, the government sector — which has lost jobs every year since 2003 — will continue its downward trend with job losses of 11,000 this year, 8,000 next year and 3,000 in 2013.

“All levels of government continue to be financially challenged, with the downsizing of the U.S. Postal Service at the federal level, prison closures at the state level, and stressed school districts and communities at the local level,” Fulton said. “Some of the growth in temporary help services is due to the privatization of public-sector positions, particularly support staff at local public schools.”

Overall, the UM economists say that Michigan’s economy still has a ways to go. But after suffering through a decade of systematic decline prior to the recovery, when Michigan lost more jobs than any other state and earned its moniker as the nation’s economic caboose, it’s off to a good start in reclaiming its place as an economic engine.

“After all, we have the farthest to go — coming off the very bottom, we have the most room for improvement,” Fulton said. “But the analogy for the Michigan economy’s place in the train has moved well forward of the caboose, and for that we can be thankful.”

More from the UM Research Seminar in Quantitative Economics at www.umich.edu/~rsqe.

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