Michigan’s Bounce Back: Economists Predict Job Growth to Start by 2010
New reports indicate that there is more pain ahead for the Michigan economy – but that the end of the state's economic anguish could be in sight.
An economic forecast released last week by the Research Seminar in Quantitative Economics at the University of Michigan predicts that the state's economic slump will continue for another two years – costing the state about 90,000 jobs. But in 2010, the UM forecast projects, the state will see a slight gain of about 30,000 jobs – including the hiring of temporary workers for the 2010 Census.
UM economists first predicted the state would see a small job gain in 2009, but have revised that. They now say rising food and energy prices will delay the recovery of the state's economy until the following year.
“Real disposable income receives a boost this year from the federal tax rebate,” the UM report says, “countered by higher inflation and an increase in the state personal income tax rate. The net result is a 0.5 percent increase in real disposable income for 2008, a tad below the 0.7 percent rate posted for 2007. With no tax rebate in 2009, purchasing power shrinks by 0.7 percent before rebounding to an increase of 1.7 percent in 2010, in line then with more subdued inflation, accelerating nominal income growth, and stable state tax rates.”
More hard-to-hear news came from Comerica Bank, which this week updated its Michigan Business Activity Index and the Detroit Purchasing Managers composite index, compiled by economist and Walsh College Director of Doctoral Programs David Allardice.
Michigan Business Activity Index fell 4 points for June – the most recent data available – after rising 2 points in May. It has now declined in 5 of the last 6 months. The June level of 87 was the lowest reading since July 1998. So far this year, the index has averaged 3 percent less than it did in all of 2007. The reasons for the decline were familiar: a weak national economy and slow sales of big vehicles that have been the mainstay of the Detroit Three.
But Johnson, like the UM economists, says the state’s economic woes might be close to ending, though at least several more months of hardship seem likely before that happens.
“I see the potential for the Michigan economy to start edging up in the second half of 2009 in lagged response to the US economy accelerating starting in the first half of 2009,” Johnson said.
Meanwhile, Allardice’s Detroit Purchasing Managers survey for August fell 6 points from its July level. The measure of production, new orders, employment, inventory, vendor deliveries, and commodity prices was 48.2. Readings below 50 indicate that manufacturing is contracting. Seventy-six percent of the managers surveyed said that they believe the economy is in a recession.
“Concerns with the future and poor current business conditions were cited as the reason respondents believe the economy is in a recession,” Allardice said. “Looking six months ahead, 28 percent expect a less stable environment regarding business prospects. This is down 9 percentage points from July.”
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New reports indicate that there is more pain ahead for the Michigan economy – but that the end of the state's economic anguish could be in sight.
