ANN ARBOR—The Michigan economy will continue to grow over the next two years, but at a slightly slower pace than it did this year, according to a University of Michigan economic forecast.

“The continued expansion of the economy over the next two years would give us eight consecutive years of job growth in the state,” says U-M economist Joan P. Crary. “That would match the stretch of job growth sustained in the 1960s and again in the 1980s, the longest runs since state employment data were first collected almost half a century ago.”

Crary and U-M economists George A. Fulton and Saul H. Hymans predict increases of about 52,000 jobs in each of the next two years, down from the 59,000 job additions reported for 1997. This translates into moderate employment growth of 1.2 percent for both 1998 and 1999, down slightly from the 1.4 percent rate of the current year.

Unemployment, they say, will drift upward, however, from the current rate of about 4 percent to an average of 4.3 percent in 1998 and 4.5 percent in 1999. Despite the rise, the number of unemployed persons in Michigan will remain low, with a very tight labor market projected for the next two years, they add.

“Indeed, we are now utilizing our labor resources so fully in some sectors that the prospect of labor shortages is becoming worrisome,” Fulton says. “To the extent that supply constraints do exist, they can temper growth and thus influence the outlook.

“The threat of labor shortages notwithstanding, a construction boom in Detroit—headlined by three gaming casinos and two new sports stadiums—is expected to give a boost to the local economy in about a year’s time, continuing through at least the year 2000.”

According to the U-M forecast, employment in the manufacturing sector, which decreased by an estimated 1.1 percent in 1997, is predicted to fall by similar rates over the next two years. Manufacturing jobs are expected to decline by 9,300 in 1998 and by another 12,000 in 1999, due largely to job losses in the auto industry and other durable manufacturing.

The researchers predict that non-manufacturing employment will increase by 1.8 percent in each of the next two years (about 61,000 jobs each year), following a rise of 2.1 percent in 1997.

More than half of the non-manufacturing job gains in the next two years will be made in services, with an additional third in retail trade and construction, the economists say. With the exception of mining, every major industry in non-manufacturing is expected to show job growth over the forecast period, they add.

In addition to moderate overall job growth, the U-M forecast indicates that growth in personal income will hold fairly steady at 4.8 percent in 1998 and 4.7 percent in 1999, after rising 4.6 percent this year. Also, the growth in real disposable income, or consumer purchasing power, will increase from a current rate of 1.3 percent to 2.5 percent next year before dropping slightly to 2.3 percent in 1999.

The rise in purchasing power from this year to next reflects the smaller anticipated increase in personal taxes in 1998, stronger income growth, and lower inflation, which is expected to slow slightly from 2.4 percent this year to 2.3 percent next year, before moving up to 3 percent in 1999.

In all, while the U-M economists, historically, have been accurate in forecasting Michigan’s economic outlook, they acknowledge that there always exist concerns and uncertainties that may affect the accuracy of a forecast. This year, these include the impact of labor shortages on economic growth, the potential for more extensive labor reductions in the auto sector, and the broader economic impact of the advent of casinos in Detroit.