ANN ARBOR—Like ancient times, Michigan’s economy has seen seven years of great plenty, followed by seven years of economic famine—but, unfortunately, it’s not over yet, say University of Michigan economists.

“During the seven-year interval ending in mid-2000, the state basked in its greatest economic prosperity in a generation as more than 700,000 jobs were created,” said U-M economist George Fulton. “In the seven years that followed, job losses cumulated to just short of 400,000 workers—70 percent in manufacturing activities that have long formed the core of the Michigan economy.

“Harking back to ancient wisdom, we ask the obvious question, ‘Do we now emerge from seven years of lean to indulge in some feasting?’ Our answer is yes, but not for awhile, not without more pain and not in a big way when we do turn the corner.”

In their annual forecast of the Michigan economy, Fulton and colleagues Joan Crary and Saul Hymans predict the state will lose 76,000 jobs during 2007—the most since 2001—and another 51,000 jobs during 2008. In 2009, they say Michigan can expect a net gain of 15,000 jobs.

“Not exactly the feast we might like, but at least a decent meal,” Fulton said.

The improvement in 2009, the economists say, results from fewer job losses in the auto industry as the Detroit Three’s light vehicle sales stabilize and from a local housing market that begins to turn around, thereby jumpstarting the construction industry. As usual, most of the job gains are in the service industries, adding two jobs for every manufacturing job lost during 2009.

According to the forecast, Michigan will lose 24,000 manufacturing jobs this year, 25,000 during 2008 and 10,000 the year after. About two-thirds of these losses will be in the auto industry. By comparison, the state lost 38,000 manufacturing jobs, including 27,000 auto jobs, during 2006.

While the construction industry will suffer the loss of 27,000 jobs during 2007 and 2008, and the trade, transportation and utilities sector will lose 25,000 jobs over the same period, both will fare better in 2009. Construction adds 4,000 new jobs, while trade loses “only” a thousand jobs that year.

After a flat year in 2007, service industries will account for 24,000 net job gains during the next two years—mostly in 2009. Education and health services, the economists say, will continue to “march to a different drummer,” adding 7,000 jobs this year, 10,000 next year and 9,000 the year after.

With payroll jobs declining by more than 1 percent per year, Michigan’s unemployment rate is expected to rise from 7.6 percent at the end of this year to just over 8 percent by the end of 2008 and throughout 2009—the highest rates since 1992.

Overall, despite their projections for continued job losses in the short term, the U-M economists say Michigan has room for optimism.

“Since the turn of the millennium, the state’s job market has been running at a pace that could be described as two steps forward, three steps back,” Crary said. “Because we have been continually losing ground, there is an air of pessimism that makes it seem as if there were no movement but backward. But that’s not all there is to the story. The two steps forward also have something to tell us. What they say is that the potential is there for the forward momentum to break through and eventually dominate.

“Recently released data show that, alongside the losses, the state’s economy consistently produces a very large number of job gains. There must be some vitality in an economy that can continue creating jobs even though it’s not keeping pace with the leakage. If the leaks can be plugged, the state’s economy and labor market have the capacity to grow and prosper. And therein lies both our challenge and our opportunity.”

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