ANN ARBOR—A lack of qualified workers, along with a slowing national economy, will cause employment growth in Oakland County—for years one of the nation’s strongest economies—to taper off in the next two years, say University of Michigan economists.

While the county is still expected to add 15,000 private-sector jobs in 1999 and another 8,000 in the year 2000, a dearth of trained workers will be a major factor in job growth slowing to 2.3 percent this year and to 1.1 percent next year, they say.

“This pace of job creation is much slower than in the recent past, when growth averaged 3 percent per year earlier in the 1990s and 4 percent per year in the 1980s,” says economist George A. Fulton of the U-M Institute of Labor and Industrial Relations (ILIR). “Why will growth slow as much as we anticipate? We can answer in two words—labor shortages.”

In their annual forecast of the Oakland County economy, Fulton and colleague Donald R. Grimes say that local businesses can attract new workers from four sources: the ranks of the unemployed, existing residents who decide to enter the work force, commuters from surrounding areas, and population growth.

However, since unemployment rates in Oakland County and surrounding areas are extremely low and since almost all adults not in school or retired are already in the labor force, there are very few available workers in Oakland and nearby counties—especially among those with a college education, they say.

Population growth, therefore, offers the best opportunity to add significant numbers of new workers for Oakland County businesses, although over the past three years, Oakland’s population has increased by slightly over 25,000 people, an average growth rate of 0.7 percent per year, the researchers say.

“Unless this growth rate can be increased, it will eventually establish a speed limit on county job growth of less than 1 percent per year,” Grimes says. “If the county wants to raise this limit to accommodate the growth in demand in the local economy, policies and actions that are focused on attracting more working-age residents and keeping existing ones, particularly educated ones, would yield higher returns than other strategies to support growth.”

Despite tight labor market conditions, the service industry is expected to account for most of the job gains (about 17,000) in Oakland County in the next two years, Fulton and Grimes say. Health services are forecast to add about 1,000 jobs and social services and legal services about 600 each.

The vast majority of job gains (some 15,000) in the service industry and in all sectors, for that matter, will occur in business and professional services, they say. These range from higher-wage jobs in engineering and computer services to lower-paying positions in janitorial services.

“The business and professional services industry has long been one of the engines behind Oakland’s booming economy,” Fulton says. “Over the next two years, we project that business and professional services will account for two out of every three jobs created in the county, despite the fact that this industry today accounts for only one job out of four.”

In addition to services, other nonmanufacturing industries, such as retail trade, finance, transportation and utilities, and wholesale trade, are expected to add between 1,000 and 2,000 jobs each through the year 2000.

Construction, on the other hand, is forecast to remain flat this year before losing about 1,000 jobs next year—thanks to a slowdown in the building of new homes, the completion of major construction projects such as the Great Lakes Crossing mall, and the diversion of construction activity to Wayne County to build new stadiums and casinos and to expand Detroit Metropolitan Airport.

Manufacturing employment, which grew by a solid 2.5 percent in 1998 despite strike-induced shutdowns in auto-related activity, will slow to 1.2 percent this year and will decline by 0.7 percent next year. This projected weakness, the researchers say, reflects a “flattening out of motor vehicle production over the period and slowing industrial equipment investment through mid-2000, accompanied by a general slowing of the national economy.”

The number of automotive jobs, they say, will remain steady in 1999 before declining by 2,000 next year. Other manufacturing industries are expected to add about 1,000 jobs in each of the next two years, with the greatest gains forecast in plastics, fabricated metals, and electronic and other electrical equipment.

Although Fulton and Grimes believe that Oakland’s economy will continue to be somewhat sluggish throughout the rest of this year and next, it still remains one of the most robust economies in Michigan and the nation.

In the 1990s, private-sector employment in Oakland County has expanded about one-and-a-half times as fast as Michigan as a whole and will continue to outpace the state this year and next. Further, the county has created more private-sector jobs than any other area in the state, accounting for about a fourth of the employment gains in Michigan throughout the decade.

In addition, compared with 25 other large suburban counties in the United States from 1990 to 1996, Oakland County ranked first in both per capita income growth and earnings-per-job growth, second in both total private-sector job growth and manufacturing job growth, and third in private non-manufacturing job growth.

The 14th annual U-M forecast of Oakland County’s economy was sponsored by 20 Oakland County organizations. Its presentation was hosted by the county’s Planning & Economic Development Services Division, NBD Bank and Oakland Community College.

Wayne CountyPlanning & Economic Development Services Division