[For the U-M forecast on the national economy, click here.]

ANN ARBOR—Job growth in Michigan will continue at a steady pace in the next two years, although unemployment will rise slightly during that time, according to a University of Michigan economic forecast.

U-M researchers Joan P. Crary, George A. Fulton and Saul H. Hymans anticipate increases of nearly 70,000 jobs in 1997—about the same increase as in 1996—and just under 64,000 jobs in 1998. Their projected employment growth rates of 1.6 percent for next year and 1.5 percent for 1998 are largely the same as the current rate of job growth in the state.

The unemployment rate, they say, will drift upward, however, from the current reading of 4.8 percent to an average of 5 percent in 1997 and 5.1 percent in 1998. Despite the rise, the number of unemployed persons in Michigan will remain low, with a moderately tight labor market projected for the next two years, they add.

” The Michigan economy will continue to expand over the next two years—slightly more slowly than it did this year, but similar to its average growth over the past quarter century,” Fulton says. ” The contributions to this job growth over the next two years are uneven, however, among the major industry sectors of the Michigan economy.”

According to the forecast, employment in the manufacturing sector will be flat in 1997, with small gains in automobile and non-durable manufacturing offset by losses in other durable manufacturing. In 1998, manufacturing jobs will decline by 2,200

” Motor vehicle employment rises slightly in 1997 as vehicle output returns to 1995 levels following a 3 percent decline in 1996,” Crary says. ” The weakness in the manufacturing sector in 1998 reflects our projection of modest growth in vehicle production, coinciding with the auto industry’s continued push for productivity gains within its work force.”

The researchers say that non-manufacturing employment is expected to increase by 2.1 percent (nearly 70,000 jobs) in 1997 and by 1.9 percent (66,000 jobs) in 1998, following an increase of 2.5 percent in the current year. Nearly half of the slowdown in job growth for 1997 can be attributed to the construction industry, which is forecast to grow by a ” still-healthy” 3.3 percent following an unsustainable pace of 8.3 percent in 1996.

Further, the service industry will account for more than half of non-manufacturing job gains in 1997 and 1998, while retail trade will contribute nearly a quarter of the jobs added in the next two years. With the exception of mining and government, every major industry in non-manufacturing is expected to show some job gains over the forecast period, they add.

In addition to moderate overall job growth, the forecast indicates that personal income will rise by about 5 percent over the next two years, up from a 4.3 percent increase in 1996. Also, the growth in real disposable income, or consumer purchasing power, will surge from a current rate of 1.2 percent to 3.2 percent next year before slowing to 2.5 percent in 1998.

This, the researchers say, reflects, in part, the fluctuation of local inflation from a current 2.6 percent rate to 1.8 percent in 1997 and back to 2.6 percent in 1998.

In sum, while the U-M economists, historically, have been accurate in forecasting Michigan’s economic outlook, they acknowledge particular uncertainties associated with some major sectors of the state’s economy, such as retail trade and services.

For example, an acceleration of the recent trend toward less labor-intensive retail trade (that is, growth in ” superstores,” more catalog business, etc.), greater cost-containment in health services (for example, cutbacks in hospital employment), and possible labor shortages in a low-unemployment environment could further dampen employment growth in these sectors.

Finally, Crary, Fulton and Hymans note the importance of keeping sight of issues that govern long-term prospects for the state’s labor market, such as emerging high-skill work environments.

” The new ‘information and knowledge’ economy is growing and will continue to grow, and those with requisite skills and knowledge are rewarded with attractive employment opportunities and higher wages,” Fulton says. ” The degree to which Michigan participates in this new economy will be important in determining the state’s long-term growth and welfare.”

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