Michigan’s economy will add jobs for the first time in four years

ANN ARBOR, Mich—After four straight years of employment losses, Michigan’s economy will add more than 130,000 jobs during the next two years—more than half in the service industry, according to a new University of Michigan economic forecast.

“As 2005 unfolds, we anticipate steady improvement in the state labor market with job growth accelerating throughout the year,” said U-M economist George Fulton. “The job creation during the next two years is comparable to what was recorded during the 1999-2000 interval prior to the losses of the past four years.”

In their annual forecast of the Michigan economy, Fulton and colleagues Joan Crary and Saul Hymans predict employment gains of 49,500 jobs during 2005 and 82,600 jobs during 2006. Since mid-2000, the state has lost more than 325,000 jobs.

Although Michigan’s moderate job growth during most of next year will lag behind the national rate, employment gains in 2006 will outpace U.S. job growth (1.9 percent in the state vs. the nation’s 1.8 percent). The state’s unemployment rate will edge downward from the
Service-industry jobs—including professional and business services and leisure and hospitality services—will account for about 60 percent of the job gains over the next two years (about 84,000 new jobs). Overall, these jobs make up about 40 percent of all jobs in Michigan.

“The accelerating growth of this sector is consistent with strengthening purchasing power among the state’s residents, as the local job market improves and interest income increases,” Crary said.

Other non-manufacturing employment also will contribute to the job gains, including about 40,000 new jobs in the trade, transportation and utilities sector, roughly 10,000 jobs in financial activities and about 5,000 jobs in the public/government sector.

On the other hand, manufacturing jobs in Michigan will continue to decline through 2006, though at a much lower rate relative to the past four years. Automotive manufacturing, specifically, will lose nearly 14,000 jobs over 2005 and 2006.

“National vehicle production rises only modestly over the forecast horizon and the Big Three market share in production and sales is expected to continue to lose ground over the next two years,” Fulton said. “Although General Motors will start up operations in its new assembly facility in Lansing and will expand operations in Lake Orion, no new hires are expected.”

On a positive note, the forecast calls for modest gains in manufacturing jobs outside of the auto industry—3,800 workers over the next two years—thanks, in part, to an ongoing recovery and expansion in equipment investment and improvements in real net exports.

“Despite overall job losses in manufacturing, we believe that job gains in Michigan, on the whole, will be sustained through 2006,” Crary said. “The pace of recovery is moderate during most of 2005 though, before picking up steam to register healthy growth by the turn of the year into 2006.”