Oakland County’s economy to continue expanding but more slowly

ANN ARBOR—Oakland County, which set the pace for job growth in Michigan during the 1990s and has enjoyed one of the most thriving economies in the nation during that time, will continue its economic expansion early into this new century, albeit at a slower rate, say University of Michigan economists.

An ever-tightening labor market, coupled with anticipated slower economic growth nationally, will result in private-sector employment growth in Oakland County of 14,400 jobs in 2000 and 9,800 in 2001—slightly more than the county’s job gains of 23,700 in 1999 alone, they say.

While the overall rate of job growth will slow from last year’s 3.5 percent to 2.1 percent this year and 1.4 next year, the U-M economists say that unemployment will remain at an extremely low 2.4 percent in 2000 and 2001, down slightly from the past two years’ jobless rate of 2.5 percent. By comparison, the national unemployment rate is predicted to remain between 4 percent and 4.5 percent.

“The honor of having one of the lowest unemployment rates in the state, however, is a double-edged sword,” says economist George A. Fulton of the U-M Institute of Labor and Industrial Relations (ILIR). “The full-employment economy that creates opportunities for the job-seeker also creates scarcities for the employer. The shortage of qualified workers has been limiting job growth in Oakland for the past few years.”

In their annual forecast of the Oakland County economy, Fulton and colleague Donald R. Grimes say that the county will continue to rely on commuters to fill new jobs, although that source is expected to be less plentiful than it was in 1999.

Last year, nearly three-fourths of the new jobs went to commuters from surrounding counties, but over the next two years, commuters are expected to fill only about 40 percent of the job gains, they say. Instead, growth in the labor force (new residents moving into Oakland County or existing residents entering the work force) will account for nearly 60 percent of the new jobs.

“In years where jobs have grown dramatically, such as 1999, commuters tended to account for a much greater share of the required work force than in other years,” Grimes says. “If, in future years, employers in Oakland County have significantly greater employment requirements, much of the need will have to be filled by additional commuters from surrounding communities.”

Despite tight labor market conditions, manufacturing employment in Oakland County is expected to add another 1,000 jobs this year, after registering job gains of 8,000 in 1999, a vigorous 6.4 percent increase. However, some 4,000 manufacturing job losses are forecast for 2001.

“The losses reflect a decline in motor vehicle production as it moves to a lower level consistent with a 16-million-unit light vehicle sales pace, combined with declining industrial equipment investment and a general slowing of the national economy,” Fulton says.

Although manufacturing jobs in Oakland County will decline overall through next year, non-manufacturing employment will add another 27,000 jobs in the next two years, the U-M economists say.

The largest job gains will come in the service industry (about 17,000 jobs), with business and professional services (ranging from higher-wage jobs in computer services to lower-paying positions in janitorial services) expected to add 8,000 jobs, engineering and management 6,000 jobs, health services 2,000 jobs, and other services 1,000 jobs.

Retail trade will account for 4,000 new jobs in 2000 and 2001, finance another 3,000 jobs, wholesale trade an additional 2,000 jobs, and transportation and utilities another 1,000 jobs. Construction is forecast to remain flat, due in part to higher mortgage rates for residential construction, Fulton and Grimes say.

Although the U-M forecasters believe that Oakland County’s economic growth will slow over the next two years, 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.

Moreover, the county has created more private-sector jobs than any other area in the state, accounting for about a third of the employment gains in Michigan throughout the decade. In fact, Fulton and Grimes expect that Oakland County will account for half of all private-sector job growth in the entire state over the next two years.

Further, compared with 25 other large suburban counties in the United States from 1990 to 1997, Oakland County ranked first in per capita income growth, second in earnings-per-job growth and private non-manufacturing job growth, and third in total private-sector employment growth and manufacturing job growth.

The 15th 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, Bank One and Oakland Community College.

Oakland CountyGeorge A. FultonDonald R. GrimesPlanning & Economic Development Services Division