ANN ARBOR—As the nation’s already-weakened economy tips into recession amid the economic fallout of the Sept. 11 terrorist attack, Wayne County’s economy will be derailed in the next two years before getting back on track, say University of Michigan economists.

“Wayne County had already been losing jobs at a modest pace since the spring of 2000, and before the terrorist attacks we expected that this modest decline would continue through early 2003,” says George A. Fulton, senior research scientist at the U-M Institute of Labor and Industrial Relations (ILIR). “We now forecast that the attack of Sept. 11, although not extending the period of decline, will deepen the drop significantly and ensure a recession.

“However, our view is that Wayne County’s economy is now structurally more sound, and it will endure these difficult times and then steadfastly move on. The county has yet to reach its full potential.”

In their third annual forecast of the Wayne County economy, Fulton and colleague Donald R. Grimes, ILIR senior research associate, predict that the county will lose 10,000 jobs this year and 16,000 jobs over the next two years. In all, the private-sector work force will shrink from 748,000 in 2000 to 722,000 in 2003.

Fulton and Grimes say that the projected job loss is still much less than the loss of 40,000 jobs suffered in 1991 alone during the previous recession, which in turn was less severe than the recessions of the mid-1970s and early 1980s.

They estimate that 10,500 jobs will be lost (1.4 percent of the private-sector work force) in Wayne County through the end of 2003 because of the terrorist attack and its repercussions. Although, as might be expected, the largest losses due to the tragedy are in the manufacturing and transportation sectors of the economy, Wayne County’s increased focus on high-technology and other non-manufacturing jobs in recent years has softened the economic blow, they add.

“Indeed, it is the efforts to diversify the county’s economy over the 1990s, as well as to invest in some more stable and less footloose enterprises, that are providing some cushion in the current downturn,” Fulton says. “The renewed easing of monetary policy by the Federal Reserve and the large stimulus package engineered by the federal government are also major contributors to our expectations of an economic scenario that is less severe than it might have been.”

Wayne County’s unemployment, in turn, is expected to rise from a record-low rate of 3.9 percent last year to 5.3 percent this year and 5.6 percent in each of the next two years.

“The jobless rate for Wayne in 2001 is forecast to be 0.6 percent above the rate for the nation, but the difference in the local and national rates dwindles to zero in 2002,” Grimes says. “The local jobless situation continues to improve relative to the nation in 2003, poking below the national rate as it did in the second half of the 1990s, as Wayne puts its comparatively small pool of surplus labor back to work.”

Of the 26,000 jobs that Fulton and Grimes say Wayne County will lose from last year through 2003, nearly 70 percent will be in manufacturing. About 8,000 of these 18,000 lost manufacturing jobs will be in the automotive industry. Overall, the number of manufacturing jobs will drop from 182,000 in 2000 to 164,000 in 2003.

In non-manufacturing fields, some 8,000 jobs will disappear in Wayne County between 2000 and 2003. While positions in retail trade will increase slightly from 140,000 to 142,000, and jobs in finance and insurance will hold steady at 39,000, other non-manufacturing areas will register job losses.

Service-industry jobs (business, health, engineering and management, amusement and recreation, and other services) will fall from 248,000 to 245,000; wholesale trade employment will be down from 48,000 jobs to 46,000; construction jobs will steadily decline from 29,000 to 25,000; and jobs in transportation and utilities (including air transportation) will slip from 58,000 to 57,000.

“Air transportation has been one of the biggest contributors to the county’s economic growth since 1993, and we expect that it will return to its strong growth path after 2002,” Grimes says.

“Overall, our preliminary investigation into the extended outlook suggests that the local economic recovery will be picking up steam by 2004, and the prospects for Wayne then will look more similar to its performance in the later 1990s. The biggest risk to the accuracy of our forecast is the nature and extent of the future responses resulting from the events of Sept. 11 and their impact on the domestic and foreign economies.”

The Wayne County forecast is generated from a regional economic model constructed specifically for this study by the U-M Institute of Labor and Industrial Relations and uses as inputs national economic indicators from the U-M Research Seminar in Quantitative Economics. It was constructed with the support of the Wayne County Department of Jobs & Economic Development.

For more information, contact Tim Johnson, Office of the Wayne County Executive, (313) 224-0982.