LANSING – Both Michigan and the national economy are growing, but growth will be very slow, economists said at the Revenue Estimating Conference on Friday, and it could still be another decade before the state recovers to the point it was in 2000.

And there are still major potential threats that face the economy as well as some underlying factors that will drag on continuing growth, they said.

One of the major factors that remains a serious problem for the economy is the state of the housing market, for example. That is particularly significant in Michigan where the members of the conference were told that as many as 40 percent of the homes in the state may be underwater, in other words owners owe more on their mortgages than their houses are now worth on the market.

But George Fulton of the University of Michigan’s Research Seminar in Quantitative Economics said the state has probably, finally hit bottom and started to come back. Even so, he said, very hard times remain for many people for some time to come.

He and all the economists who testified, as well as the state’s economists with the Department of Treasury and the Senate and House Fiscal Agencies, projected Michigan will see job growth for the first time in a decade in both 2011 and 2012. But the growth right now is forecast to be anemic.

For example, Mr. Fulton forecast that Michigan would see growth of 16,000 jobs in 2011 and 58,800 jobs in 2012. He was probably the most optimistic in terms of total job growth.

And that growth stood in contrast to the more the 858,000 jobs the state lost since 2000. If the state continued to grow jobs at the 2012 rate, Michigan would be well into the third decade of the century before it got back to the number of jobs it had in 2000.

However, Fulton said, the 58,800 job growth in 2012 actually matches the average number of jobs the state saw in annual growth from 1971 to 2000. His colleague at the RSQE, Joan Crary, said that the national economy grew in 2010, after the Great Recession of 2008-09 was declared over, at a rate of 2.9 percent. The national economy should continue to grow by 3.1 percent in 2011 and at 2.9 percent in 2012, she said.

But that is not fast enough to bring the national economy, and certainly Michigan’s economy, back to its pre-recession levels. To accomplish that, the economy should grow at a level of more than 4 percent for several years, she said.

Even though the state is making a major effort to diversify its economy beyond automotive manufacturing, the overall importance of manufacturing to jobs was magnified by a statistic from Fulton which showed that as total vehicle sales by the Big Three automakers – General Motors, Ford and Chrysler – collapsed from more than 11 million in 1999 to about 4.5 million in 2009, so too did total employment in the state from 4.5 million to slightly less than 4 million.

Fulton also showed another statistic that indicated unemployment of those persons with at least a bachelor’s degree from college dipped only slightly in Michigan, while employment of persons without college degrees – that would include most auto workers – collapsed to nearly 76 percent of its pre-recession total.

In terms of vehicle sales, however, the economists all had good news: total sales would continue growing to perhaps as much as 15.1 million cars and trucks in 2012. That level is still at least 1 million vehicles less than what was sold in the mid-1990s.

Fulton said concessions of the auto unions should mean the auto companies can make a profit at sales above 10 million units. Before they could not make a profit even on sales of 15 million units, he said.

And the market share of U.S. auto companies, though half what it once was, should not decline significantly any further.

One long time worry for the economy remains the federal deficit, but none of the economists thought major efforts should be taken now to rein in the deficit because of the effect it could have on economic growth.

Nigel Gault of IHS Global Insight said controlling the deficit long term will mean the federal government will have to eventually raise taxes because cutting spending alone will not curb the deficit and could hurt economic growth.

Among the factors that could hurt economic growth is the price of oil, which is now running about $90 a barrel and could approach $100 a barrel. In 2008, oil exceeded $140 a barrel at its peak.

Rep. Dave Agema (R-Grandville) said the economists should give more emphasis to the potential impact of oil prices on the economy.

But Crary said the U.S. economy should be better prepared to handle higher oil prices as the cumulative auto fleet has many more fuel-efficient vehicles than it did in 2008.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

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