Over the past five years, Michigan’s economy has lost 308,900 jobs and will lose another 9,600 jobs in 2006. The state’s manufacturing workforce has declined by about 25 percent since 2000 and will lose another 28,600 jobs in the next two years. Six straight years of job losses in Michigan is unprecedented since World War II.
“We’re not at the point of declaring that the Michigan economy has fallen into the fire, but we don’t see it getting out of the frying pan soon, either,” said U-M economist George Fulton. “Some progress has certainly been made since the large job dumps between 2000 and 2003. The losses have dwindled significantly since then, but they still persist.”
In their annual forecast of the Michigan economy, Fulton and colleagues Joan Crary and Saul Hymans predict that the state will return to overall positive job growth in 2007, with 10,600 new jobs. However, compared with other years of job growth, this would rank as the weakest increase in the past 50 years, they said.
“Again, the chief culprit in the stagnant profile is the manufacturing sector,” Crary said. “Manufacturing is forecast to sustain significant job losses over the next two years. This reflects our assumption of a continued loss of auto industry market share among the domestic producers, coupled with our forecast of fairly flat annual sales of light vehicles.”
Unemployment in Michigan is expected to increase from the September rate of 6.5 percent to 7.1 percent a year from now and to 7.6 percent by late 2007 – the highest rate since the end of 1992. By comparison, the national unemployment rate will be less than 5 percent in the next two years, the economists said.
On the positive side, the private non-manufacturing sector, which will lose 5,400 jobs this year, will add 4,400 new jobs in 2006 and 24,100 jobs in 2007, the forecast predicts. The service sector will show positive employment growth next year, while the trade, transportation and utilities sector will turn around by mid-2006.
“The service industries have been the one bright spot in the Michigan labor market,” Crary said. “The service sector is projected to be the only source of net job growth during 2006 and accounts for 70 percent of the non-manufacturing job gains during 2007.”
On the other hand, the public sector, which has lost about 2,400 jobs both last year and this year, will lose another 1,600 jobs in 2006, before gaining back 2,800 jobs the year after.
In all, the U-M economists say that there have been a number of times in the past few years when Michigan seemed poised to return to positive job growth, but it now appears its economic recovery will have to wait.
“Despite the ongoing problems in the Michigan economy, we have been teased periodically with numbers that have suggested the state economy was on the verge of turning the corner,” Fulton said. “The events of the past month or two in the domestic automotive industry have made it apparent, though, that new restructuring plans are in the works.
“Many details remain to be worked out by all of the major industry players, and the implications for Michigan are yet to be seen. Whether the Michigan economy overall continues its decline is addressed in our short-term forecast. The important longer-term question is whether the actions of the past few years and the next few years lead to something better, or does Michigan ultimately become a smaller and poorer economy? The answer at this point is not obvious.”
