ANN ARBOR – Detroit is likely to experience falling unemployment, rising wages and an expanding labor force in the years ahead despite a slowing national economy and the lingering risk of a recession in the near term.

The “cautiously optimistic” forecast comes courtesy of the Detroit Economic Outlook 2023-28, produced by the University of Michigan. The economists see a brightening economic outlook despite recent and ongoing challenges, including the pandemic, a series of labor strikes, job losses in the financial services sector and the durability of remote work.

Gabriel Ehrlich
Gabriel Ehrlich

“Slower national economic growth in 2024 poses risks to the local economy, but we expect Detroit’s economy to display encouraging resilience in the face of a challenging external environment,” said Gabriel Ehrlich, study co-author and director of the Research Seminar in Quantitative Economics at U-M.

Here are some of the report’s highlights:

  • Payroll jobs are expected to increase by 3,000 this year after 600 net job losses in 2023. Job gains accelerate to 3,800 in 2025 and then average 1,700 a year for the duration of the forecast. Detroit resident employment grows by an average of 1,600 residents annually during the outlook period. Resident employment has performed better recently than payroll employment, leaving it a bit less room to run.
  • Detroit’s jobless rate is expected to average 8.2% this year and edge down to 7.1% by 2028. The city’s labor force reaches its highest level since 2013 by the end of the forecast.
  • Wage growth at payroll jobs in the city averages 3.4% a year during the outlook period. Growth for city residents averages 3.7% during the same time, and both outpace statewide wage growth of 3%.
  • Average wages at payroll jobs in Detroit are expected to reach nearly $96,000 by 2028—40% higher than 2019—and average wage and salary income for employed Detroit residents should increase to roughly $50,000—42% higher than 2019. Unfortunately, however, inflation will claw back the significant majority of those gains.

The U-M economists categorize Detroit’s industries into three groups: 1) blue-collar, which includes mining, construction, manufacturing and transportation; 2) higher-educational attainment services, which includes education, health care, finance and information; and 3) lower-educational attainment services, which includes retail trade as well as leisure and hospitality.

The report expects both blue-collar and lower-educational attainment services to exceed their pre-pandemic employment levels by the end of 2028, though higher-ed attainment, weighed down by a slow recovery in financial services, is expected to be 2.5% below its pre-pandemic employment level at the end of that period.

“We are forecasting a soft patch for growth through the first half of 2024, as elevated interest rates pose challenges for Detroit’s mortgage and auto manufacturing industries,” Ehrlich said. “We expect economic growth to pick up later this year and continue at a steady pace from then through the end of our forecast period.”

The forecast was produced as part of the City of Detroit-University Economic Analysis Partnership between U-M, the city of Detroit, Michigan State University and Wayne State University.