LANSING – The Michigan and U.S. economies should continue growing over the next two years, but that growth will be slower as the economy tries to deal with near full-employment situation and demographic changes as more Baby Boomers retire and more millennials go into the jobs market, economists said Wednesday at the May Revenue Estimating Conference.

For Michigan, an important question will be whether the state is finally beginning to diversify itself away from the lockstep its economy has with the automotive industry. One forecast economists at the Research Seminar for Quantitative Economics at the University of Michigan developed showed the state continuing to gain jobs even as sales of the Detroit-based manufactured vehicles are expected to be flat.

The national economy was stunned when the first quarter of 2017 only produced 0.7 percent growth, but Daniil Manaenkov with the RSQE said the rest of the year should show an upturn as basic economic fundamentals “are solid.”

The national Gross Domestic Product grew only 1.6 percent in 2016 largely because of a shock in oil prices, Mr. Manaenkov said, but the national economy is expected to grow by 2.2 percent in 2017, followed by 2.4 percent growth in 2018 and 2.2 percent growth in 2019.

A big change to the economy could come in whatever tax proposal President Donald Trump finally makes and what Congress passes, assuming something passes. Based on the outlines of a proposal Mr. Trump has released, Mr. Manaenkov said, the current federal budget deficit could grow to $661.8 billion this year, jumping to $804.4 billion in 2018 and then to $946.5 billion in 2019.

In terms of jobs, Manaenkov said growth for 2017 is on a par with 2016, and that openings are exceeding the previous business cycle peak.

The labor growth will probably lead to the Federal Reserve Bank raising interest rates in June, he said, and then enacting two increases each in 2018 and 2019.

However, labor participation rates are still flat as the nation is seeing demographic changes, he said. A large part of those changes, affecting Michigan as well, is the number of Baby Boomers retiring and leaving the employment market.

Gabriel Ehrlich, also with the RSQE, said Michigan gained 96,800 jobs in 2016, which was “scorching hot, but unsustainable.” He expected that this year as a whole, job growth would “take a bit of a breather” and then pick up again in 2018 and 2019.

Ehrlich made the comments before the state’s monthly unemployment numbers were released, which showed job growth of 18,000 people in April.

State economists projected the state to see growth of some 60,000 jobs in 2017, falling to growth of 38,400 jobs in 2018 and then increasing slightly to 42,500 jobs in 2019.

The final forecast adopted by the conference was that the state’s unemployment rate would average 5.1 percent in 2017 and 2018 and then drop to 5 percent in 2019.

Personal income growth is expected to reach 3.6 percent in 2017, with 3.5 percent in 2018 and 4.6 percent in 2019.

After adjusting for inflation, real personal income growth will be 2.6 percent in 2017, 1.3 percent in 2018 and 2.8 percent in 2019.

With the growth the state has seen since the end of the Great Recession in 2009-10, Mr. Ehrlich said, it will be important to see if the state is now in a position where it does not follow completely the changes in the auto industry.

He presented a chart to the conference and the lawmakers present showing how employment in Michigan has trended with increases and declines in motor vehicle sales, specifically those vehicles sold made by General Motors, Ford and Chrysler, the Detroit-based companies. As sales go up, so do jobs. When sales go down, so, too, do jobs.

Some of that pattern, of course, is because of changes in manufacturing employment. But automotive manufacturing has been such a dominant industry in the state that those changes have affected other businesses as well.

However, the RSQE forecast shows jobs increasing in Michigan during 2017-19 when automotive sales are expected to be largely flat.

In the mid-1990s, there was a period where jobs also increased even though sales were flat, Mr. Ehrlich said, but this could be an indicator of whether the state has started to diversify its economy broadly enough to minimize the impact of changes in the auto industry.

Rep. Edward Canfield (R-Sebewaing) said, “It should be a goal to make this chart go away. We have long been too dependent on auto sales.” Broader diversification would make the state more viable, he said.

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