U-M forecast: Expect Michigan’s economy to recover by the end of 2023
Michigan’s economy is expected to fully recover by the end of 2023, with job growth and personal incomes set to increase in that time, according to a University of Michigan forecast released Friday.
However, high inflation will continue to cut into purchasing power, the economists said, with real disposable income, which factors in taxes and rising prices, forecast to be just 3.1% higher at the end of 2023 than at the end of 2019.
“All things considered, this year’s economic performance offers many reasons to be thankful,” Gabriel Ehrlich, director of U-M’s Research Seminar in Quantitative Economics, said, pointing to employment gains of more than 50,000 jobs in the third quarter after a relatively disappointing pace of 25,000 per quarter in the first half of 2021.
Ehrlich said job growth will moderate in the coming quarters but the payroll job count should get to within 0.6% of its pre-pandemic levels by the end of 2023.
That represents a far faster recovery than the state experienced during its long downturn in the early 2000s, Ehrlich and co-authors Jacob Burton, Donald Grimes, Owen Kay and Michael McWilliams said.
Last year, the U-M economists warned that the state was on a two-track recovery, and said low-income workers in the leisure and hospitality and restaurant industries would see job losses persist. The economists said jobs in those industries — after plunging by more than 30% at the start of the pandemic — have come back, but still remain 10% below their pre-pandemic level.
The economists expect steady growth over the next two years, but employment in those industries will remain about 5% below pre-pandemic levels at the end of 2023.
“The pandemic took an especially heavy toll on job opportunities for less-educated workers, and we anticipate a challenging few years for those seeking an initial foothold in the labor market,” Ehrlich said.
The researchers noted the manufacturing industry is expected to fully recover, ending 2023 with nearly 2% more jobs than before the pandemic.
Unemployment
The researchers said Michigan’s unemployment rate is expected to hover around 6% for the remainder of the year and the first quarter of 2022 before dropping more rapidly over the rest of next year. The researchers forecast the jobless rate will be at 5% by the end of next year and 4.5% by the end of 2023, less than a percentage point above pre-pandemic levels. The state had been reporting the jobless rate was as low as 4.6% in September, but corrected that to 6.3% on Wednesday. The jobless rate in October, the state said, was 6.1%.
Labor force participation
Michigan’s labor force participation rate was 59.3% in September, according to data from the Bureau of Labor Statistics, which ranks Michigan at 41st out of 50 in the nation. U-M economists don’t expect that to change much until the end of next year, when the public health situation improves enough that vulnerable workers feel safe to return and caregiving responsibilities become more predictable. The economists expect it to rise to 60.4% by the end of 2023 but that’s still below the nearly 62% rate at the end of 2019.
Automotive industry
The worst of the microchip shortage appears to be over, the economists said, but there could be other supply chain strains coming. Still, they expect production and sales will begin to improve, and forecast total light vehicle sales will rise from 13.3 million units in the third quarter to 13.8 million in the fourth quarter, then jump to 16 million next year.
Posted By: Detroit Free Press on November 19, 2021. For more information, please click here to read the source article.
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