Key Michigan business leaders are pretty confident regarding their own ability to grow their companies, with the only weakness in the game coming from their inability to predict the status of international trade issues.
In fact, according to the latest survey results from the Business Leaders for Michigan group headed up by CEO Doug Rothwell, optimism remains strong among Michigan’s business community, with most leaders anticipating continuing growth during the remainder of 2019.
Rothwell tells us, “Michigan’s business leaders remain bullish on their ability to grow jobs and investment, and are anticipating plenty of opportunities on the horizon,” he notes, however, “Any uncertainty expressed by the state’s senior executives is grounded in the unknowns surrounding international trade relations.”
Regarding the overall economic outlook for the state and nation, a majority of the executives surveyed predict stability, though 25-percent see a downturn in Michigan as a possibility, due to the state’s higher exposure to international trade changes.
Looking at the numbers, Rothwell says, “Most respondents—80-percent—think the U.S. economic outlook is going to stay about the same during the next six to 12 months, while just over 67-percent believe Michigan also will remain stable.” Rothwell adds, “There are priorities that we must invest in while our state economy is still growing – namely, directing at least $2 billion dollars annually to fixing our severely ailing roads.”
Business Leaders for Michigan, the state’s business roundtable, is dedicated to making Michigan a “Top Ten” state for jobs, personal income and a healthy economy. The organization is composed exclusively of the chairpersons, chief executive officers, or most senior executives of Michigan’s largest companies and universities. The members drive nearly one-third of the state’s economy, provide 390,000 direct jobs in Michigan, generate over $1 trillion in annual revenue and serve nearly half of all Michigan public university students. You can learn more online at: www.businessleadersformichigan.com.
Just days before Rothwell’s survey results were released, the University of Michigan’s Department of Economics in Ann Arbor released highlights from their most recent Research Seminar in Quantitative Economics.
In that report, Director Gabriel Ehrlich reports that Michigan has added jobs in every year from 2011 to 2018, resulting in total growth of 555,400 jobs. The pace of job growth has generally slowed over the recovery period, however, from 88,400 job gains in 2011 to 49,400 in 2017. The state added 50,000 jobs in 2018, placing it slightly above that trend.
Ehrlich’s reports says, “We forecast Michigan’s economy to add 37,000 jobs in 2019 and 26,000 in 2020. Those totals translate to growth rates of 0.8-percent and 0.6-percent, respectively, down from an average of 1.7-percent from 2011–2018.”
Ehrlich adds, “We judge that the state’s solid job growth last year was helped by above-trend growth in U.S. real GDP, which we see slowing over the forecast period. Local job growth over the next two years is also restrained by layoffs at General Motors and a decline in Detroit Three light vehicle sales. Perhaps the most important factor restraining job growth over the forecast, however, is the tight labor market.”
Michigan’s unemployment rate has stayed in the 3.9–4.0 percent range every month since June 2018, and UofM experts expect it to average 3.9-percent in each of the next two years, with the state’s labor force participation rate creeping up to 61.5-percent in that time, but the aging of the state’s labor force puts a ceiling on how far it can climb.
The UofM research also looked at inflation and income growth.
Indications are that local inflation picked up from 2.1-percent in 2017 to 2.4-percent in 2018, due in large part to the increase in gas and energy prices from mid-2017 through the third quarter of 2018. Energy prices have since tumbled substantially, which is expected to put significant downward pressure on inflation in 2019. Local inflation registers 1.3-percent this year before climbing to a forecast of 1.9-percent in 2020 as energy prices stabilize.
Nominal personal income growth dipped from 3.5-percent in 2017 to 3.3-percent in 2018 amid a disappointing slowdown in the growth of wages and salaries and proprietors’ income. Ehrlich says, “We see personal income growth accelerating over the next two years to 3.6-percent in 2019 and 4.0-percent in 2020. A rebound in the growth of wage and salary income in 2019 is joined by pickups in the growth of proprietors’ income and property income in 2020.”
The report notes that real disposable personal income growth held flat at 1.4-percent per year from 2017 to 2018, as higher inflation and slower nominal growth were counterbalanced by a decline in personal taxes driven by the 2017 tax cuts. The UofM forecast is for real disposable income growth to accelerate to 2.2-percent in 2019 as local inflation recedes and nominal income growth picks up. It then dips to 2.1-percent in 2020 with the rebound in local inflation.
