Job growth in Michigan will slow through 2023 as the U.S. economy slows due to higher interest rates intended to keep inflation in check.
That’s according to an update of the state’s economic outlook for University of Michigan economists, who predict the addition of just 6,600 jobs per quarter by the end of next year “as the national economy enters a stalling phase”.
Michigan’s job growth then improves to add an average of 10,800 jobs per quarter in 2024 as the state returns to pre-pandemic employment levels, according to the New Outlook Research Seminar in quantitative economics of the university.
“Michigan’s blue-collar industries likely hold the key to whether the state can continue to grow over the next year and a half. The construction and manufacturing sectors, in particular, have always been sensitive to rising interest rate environments such as today. We expect demand backlogs in these industries to dampen employment throughout the Fed tightening cycle,” the University of Michigan economists wrote in the updated outlook. “We expect the Fed to be successful in controlling inflation; the biggest questions in our minds are the timing and the real growth slowdown that will be required.
Statewide unemployment will rise slightly from an expected 4% at the end of 2022 to 4.6% at the start of 2024 “before falling again as the Fed eases off the brakes” from the US economy with higher interest rates.
Rising interest rates by then should bring down high inflation, economists said. They project inflation for Michigan to be 8.4% in 2022, the highest rate since 1981, then drop to 4.4% in 2023. Local inflation is expected to fall further in 2024 to a projected 2.3% .
Many business leaders who participated in the latest Michigan Business Leaders Outlook Survey also expect reduced economic growth and lower inflation.
More than half of survey respondents expect the rate of inflation to decline over the next six to 12 months and one in five expect the rate to rise. Nearly two-thirds expect the US economy to decline, while 36% expect it to stay the same or improve.
In Michigan, 46% of respondents to the last Business Leaders for Michigan The survey estimates that the state’s economy will stay the same or improve over the next six months to a year and 53 percent expect it to decline.
The survey also found that 84% of responding executives said their company struggled to fill vacancies.
“Michigan businesses work every day to maintain and grow jobs in our state, even with inflation and labor shortages. Ensuring they can continue to do so in the future will require smart policies and investments from our state,” said Michigan Business Leaders President and CEO Jeff Donofrio. “With a softening economic outlook, more than ever, Michigan will need to find ways to hone its workforce and become more competitive for business and job creation.”
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