The Building Tradesman Newspaper

Friday, December 05, 2014

'Positive story lines' emerge from economic forecast, too

By The Building Tradesman

ANN ARBOR – Michigan’s construction industry is expected to add 18,000 jobs over the next two years, more than double the 4,300 industry jobs added in the 12 months leading up to October 2014.

The outlook for statewide construction is better than that for the overall economy. “Michigan has just completed its fifth year of economic recovery, and we are forecasting that the string will be extended to at least seven years,” said a state-specific analysis in the annual University of Michigan Research Seminar in Quantitative Economics, released Nov. 21. “We see job growth moving forward at a solid clip, with gains of 59,400 jobs during 2015 rising to 73,200 during 2016, a two-year pace similar to the 2012-13 period.”

The U-M economic forecasters said if the current outlook holds up, Michigan will have added 462,600 jobs from the bottom of the Great Recession in 2009 through the end of 2016. That would recoup 54 percent of the jobs lost during the period of spring 2000 to summer 2009, returning the state to its job level at the end of 2006.

Real disposable income shrank 1.2 percent in 2013, but is expected to grow to 2.5 percent in 2014 and 3.0 percent in 2015. Higher inflation and federal personal taxes are expected to drop that rate to 2.8 percent in 2016.

“When we judge the progress of Michigan’s economy from a big-picture perspective, there are several positive story lines,” said George Fulton, director of U-M’s Research Seminar in Quantitative Economics. “More than 300,000 jobs were created over the past five years, the unemployment rate is about half of what it was five years ago, and the auto industry is booming with vehicle sales at their highest level in eight years.

“With the court’s approval of Detroit’s plan for the adjustment of its debts, the city is about to exit bankruptcy, creating excitement about a fresh start for Michigan’s largest city. And three major credit-rating agencies have upgraded Michigan’s outlook in the past few years. What all of this suggests is that the Michigan economy has gone some distance from the dire straits it was in five years ago, at least overall, but there is still a fair way to go.”

While their forecast is cause for optimism, the U-M economists caution that Michigan continues to be among the states with the highest jobless rates, ranks in the bottom third in per capita personal income, lags in population growth among the young and college-educated adults, and is home to numerous residents “not yet vested in the recovery.”

Nationwide, the survey says:

*The U.S. economy will add 5.3 million new jobs in the next 24 months, with 2.7 million new jobs projected in 2015 and 2.6 million jobs in 2016.

*If the survey is correct, the years of 2013 through 2016 could be the best four-year run for job creation (10.3 million) since the 1997-2000.

*The national unemployment rate, at 5.8 percent, has declined 0.9 percentage points so far during 2014. It is forecast to fall to 5.4 percent in 2015 and to 5 percent in 2016.

*U-M projects that economic output for the U.S. economy as measured by GDP will increase in 2015 to 3.1 percent from 2.2 percent this year. By 2016, GDP growth will increase to 3.3 percent.