Holland Area Economy May Fare Better Than Others

May 8, 2002
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HOLLAND — The planned closing of the LifeSavers plant in Holland, coupled with the continued freefall of the office furniture industry and the expected decline in automotive production, will push the area’s job growth into negative territory for 2002, according to a new economic outlook.

George Erickcek, senior regional economic analyst for the W.E. Upjohn Institute for Employment Research, sees a 0.4 percent decline in employment for Allegan and Ottawa counties in the year ahead before a 1.9 percent upswing occurs in 2003 on the wave of an economic recovery that’s expected to begin in the latter half of this year.

Leading the way downward is a projected 1 percent decline in jobs with the goods-producing sector for the region, where manufacturing accounts for 30 percent of the local employment base, nearly three times the national average.

For employment growth in Allegan and Ottawa counties, “2002 is going to be a very harsh year,” Erickcek said during a Jan. 8 presentation to the Holland Area Chamber of Commerce’s monthly Early Bird Breakfast.

Erickcek described the 2002 outlook for the Holland area as “nothing to write home about.”

The projected employment decline comes after a 1 percent increase for 2001, which is by far the smallest growth rate the region had seen in recent years. Ottawa County’s unemployment rate was 4.8 percent in November, which compares with 2.5 percent a year earlier

The employment projection for 2002 would have been for positive growth had it not been for the planned closing of the LifeSavers plant that was announced the previous day and directly cost the region 600 jobs by mid-2003, as well as hundreds more in the community that are linked to the plant’s operations. Prior to the announcement, Erickcek was projecting flat job growth for 2002 and a 2 percent growth rate in the following year.

Driving the forecast are the further decline of the office furniture industry, which saw an unprecedented 17.8 percent estimated decline in 2001 and which expects an additional 8.8 percent fall in 2002, and expectations that auto sales will decrease, impacting locally based automotive suppliers.

North American auto production, driven by zero percent financing deals launched following the Sept. 11 terror attacks, managed to reach 17.1 million units in 2001 — one of the industry’s best years ever. But with the sales incentives disappearing, and many feeling that automakers cannibalized future sales with zero percent financing, auto production is forecast to fall to 15.8 million units in 2002 and increase slightly to 15.8 million units in 2003.

The lower production will force automakers to intensify demands for price cuts from suppliers, Erickcek said.

“It’s not going get any better” for auto suppliers, he said. “It’s just going to be very tough going in 2002.”

On the upside, Allegan and Ottawa counties have fared better in their unemployment levels than the state and national averages, Erickcek said. If the area was in line with the national jobless rate, it would have 6,000 fewer jobs, he said.

The goods-producing and government sectors are the only areas where Erickcek is forecasting a decrease. Service-sector employment should still experience a 2.1 percent growth rate in 2002, according to the Upjohn Institute forecast.

All that points to the Holland-area economy faring better than other areas.

“That says something about the dynamics of your community,” Erickcek said.

As many economists predict a recovery by mid-year, there are signs that the state and national economies are already beginning to pick up, although the office furniture industry won’t feel the improvement for some time since it typically lags leading economic indicators by about six months.

While the local outlook offers a year of more pain before the economy goes on the upswing, Erickcek stressed during his presentation to the Holland Area Chamber that economic forecasting is often a tough proposition at best, particularly when it comes to calling a recovery. Since many economists missed or were surprised by the 2001 downturn and the rapid pace at which it deteriorated during the year — including himself — there’s always the chance that they’ve underestimated the rebound and that the economy will improve faster than expected, Erickcek said.

“It’s really possible we could be surprised the other way. It was surprising how fast we fell into the hole. It could be surprising how fast we get out,” he said. “I believe we can do more than just hope for it. I believe it’s in the cards.”

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