Regional Forecast Modest Growth

January 23, 2004
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GRAND RAPIDS — Business confidence, employment and sales are expected to increase in West Michigan this year, but only modestly.

That prediction is based on a representative sample of CEOs across more than 600 organizations in the Grand Rapids MSA that includes Kent, Ottawa, Muskegon and Allegan counties.

But Hari Singh, Ph.D., chair of the Seidman School of Business Economics Department, said the data collected in the survey doesn’t tell the whole story, because the numbers have improved since November 2003 when the survey was taken.

“One of the most exciting things to come out in the last two weeks or so has been the jump in the business confidence index,” Singh told a group of about 250 businesspeople gathered at Grand Valley State University’s DeVos Center Wednesday.

Historically, when the economy is growing steadily the confidence index depicts a high level of confidence, generally above 80 percent for the private sector.

The confidence index for the Grand Rapids economy indicates that business confidence in the private sector is still somewhat low at 65 percent but is projected to grow to 71 percent during the year.

“That really bodes well for higher consumption expenditures, because consumer spending is more than two-thirds of GDP.”

When consumers feel confident in the economy, they’re more inclined to spend, Singh pointed out.

Survey respondents projected average sales growth of 2.6 percent for 2004, compared to a projected national economic growth rate of about 4 percent to 5 percent.

Productivity is a “mixed bag,” Singh said.

“Productivity is the single most important thing in terms of improving our standard of living and making us buy more things and live a better life,” he observed. “But in the short run, the higher productivity obviously means we can do with less labor. So the high productivity has muted job opportunities.”

The rise in productivity, coupled with an increase in outsourcing, suggests that job prospects aren’t likely to improve much in the next year, according to Singh’s research.

Survey respondents projected growth in employment for 2004 at 2.1 percent, though the predictions varied across sectors.

Singh expects employment growth in the Grand Rapids MSA, at best, will be about 1.5 percent this year.

Manufacturing jobs have been going south and overseas since the 1980s, but the difference now is that even high skill manufacturing jobs have become mobile, Singh said.

Forrester Research, in fact, projects that 3.3 million jobs will probably be outsourced overseas by 2015.

Singh said that because of the restructuring taking place in manufacturing, the regional economy will expand more slowly than the national economy.

“However, as some of the basic skill and high skill manufacturing jobs move offshore, natural resources will be freed up to be used, ultimately, in more high value-added terms — in more productive ventures that will improve the standard of living over the long run,” Singh explained.

He pointed to a recent analysis that indicates $1 of cost shifted offshore brings a net benefit of about $1.13 to the United States.

Employment growth areas in West Michigan, he said, are expected to be in the health, biotechnology, education, construction and special services sectors.

To capitalize on the new job opportunities, he said, the region needs “a massive job training program” that includes traditional classroom education, vocational training and on-the-job training.           

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