Economist Sees Slight Improvement

January 10, 2005
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HOLLAND — The growth in service-producing jobs, as goods-producing employment continues to struggle, is creating a need to place more emphasis on building the service sector, one economist in western Michigan argues.

Foreseeing a year of growth in service jobs and flat goods-producing employment in Ottawa and Allegan counties, George Erickcek of the Upjohn Institute for Employment Research says a big question for the future is preparing people, particularly workers displaced from manufacturing jobs, for the growing service sector.

Although the wage disparity between the two sectors is worrisome, the service sector is creating some good-paying jobs that can make up for the loss of manufacturing jobs, yet lacks the public economic incentives and support to encourage the creation of service jobs.

“Can it play a stronger economic development role? That is something we all struggle with as economic developers,” Erickcek said last week as he presented his annual employment outlook for Ottawa and Allegan counties to the Holland Area Chamber of Commerce.

“That’s the challenge we face in West Michigan and the entire U.S.,” he said. “Can we cultivate the service economy to become a greater player in the economic base of the community?”

The service sector will lead employment growth in the Ottawa-Allegan county labor market for the next two years, according to Erickcek’s forecast.

He predicts that service-producing employment will grow in the market by 0.8 percent in 2005 and 1.3 percent in 2006. Continued population growth in both counties will drive much of the service sector growth, Erickcek said.

Goods-producing jobs in Ottawa and Allegan counties, after a sharp decline in 2004, will stabilize but have flat growth during 2005 and then grow a slight 0.2 percent in 2006, Erickcek forecasted. The region’s two key manufacturing industries — office furniture and automotive suppliers — will continue to face harsh business conditions, although office furniture is clearly on the rebound from a deep, three-year slide, he said.

Yet the office furniture industry still faces weak office construction in the United States and high office vacancy rates in many domestic markets, Erickcek said.

“It is going to come back but not at the same strength, the same power and the same robustness that we have enjoyed in West Michigan,” he said.

When combined with expected declines in government employment in the next two years, overall employment in the Ottawa-Allegan market is forecast to grow 0.4 percent in 2005 and 0.7 percent in 2006.

An improving economy will help to drive future growth in overall employment, Erickcek said, although the Ottawa-Allegan market will experience a weaker job market than the broader West Michigan region that includes Grand Rapids, Holland and Muskegon.

The new forecast comes following a 2004 in which Erickcek estimates overall employment fell 1.6 percent, led by the loss of manufacturing, retail and hospitality jobs. Goods-producing employment fell 2 percent last year in the Ottawa-Allegan market and service-producing jobs declined 1.9 percent.

Erickcek is scheduled to present his annual forecast for Muskegon County to the Muskegon Area Chamber of Commerce on Jan. 28.    

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