Economic Development

Economic outlook rosy for West Michigan

Experts are especially pleased with diversity of region’s economy.

December 19, 2014
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With collaboration and a diversified economy fueling West Michigan’s growth, the future of the region looks bright amid familiar challenges.

The Right Place Inc. hosted the 18th annual West Michigan Economic Outlook in partnership with the W.E. Upjohn Institute last week to present a comprehensive economic analysis and preliminary forecast at the regional, state and national levels.

Roughly 450 business owners, community leaders and representatives from educational institutions and local government attended the economic development event to hear insight, analysis and forecasts presented by Birgit Klohs, president and CEO of The Right Place Inc., and George Erickcek, senior regional analyst at W.E. Upjohn Institute.

Klohs emphasized the importance of working collaboratively as a region as she touched on results from 2014 and factors influencing the region’s continued growth.

The Right Place works to impact the region’s future economic outlook by leveraging growth industries and identified the five sectors in West Michigan as smart manufacturing, agribusiness and food processing, life sciences and medical devices, technology and communication, and commercial design. The strategic growth areas are built on the foundations of economic growth, which include business support systems, infrastructure, work-ready talent and quality of life.

With an initial three-year goal of creating 5,500 new jobs, $183 million in new payroll, and $390 million in capital investment in the region, Klohs said The Right Place facilitated 22 new projects, $315 million in capital investment, $75 million in payroll, and 2,183 new jobs in 2014.

“We were very happy with the year we have had. We have seen our manufacturers really bust at the seams, if you will,” said Klohs. “A lot of them are auto suppliers, of course, but also furniture suppliers, and it really goes across the board. A good number of those jobs and 14 of those 22 projects were in the manufacturing sector.”

Throughout the year the organization also worked collaboratively with economic developers in surrounding counties on infrastructure, agricultural industry, logistics and talent. With a natural labor pool of 1.5 million individuals within the 13-county region, Klohs said it is important to promote collaborative partnership and market the entire area for future development to compete internationally.

“If we don’t compete as a region globally, we don’t compete. We have to work together. We have to be able to market our airport here and we have to be able to market the port in Muskegon, which is the only deep-water port. We have to market our educational institutions, our health care institutions as a region,” said Klohs. “That is what makes us stronger. The more we can do that, the more we can compete on a global basis.”

Looking ahead to 2015, Klohs highlighted several factors influencing a company’s decision to relocate or expand to a new area, including infrastructure, taxes, financing, available buildings and access to skilled labor. Although Michigan has had significant changes in its tax structure to create a more business-friendly environment, Klohs said the region has run out of good buildings to showcase, and the issue of a lack of infrastructure and skilled labor is not going away.

“We are facing a number of demographic changes. We are facing retirements, we are facing the fact that a lot of younger people are not looking at skilled trades at all, and we are facing that we are losing labor participation,” said Klohs. “As the economy continues to get better, if we don’t pay, people will go to the next company for their better-paying job, and you can’t blame them. There has to be a balance between labor costs and continuing to hire new people.”

The Right Place anticipates a very robust pipeline of projects as 2015 approaches and sees opportunities in manufacturing, food processing and medical devices, according to Klohs.

“We believe that if we can tackle the talent issue in our region, we can really become a leader in the country,” said Klohs. “We’re becoming nationally known for some of the things we are putting in place.”

Erickcek also focused on employment trends on the regional, state and national levels as he highlighted continued challenges despite a 3.9 percent growth in national GDP in the third quarter and falling unemployment levels. Although consumer confidence on a national level has reached 92 out of 100, Erickcek said the number is not as robust comparing it to the public’s perspective on future earning potential.

“The pay structure of this country — not only here, where we know relative to other metropolitan areas we pay relatively low wages — we also haven’t seen any wage growth anywhere in the U.S.,” said Erickcek. “So when people think about the future, I think they are thinking about their earning potential and the fact we seem to be stalled in terms of earnings.”

On a national level, Erickcek said the economy is surprisingly strong and continues to grow in terms of GDP and employment, despite flat wages. Michigan is forecast to also see employment growth during 2015 and 2016, fueled by strong auto sales predicted to remain high through 2017. Despite the positive outlook and unemployment rate receding to pre-recession levels, Erickcek said Michigan lost 408,200 jobs during the economic downturn and is still short 120,000 positions despite the 36,300 jobs added during October 2013 to October 2014.

Erickcek noted at the local level there were 19,000 more people who entered the workforce during that timeframe as the employment level increased to more than 26,000 and unemployment dropped to 4.6 percent.

“Unlike the state of Michigan where we are looking at manufacturing to be the powerhouse, in the Grand Rapids metropolitan area, everyone is chipping in to the mix, which I think is great,” said Erickcek in reference to the variety of new jobs created.

Comparing January-October 2013 to the same time period this year, Grand Rapids experienced a 3.8 percent total employment increase, 3.3 percent services employment growth, and a 3.9 percent rise in manufacturing jobs. The metropolitan area also experienced a 23.3 percent growth for self-employed individuals in professional, scientific and technical services.

Predicting continued growth for the local region, Erickcek said the preliminary forecast for total employment growth in 2015 is 3.2 percent and 2.5 percent in 2016, while goods-producing is predicted at 4.8 percent in 2015 and 2.8 percent in 2016. Grand Rapids area service providers are expected to see continued growth of 3.2 percent during 2015 and 2.6 percent in 2016, according to the forecast.

“We truly see Grand Rapids excelling for the next two years in terms of a well-balanced economy, and I can’t repeat that enough,” said Erickcek. “Yes, manufacturing is important and always will be, but we are also seeing that Grand Rapids is becoming a star of its own in terms of a diversified service base, as well. This is becoming a wonderfully diverse economy.”

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