Resurgent auto sector responsible for steady growth
Job growth in Michigan was steady after allowing for the occasional bump, as occurred in May.
In that month, state employment dipped by 20,400 jobs, contributing to a weak month for overall U.S. job growth. Like the U.S. numbers, Michigan job growth bounced back in June and July. For the 12 months ending in July, state payroll employment was up by 2.5 percent, well ahead of the U.S. average of 1.7 percent growth over the year.
A resurgent auto sector has been a big part of the “steady growth” story for Michigan. In July, manufacturing employment ticked up to 604,200, the highest level since August 2007, stoked by the humming auto industry. We believe U.S. auto sales likely peaked for this business cycle last fall, when annualized sales averaged 18.1 million units for September, October and November.
For this coming fall (2016Q4), we forecast auto sales to average close to a 17.2-million-unit pace. The last four business cycles — roughly the 1970s, 1980s, 1990s and the 2000s — all ended with a different pattern for auto sales.
The ’70s saw a sharp deterioration in sales into early 1982. In the ’80s, the drop in auto sales was less steep into 1991. After the ’90s, there was no dip in auto sales through the recession of 2001.
The slide into 2009 was devastating. We are assuming auto sales follow the middle path at the end of this business cycle, and so we are forecasting a moderate deterioration of auto sales into 2018.
Regardless of the eventual downward slope, our assumptions are consistent with eventual job losses in manufacturing. We look for gains in service-sector jobs to keep Michigan’s expansion steady through 2017.
Robert Dye, Ph.D., is chief economist with Comerica Bank and Daniel Sanabria is an economist with Comerica Bank.