Economic investment outlook is mixed
Region should see solid growth next year, but new jobs won’t keep pace.
The Right Place CEO Birgit Klohs recently received anecdotal validation West Michigan is heading in the right direction.
Recent information from the Bureau of Economic Analysis revealed Grand Rapids is the No. 6 fastest growing large metro in terms of gross regional product, boasting a five-year growth percentage rate of 30.9 percent. The top city in that report was San Jose, California, which grew by 43.6 percent over the same time period.
“That’s all thanks to you and your companies, who are doing so well and investing into this region,” Klohs said, presenting at The Right Place 2017 Economic Outlook for West Michigan. “So, I think you can be really pleased where West Michigan has gone, and you know this, you can feel it. Someone came to me and said, ‘Birgit, we have traffic.’ But that’s a good thing.”
Klohs was the opening presenter Dec. 7 in the Ambassador Ballroom at the Amway Grand Plaza Hotel. Klohs, along with Jim Robey, director of regional economic planning services for the W.E. Upjohn Institute for Employment Research, painted a broad picture of West Michigan’s economy in 2016 and what the region can look forward to in the coming years.
Robey forecasted a 2.5 percent growth rate for the Grand Rapids MSA’s economy next year but just a 1.1 percent increase in employment. He also expects similar trends going into 2018, predicting 2.4 percent growth in West Michigan’s economy with just a 1 percent job growth rate.
“On a regional basis, our forecast is for strong growth in output but somewhat slower growth in employment primarily because of productivity enhancements, as we see kind of naturally in manufacturing,” Robey said at a media briefing following the presentations. “A lot of capital investment in plants and equipment making the plants more productive and using smarter and better trained workers.”
Those trends are in line with what The Right Place has seen in the past three years. During her presentation, Klohs revealed West Michigan has brought in $725.3 million of capital investment in the past three years, nearly twice the amount of the $390 million laid out in the organization’s strategic goals in 2014. However, the 4,146 jobs created as a result of those investments is well shy of the goal of 5,500 new jobs in the region. Additionally, the increased payroll of $153.8 million falls short of the region’s three-year goal of $155.8 million in payroll.
Klohs said the disparity in those numbers is a result of a shift in the jobs that are being attracted to West Michigan, from skilled workers to high-technology content jobs that require more comprehensive training. Kohs noted that in 1980, to create an economic output of $1 million, it would take 25 workers. In 2016, it takes five workers.
“What we’re seeing is not just that lack (of jobs) but higher investment numbers that require fewer jobs,” Klohs said at the briefing. “And we are going to have to adjust our expectations in what we expect out of economic development in Grand Rapids.
“When you look at a $20-million investment and 50 jobs versus a $20-million investment and 100 jobs, it’s really all due to technology and automation. And what we have to do is to make sure that the talent we have gets trained properly for the jobs of today and tomorrow, not what happened yesterday.”
During her presentation, Klohs reported the 2016 results for The Right Place’s work in West Michigan. The Grand Rapids economic development agency completed 19 projects, creating $29.4 million in new payroll and $240.6 million in capital investment while retaining and creating 635 jobs. She added The Right Place figures to complete three more projects by year-end, which will bump those numbers even higher.
“What you see in those 19, soon to be 22 projects, is sort of the tip of the iceberg,” Klohs said. “You only see the results of what we do. We can’t really talk about what all goes into that, but when you think about the infrastructure, the talent, etcetera, of what we do with other organizations and agents to build capacity … that’s the kind of work that we continue to do, including work with our rural communities in building capacities.”
With the end of 2016 right around the corner, The Right Place concludes its three-year strategic plan from 2014. The 2017-2019 strategic plan will be released in February.