Growth projected for 2018 but is precarious long term as talent search intensifies
Michigan Treasurer Nick Khouri last week made brief remarks to the Michigan Bankers Association in a joint Economic Forecast Forum with the Michigan Chamber Foundation, providing his certainty that state revenues would increase by 3 percent in 2018. A day later Khouri, state Budget Director Al Pscholka, Senate Fiscal Agency Director Ellen Jeffries and House Fiscal Agency Director Mary Ann Cleary announced consensus on those revenue figures, paving the way for Gov. Rick Snyder’s budget proposals in February.
In discussion with Khouri during the forum, the Business Journal questioned the revenue increases in contrast to small across-the-board wage increase percentages, an increasingly broad talent shortage and expected reductions in auto production. Khouri remained staid, indicating job growth and higher-than-anticipated wage gains outpacing inflation provided the framework for the projections. He also said the state’s order of funding was “maintenance of long-term assets” (primarily infrastructure) and long-promised road, water and sewer improvements. Education spending to help answer the demand for workers and skill sets, according to Khouri, is a bit lower on the investment list, at No. 3. Pensions remain the significant long-term liability, though he expressed confidence resolution “would just take time.”
The Business Journal suggests long-term viability on the part of Michigan businesses and prosperity for the state lies primarily in the success of finding talent for the number of jobs available or that will be available as business expansions continue. It is the state’s greatest liability, as it is in the Grand Rapids metro region. Current business practice to answer the liability is to pirate employees from other businesses, which will likely drive pricing and could be a point for those increasingly concerned about inflation. Optimism for the increase in revenue projections may likely be a result of using corporate tax cuts to pay for those wage increases demanded by a shrinking labor force. The systemic problem remains a threat for the near future.
The Business Journal report on PNC’s economic forecast for 2018 anticipates continued economic expansion. PNC Regional President, West Michigan, Sean Welsh told the Business Journal the region’s strengths include competitive cost of living, low cost of materials, a network of public-private collaborations, workforce development initiatives such as Talent 2025 — where he sits on the board — and an established supply chain. “I do think we’ll see growth in West Michigan in 2018. I don’t think it will be high growth, but moderate, sustainable growth throughout the year,” he said. But Welch also acknowledged “the affordable housing crunch and talent gap continue to be challenges in West Michigan.”
Attention and prescription for the systemic issue are necessary to provide a stable climate of continued prosperity.