Economic Development, Human Resources, and Manufacturing

Sluggish job growth seen here in 2013

Upjohn analyst George Erickcek doubts claimed shortage of skilled factory workers.

December 15, 2012
| By Pete Daly |
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Net job growth in the Grand Rapids region in 2012 is estimated at about 1 percent over last year, and it may not be much better than that in 2013, according to George Erickcek, senior regional analyst at the W. E. Upjohn Institute for Employment Research in Kalamazoo.

Erickcek, making his annual economic forecast for the business community at the Amway Grand Plaza last week, said there were 5,000 net jobs added to the Grand Rapids/Wyoming Metropolitan Statistical Area this year. In 2013, he said, he expects similar job growth “maybe a bit higher.”

However, growth in the manufacturing sector — the most important sector, in terms of its multiplier effect leading to new jobs in other sectors — will be “slower than what everyone would want to see,” said Erickcek.

He has been making his annual forecast for at least 15 years at the event sponsored by The Right Place Inc. economic development agency in Grand Rapids.

Looking at the three broad sectors — goods producing, service providing and government — Erickcek predicts that the only employment drop in the next two years will be government. He sees a 2.4 percent drop next year and 0.9 percent in 2014.

In the goods-producing sector in 2012, there was a 1.3 percent increase; 2013 is predicted at 1.1 percent and the same for 2014. In the service-providing sector, 2012 growth was 1.4 percent, with Erickcek predicting a 1.5 percent increase in 2013 and 1.8 percent in 2014.

“We are noticing (jobs in) the service sector are also expected to grow” even faster next year than manufacturing, said Erickcek, which he attributes to the spin-off effect of increasing manufacturing employment.

Erickcek noted that the construction industry is still struggling, with no predicted growth in employment through the next two years.

He broke down the job sectors further, showing that throughout Michigan, from September 2011 through September this year, the construction, retail, educational services and government employment job sectors declined — with retail suffering the biggest decline at almost 8 percent. Professional/business services showed the largest increase at more than 20 percent, with statewide manufacturing up by about 18 percent.

Erickcek said that data source, however, does not count temporary workers in manufacturing; they are counted among professional/business services.

Comparing Grand Rapids to 11 other metropolitan areas in the Midwest, the region had an average unemployment rate of 6.9 percent from January through October this year. Total employment growth, however, was above average at 2 percent, with only Fort Wayne and Louisville higher. That put the Grand Rapids region ahead of Omaha, Detroit, Indianapolis, Pittsburgh, Minneapolis/St. Paul, Des Moines, Kansas City, St. Louis and Milwaukee. (The last two cities actually had declines in total employment.)

Erickcek said there is a purported labor shortage: Manufacturers frequently tell him they cannot find the highly skilled workers they need for their factories. However, “the data does not agree with the employers,” he added.

Demand for skilled workers really is “not robust,” he said, and there are still “thousands of manufacturing workers in the area who are unemployed.” But not that many of those individuals have moved away or retired, according to research, and wages have remained “stagnant, at best,” he said. He displayed a chart showing that, for almost every year from 2007 through 2011, wages for the highest skilled workers have dropped. The exception was a slight uptick during 2009 from the prior year.

In a labor shortage, he said, “we do expect wages to start to rise. We don’t see that.”

Erickcek suggested employers may be “getting too picky” and are more willing to leave a vacancy unfilled.

On the other hand, employers have told him their markets are extremely competitive and they can’t risk having to pass on a higher wage in the price they present to their customers.

He said there is a genuine skilled-labor problem coming, however. As baby boomers with high skills leave employment for retirement, there may not be enough young workers to replace them because so few young people today want to consider a career in manufacturing.

Economic growth “is powered by manufacturing,” he said, and in West Michigan, that especially means automotive suppliers. He repeatedly urged the audience to buy new cars — and it became obvious he was not totally joking. New car sales, in fact, are picking up.

On the national scale, consumer confidence and spending is not as robust as it was prior to the Great Recession. Also, “consumers appear to be unhappily in debt” now, he said, while they were in just as much debt — without much concern — leading up to the recession.

Corporations seem to be improving their profits without hiring workers, which Erickcek said is “a clear break from past years.”

Another difference in the nation now is government spending is down, compared to past recoveries from recessions.

Good indicators of future economic activity are: Reports are generally upbeat, and Google search requests for employment and public assistance is down.

Not-so-good indicators include the GVSU Purchasing Managers index, which is softening, according to Erickcek, and BIFMA has revised its forecast for office furniture industry sales downward in 2013.

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