Economic Development, Government, and Human Resources

Prediction: GR employment will go up 2.6 percent in 2014

Upjohn economist said 2013 ended up better than predicted.

December 13, 2013
| By Pete Daly |
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Despite his worries about consumer confidence throughout the U.S., George Erickcek delivered an optimistic outlook for the Grand Rapids region this year at his annual presentation on the economy and employment.

Erickcek, an economist and senior regional analyst at the Upjohn Institute for Employment Research, has delivered his analysis and predictions in Grand Rapids every December for 17 years. The gathering of business and civic leaders at the Amway Grand Plaza this year was sponsored by The Right Place, the region’s main economic development agency.

This year “was a great year for the Grand Rapids MSA,” said Erickcek, with the change in total employment during 2013 estimated to be 2.4 percent. He expects that number to be 2.6 percent in 2014, and 2.5 percent in 2015.

The state as a whole had a good year, too, but not as good as the GR area. Employment statewide is estimated by the University of Michigan to be up 1.4 percent during 2013, and the next two years will be positive, too, said Erickcek, citing the U-M research.

The auto industry still makes the difference in Michigan and it is “coming back very strong,” according to Erickcek, noting a forecast of sales exceeding 16 million vehicles in 2014. Replacement of the clunkers still in use — the average age of vehicles on U.S. roads is 11.4 years — is driving new car sales, and financing is available.

Erickcek noted there will be more than 40 new vehicle launches during 2014, generating interest among consumers.

Autos still rule as the driver for the region’s manufacturing industries, said Erickcek. According to his chart, in the past year there were an additional 2,000 transportation manufacturing jobs locally, with machinery production coming in second at about 750.

Residential construction activity in the region has a long way to go before it shows significant gains in employment, he said. Building permits issued in the first few months of 2013 reflect an annual level slightly below the 2007 level, and only about a third that of each year from 2000 to 2004.

Overall, however, “unlike the nation and state, Grand Rapids has fully recovered from the recession,” said Erickcek. During the recession, an estimated 36,000 jobs were lost, but since the economic recovery began, 47,600 jobs have been added. 

In many aspects, employment growth in  the Grand Rapids region has outpaced many other Midwestern cities. This year, for the first time, Erickcek presented online job posting statistics, and those in business and finance occupations recorded above-average growth only in the Grand Rapids MSA, with the next highest cities being Kansas City, Milwaukee and Pittsburgh. Other comparison cities were St. Louis, Minneapolis-St. Paul, Fort Wayne, Indianapolis, Detroit, Louisville, Omaha and Des Moines.

In the Grand Rapids MSA — the old one that included Newaygo County and did not include Ottawa County, unlike the recently redrawn MSA — employment was up by 17,600 non-farm jobs from the third quarter of 2012 through the third quarter of this year.

Erickcek said the largest growth was in professional and business services, at slightly more than 10,000 new jobs. Education and health services was next at about 2,500, followed by manufacturing at slightly under 2,000. The increase in leisure and hospitality jobs was almost the same as manufacturing, but Erickcek noted that pay is low and hours are less for jobs in leisure and hospitality.

He indicated concern that “manufacturing appears to be playing a smaller role” in employment growth, pointing out that the greatest multiplier effect is manufacturing, which economists believe generates 1.5 other jobs for each new manufacturing job.

The percent change in employment in the Grand Rapids region during 2013 is expected to be 2.4 percent overall, with the greatest gain in the service-providing industries at 2.5 percent, compared to goods-producing at 2.1 percent. Government employment during 2013 was down almost 1 percent.

The growth in goods-producing jobs here in 2014 is predicted by Erickcek to be 2.6 percent, compared to 2.8 percent in the services sector. In 2015, those numbers are forecast to be a total increase of 2.5 percent — 2.1 in goods-producing and 2.8 in service jobs.

In his predictions last year for 2013, Erickcek said he “nailed” the government jobs forecast for the region but was “way too pessimistic” in estimating the private sector, with real job growth about double what he had forecast. He was right about government jobs being down 0.9 percent.

Erickcek said the national economy “may look stronger than it is, and uncertainty reigns.” He said as an economist, he must “look for that dark cloud behind the silver lining,” and so his biggest concern now is consumer confidence. 

Nationally, said Erickcek, we are still short by 1.3 million jobs before economists would declare a full recovery from the recession — even though the nation has been in recovery for four years now. The national rate for the number of job-seekers per opening is still double what it was in 2008, he noted, and there are still too many long-term unemployed workers.

He said consumers appear to be increasing their debt but are “not feeling good about it,” even though the level of debt is considered good by economists and is far below the dangerously high debt levels of the American people “in the manic 1990s.” Today, he said, consumers will “buy a boat — but not a real big boat. They may buy an RV but one that is really a little smaller than they want.”

The measurement by economists of good consumer confidence is 100. Currently, he said, it is 75. He speculated on the reasons for that, noting many Americans know someone who has been unemployed for a long time, and some may be worried about their own jobs, all of which leads to lower consumer confidence.

Prices are flat and inflation is low, but Erickcek said fear of inflation is largely a psychological factor. 

“When people stop buying things on sale,” he said, it reflects a fear of inflation. When people take advantage of low prices to buy products, he said, it shows the inflation fear level is low.

Consumer spending represents 70 percent of the U.S. economy, which is why Erickcek said he worries about consumer confidence. And like last year, he jokingly urged everyone in the audience to go out and buy a new car.

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