Donald R. GrimesUniversity of Michigan

The Michigan Economic Outlook

Michigan Community College AssociationSummer Workshop

Traverse City, Michigan

July 22, 2011

U.S. Outlook

Growth in U.S. GDP2009 –13

–3%

–2%

–1%

0%

1%

2%

3%

4%

2010 20122011 20132009

–2.6

2.9 3.1

2.5

3.1

U.S. GDP Growth, 1930 –2010and Forecast, 2011–13

–15%

–10%

–5%

0%

5%

10%

15%

20%

’30 ’35 ’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’13’10

WW II1930s Forecast

Post- WW IIAverage Growth Rate

1947–2010 = 3.3%

’09’01’91

’82’74 –’75’58’54’49’38

’36

’32

U.S. Unemployment Rate2009 –13

0%

2%

4%

6%

8%

10%

12%

2010 20122011 20132009

9.3 9.69.0 8.7

8.2

U.S. Unemployment Rate, 1930 –2010and Forecast, 2011–13

0%

4%

8%

12%

16%

20%

24%

28%

32%

WW II1930s Forecast

Post- WW IIAverage Unemployment Rate

1947–2009 = 5.6%

’10

’03’92

’82’75

’58’54’49

’37

’33

’30 ’35 ’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’13’10

U.S. Light Vehicle Sales, 1990 – 2013

0

5

10

15

20

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13

Millions

U.S. Light Vehicle SalesTotal vs. Detroit Three, 2009 –13

0

2

4

6

8

10

12

14

16

18

Total

2009 2010 2011 20132012

14.8

12.911.5

10.4

Detroit Three

4.5 5.15.9

6.7 6.9

15.3

Millionsof Units

45.043.3

44.245.7 45.0

Annual % Detroit Threemarket share

Michigan Outlook

Employment Growth, Michigan and National1973 – 2010

'75 ’79 ’83 ’87 ’91 ’95 ’99 ’03 ’07’73 ’77 ’81 ’85 ’89 ’93 ’97 ’01 ’05 ’10

– 8%

– 6%

– 4%

– 2%

0%

2%

4%

6%

National Employment

Michigan Employment

Private Employment Growth by Educational AttainmentMichigan vs. United States, 2001– 09

75

80

85

90

95

100

105

110

2001 2002 2003 2004 2005 2006 2007 2008 2009

Index (2001 = 100)

High edMichigan:

Low edUnited States:

High ed Low ed

Michigan Total Jobs andDetroit Three Sales of Light Vehicles

1991–2010

3,500

4,000

4,500

5,000

3

4

5

6

7

8

9

10

11

12

’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10’91 ’93 ’95 ’97 ’99 ’01 ’03 ’05 ’07 ’09

Total Jobs(Thousands)

Salesin Millions

of Units

Total jobs

Sales

Change in Michigan Wage and SalaryEmployment, 2009 –13

–350,000

–300,000

–250,000

–200,000

–150,000

–100,000

– 50,000

0

50,000

100,000

2009 2010 2011 2012 2013

Change inEmployment

– 289,900

–10,900

67,300 61,50053,100

Change in Michigan Wage and SalaryEmployment, 1940 – 2010and Forecast, 2011–13

– 400

– 300

– 200

– 100

0

100

200

300

Forecast

WW II

Thousandsof Jobs

Average Change1971–2000 = 58,000 jobs

’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10’13

4 1 2 3 4

’08 2009 2010 2011 2013

Michigan Wage and Salary Employment GrowthAnnual Rate (%)

–14–12–10– 8– 6– 4– 2

024

2012

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

– 3.9 – 6.0 1.0 1.8 1.6

– 167.7 –244.6 37.7 68.9 62.2

4th Quarter to 4th Quarter Growth Rate (%)

4th Quarter to 4th Quarter Change (Thousands)

1.6

62.2

6 Actual Forecast

–12.8

0.1

– 6.7

0.7

4.7

1.60.4 0.9 1.4

Michigan Wage and Salary Employment

First Quarter of 2000 to Fourth Quarter of 2013

3,800

3,900

4,000

4,100

4,200

4,300

4,400

4,500

4,600

4,700

4,800

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Forecast

Thousands of jobs

Peak ’00q2

Trough ’09q3

’08q4

’11q1

’13q4

WHERE’S THE JOB GROWTH?

MOST RAPIDLY GROWING SECTORS

• Manufacturing

Includes the auto industry

• Professional and business services

Scientific research and development Management and technical consulting Computer systems design

• Health care

Physicians Home health care

• Wholesale trade

• Leisure and hospitality

DECLINING SECTORS

• Government

• Information (Traditional delivery systems)

• Natural resources, mining

0%

2%

4%

6%

8%

10%

12%

14%

16%

2009 2010 2011 2012 2013

13.312.5

10.09.4 9.0

Michigan Unemployment Rate2009 –13

13.9 11.4 9.7 9.3 8.8

4th Quarter Unemployment Rate

Michigan Unemployment Rate, 1970 –2010

and Forecast, 2011–13

2%

4%

6%

8%

10%

12%

14%

16%

’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’13

Forecast

Average Unemployment Rate1970 –2008 = 7.9%

’10

Inflation Rate, Detroit CPI

2009 –13

2010 20122011 20132009

– 0.7

0.8

2.9

2.01.6

–2%

–1%

0%

1%

2%

4%

3%

2009 2010

– 3.1

2011 2012

Michigan Personal Income Growth(Current $), 2009 –13

2013

2.8

4.4

3.0

5.2

– 4%

– 3%

– 2%

– 1%

0%

1%

2%

3%

4%

5%

6%

Michigan Real DisposableIncome Growth (1982– 84 $), 2009 –13

2009

1.9

2010

– 0.2

2011 20132012

2.0

0.4

1.7

– 1%

0%

1%

2%

3%

RSQE Forecast – State Revenues by Fiscal Year (Millions of dollars)

Actual Forecast2009 2010 2011 2012

GFGP revenue

(% change)

6,785

(– 7.9)

7,514

(10.7)

7,724

(2.8)

7,366

(– 21.3)

Earmarked stateSAF revenue

(% change)

10,817

(– 1.0)

11,118

(2.8)

11,397

(2.5)

10,922

(– 5.1)

0%

5%

10%

15%

20%

25%

30%

35%

40%

0 to 24 25 to 44 45 to 64 65 plus

Population Distribution by Age GroupMichigan, 2005 and 2035

34.6

29.327.5

24.2 25.523.1

2005 2035

0%

5%

10%

15%

20%

25%

30%

35%

40%

0 to 24 25 to 44 45 to 64 65 plus

Population Distribution by Age GroupMichigan, 2005 and 2035

12.4

23.4

2005 2035

We are getting much older. By 2035, more than23 percent of Michigan’s residents will be 65 orolder.

●

Compare this with the situation in Florida today.In the state known as “God’s waiting room,”17 percent of the residents are 65 or older.

●

Implications

● Fewer traditional-aged college students

● More older workers

● Labor shortages

● Skill mismatch

● Community leadership

UNIVERSITY OF MICHIGANUNIVERSITY OF MICHIGAN

www.rsqe.econ.lsa.umich.edu

www.irlee.umich.edu/clmr