Michigan economy to see slight improvement in upcoming year

By Kathy Barks Hoffman

Associated Press

LANSING (AP) -- For the first time in 11 years, Michigan is expected to add more jobs than it loses in 2011, yet there's little reason to toast the new year just yet.

University of Michigan economist George Fulton expects the state to add about 6,300 net jobs next year and 48,000 in 2012, giving the state an average 12.4 percent unemployment rate in 2011 and 11.5 percent in 2012, down from an average rate of more than 13 percent this year.

The state still has a long way to go to replace the nearly 860,000 jobs it has lost since the economy began sliding in June 2000. Even a welcome 2-percentage-point drop in the unemployment rate over the past year leaves it with a rate of 12.4 percent, behind only Nevada and tied for second place with California. Michigan now ranks 37th in per-capita personal income and was the only state to lose population over the past decade, according to new census numbers.

For 23-year-old Bret Wamhoff, who graduated in spring 2009 with an aeronautical engineering degree from Western Michigan University, the state's economic woes have temporarily halted his dream to work on a team designing cars or airplanes. He spent a year bouncing between work on his grandfather's farm and a part-time retail job, living with his parents in the Lansing suburbs while applying for engineering jobs around the country.

Getting no offers, he settled in May for a six-month stint at Whirlpool Inc. as a lab technician modifying washers for product development tests in Benton Harbor. He started a new job last month with Xoran Technologies in Ann Arbor as an electro-mechanical technician, running tests and packing for shipment the CT scanners the small manufacturer builds.

"Graduating in Michigan with the current state economy has been another set of lessons in and of itself," said Wamhoff, who's making less than he had hoped to earn as an engineer. Now living with his wife in Ann Arbor, Wamhoff's glad he has been able to stay in Michigan and hopes engineering jobs become more plentiful as the economy improves.

"I'm blessed to have what I have, and the rest will fall in place -- even though it's been frustrating," he said.

For those who haven't been able to find a job, the recent extension of federal unemployment benefits through the end of 2011 has been a huge relief. Hundreds of thousands of Michigan residents have used up their 26 weeks of state benefits and now rely on the federal program.

The extension won't help the more than 162,000 Michigan residents who have exhausted their unemployment benefits after 99 weeks, however. U.S. Sen. Debbie Stabenow, D-Mich., introduced legislation this summer that would have added 20 more weeks of benefits in states with unemployment of 7.5 percent or more. But her bill didn't get any traction in Congress.

Despite the lingering hardship for those unable to find a job, Michigan's economy has been on an upward trend since mid-2009, according to Comerica Bank chief economist Dana Johnson. His monthly Michigan Economic Activity Index shows progress has been sluggish and uneven this year, but he's expecting annual GDP growth of 3 percent to 3.5 percent next year. Michigan hasn't seen growth rates that high since 2002, he said.

"The next five years, Michigan will look pretty decent, and vastly better than the last five years," Johnson said. Although the state's recovery likely will lag the nation's because it has lost workers to other states, "it's going to be a happier 2011 than it was in 2010," he added.

One bright spot for Michigan has been the continued increase in manufacturing jobs as major employers such as General Motors Co. have regained their footing and hired new workers. Auto sales are rising after dropping to their lowest level in 50 years, and the three domestic automakers could see their share of the U.S. market rise this year after years of decline, Fulton said.

He expects the state will see its biggest growth over the next two years in service sectors such as health care and professional services, as well as some increase in manufacturing. Health care is now Michigan's biggest jobs provider, outpacing the slimmed-down auto industry and helping to diversify an economy long reliant on making cars.

Government employment likely will continue to drop, Fulton said, as school districts and state and local governments struggle to balance their books amid depressed revenues. He doesn't expect the state to see a net increase in construction jobs until 2012.

The high rate of home foreclosures is expected to persist. Michigan currently has the nation's seventh highest foreclosure rate, and Michigan State University economics professor Charles Ballard said that won't change anytime soon because so many residents are still struggling to make ends meet.

He expects continued budget deficits at the state and local levels mean public sector workers will see little in the way of raises and likely will have to pay more for health and retirement benefits. But he's upbeat about where the state is heading overall.

"There's a very good chance 2011 will be the best year in a decade for Michigan's economy," Ballard said. "I don't think it will be a gangbusters growth year ... but after a decade of losses, even a little bit of job growth looks pretty good."

Published: Mon, Dec 27, 2010