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‘Two-Track Recovery’ Forecasted For Michigan Job Market

September 1, 2020

While payroll jobs in Michigan are already recovering from the COVID-19 pandemic, a “two-track recovery” is being forecasted by Gabriel Ehrlich of the University of Michigan’s Research Seminar in Quantitative Economics (RSQE).

Ehrlich gave the state outlook from RSQE to the Consensus Revenue Estimating Conference (CREC) Monday afternoon. 
“We’ve broken up Michigan private industries into two categories. There are the ‘slow-recovering’ industries; which are leisure and hospitality, services such as haircuts, car repair and retail trade,” Ehrlich said. “All of the other private industries in Michigan are the fast-recovering industries. 
“We are forecasting nearly equal job losses in those two groups of industries this year of about 180,000 job loses each on an annual average basis. And that is even though the slow-recovering industries were about 30% of private employment prior to the pandemic.” 
That means the slow-recovering industries are suffering more right now, Ehrlich concluded. 
“Looking forward, that story is going to continue. We are expecting the fast-recovering industries to recover 127,000 jobs next year and 58,000 in 2022. In our forecast, those industries recover to their pre-pandemic employment levels by the middle of 2022,” Ehrlich said.  
But slow-recovering industries will only see about 56,000 job gains next year and 10,000 in 2022. 
“That will leave those industries down over 100,000 jobs, 12% relative to where they were before the pandemic,” Ehrlich said. 
The average wages in those two categories are very different, he noted. 
“The average wages in what we are calling the slow-recovery industries were about $28,000 per year, whereas, in the fast-recovering industries, they were about $65,000 per year,” Ehrlich explained. “So, the recession is hurting employment in low-wage industries substantially more, in our estimation, than in the high-wage industries,” Ehrlich said. 
The economic outlook is not as dire as it was earlier in the year, as the pandemic was just getting underway. 
In the second quarter, the state overall lost 840,000 payroll jobs or about 19%. In some months this spring, the trough was even deeper, Ehrlich said. 
“We expect to recover about 390,000 jobs in the third quarter and 140,000 jobs in the fourth quarter. That leaves us with about 300,000 jobs, or 7%, short of the first-quarter job count. We are forecasting the state will recover another 120,000 jobs by the end of 2021 and an additional 70,000 jobs by the end of 2022, leaving us about 120,000 jobs, or 2.6%, shy of the level at the start of this year,” he said. 
A surprising note in the RSQE had to do with consumer spending in Michigan, which fell off 30% to 40% in late March and early April. Ehrlich said consumer spending has recovered “very substantially.” 
“Here in Michigan we are actually running above the level we were running in January,” Ehrlich said. “This is consistent with other data that we have seen that Michiganders are spending more freely than elsewhere. So, we have seen a stronger recovery in consumer spending here in Michigan than nationally.” 
It may be that Michigan residents are “more optimistic” about the future than those in other states, but if no deal is reached at the federal level for another round of stimulus money, Ehrlich warned, that consumer spending could fall off. 
The same thing could be seen in light-vehicle sales. Automakers sold 16.9 million units in 2019. RSQE projected 13.8 million sales this year and 15 million in 2021. Ehrlich projected 16.1 million units will be sold in 2022. 
“Just as a point of comparison, we had 10.4 million light-vehicle sales in 2009, so you can see we are forecasting that the market will hold up better than it did in the Great Recession,” Ehrlich said.

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