Donald R. Grimes University of Michigan

1. The Michigan Economic Outlook Michigan Community College Association Summer Workshop Traverse City, Michigan July 22, 2011 Donald R. Grimes University of Michigan

2. U.S. Outlook

3. 4% 3% 2% 1% 0% –1% –2% –3% Growth in U.S. GDP 2009–13 3.1 3.1 2.9 2.5 –2.6 2009 2010 2011 2012 2013

4. 1930s WW II Forecast 20% Post-WW II Average Growth Rate 1947–2010 = 3.3% 15% ’36 10% 5% 0% ’01 ’91 ’74–’75 ’49 ’54 ’58 ’82 ’09 ’38 –5% –10% ’32 –15% U.S. GDP Growth, 1930–2010 and Forecast, 2011–13 ’30 ’35 ’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’13

5. 12% 10% 8% 6% 4% 2% 0% U.S. Unemployment Rate 2009–13 9.6 9.3 9.0 8.7 8.2 2009 2010 2011 2012 2013

6. 1930s WW II Forecast 32% 28% ’33 24% Post-WW II Average Unemployment Rate 1947–2009 = 5.6% 20% 16% ’37 12% ’10 ’82 ’75 ’92 8% ’58 ’49 ’03 ’54 4% 0% ’30 ’35 ’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’13 U.S. Unemployment Rate, 1930–2010 and Forecast, 2011–13

7. 20 15 10 5 0 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 U.S. Light Vehicle Sales, 1990–2013 Millions

8. 18 16 14 12 10 6.9 6.7 5.9 8 5.1 4.5 45.7 45.0 45.0 6 44.2 43.3 4 2 0 Annual % Detroit Three market share Detroit Three U.S. Light Vehicle SalesTotal vs. Detroit Three, 2009–13 Millions of Units 15.3 14.8 12.9 11.5 10.4 2009 2010 2011 2012 2013 Total

9. Michigan Outlook

10. 6% 4% 2% 0% –2% –4% Michigan Employment –6% National Employment –8% ’73 ’77 ’81 ’85 ’89 ’93 ’97 ’01 ’05 ’10 '75 ’79 ’83 ’87 ’91 ’95 ’99 ’03 ’07 Employment Growth, Michigan and National 1973–2010

11. 110 105 100 95 90 85 80 75 2001 2002 2003 2004 2005 2006 2007 2008 2009 Michigan: United States: High ed High ed Low ed Low ed Private Employment Growth by Educational Attainment Michigan vs. United States, 2001–09 Index (2001 = 100)

12. 5,000 12 11 10 4,500 9 8 7 4,000 6 Total jobs 5 Sales 4 3,500 3 Michigan Total Jobs and Detroit Three Sales of Light Vehicles 1991–2010 Sales in Millions of Units Total Jobs (Thousands) ’91 ’93 ’95 ’97 ’99 ’01 ’03 ’05 ’07 ’09 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10

13. 67,300 61,500 53,100 Change in Michigan Wage and Salary Employment, 2009–13 Change in Employment 100,000 50,000 0 –10,900 –50,000 –100,000 –150,000 –200,000 –250,000 –300,000 –289,900 –350,000 2009 2010 2011 2012 2013

14. 300 Forecast WW II Average Change 1971–2000 = 58,000 jobs 200 100 0 –100 –200 –300 –400 ’40 ’45 ’50 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’13 Change in Michigan Wage and Salary Employment, 1940–2010 and Forecast, 2011–13 Thousands of Jobs

15. Michigan Wage and Salary Employment Growth 4.7 1.6 1.4 0.9 0.7 0.4 0.1 –6.7 –12.8 4th Quarter to 4th Quarter Growth Rate (%) –3.9 –6.0 1.0 1.8 1.6 1.6 4th Quarter to 4th Quarter Change (Thousands) –167.7 –244.6 37.7 68.9 62.2 62.2 Annual Rate (%) Actual Forecast 6 4 2 0 –2 –4 –6 –8 –10 –12 –14 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 ’08 2009 2010 2011 2012 2013

16. 4,800 Peak ’00q2  4,700 4,600 4,500 4,400 4,300 4,200 ’08q4 ’13q4   4,100 4,000 ’11q1  3,900  Trough ’09q3 3,800 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 Michigan Wage and Salary Employment First Quarter of 2000 to Fourth Quarter of 2013 Thousands of jobs Forecast

17. WHERE’STHEJOBGROWTH?

18. 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 MOST RAPIDLY GROWING SECTORS • Wholesale trade • Leisure and hospitality

19. DECLINING SECTORS • Government • Information (Traditional delivery systems) • Natural resources, mining

20. 16% 14% 10.0 9.4 9.0 12% 10% 8% 6% 4% 2% 0% 4th Quarter Unemployment Rate 13.9 11.4 9.7 9.3 8.8 Michigan Unemployment Rate 2009–13 13.3 12.5 2009 2010 2011 2012 2013

21. Forecast Average Unemployment Rate 1970–2008 = 7.9% 16% 14% 12% 10% 8% 6% 4% 2% Michigan Unemployment Rate, 1970–2010 and Forecast, 2011–13 ’70 ’75 ’80 ’85 ’90 ’95 ’00 ’05 ’10 ’13

22. 4% 3% 2% 1% 0% –1% –2% Inflation Rate, Detroit CPI 2009–13 2.9 2.0 1.6 0.8 –0.7 2009 2010 2011 2012 2013

23. 6% 5% 4% 3% 2% 1% 0% –1% –2% –3% –4% Michigan Personal Income Growth (Current $), 2009–13 5.2 4.4 2.8 3.0 –3.1 2009 2010 2011 2012 2013

24. 3% 2% 1% 0% –1% Michigan Real Disposable Income Growth (1982–84 $), 2009–13 2.0 1.9 1.7 0.4 –0.2 2009 2010 2011 2013 2012

25. GFGP revenue 7,366 7,514 7,724 6,785 (–21.3) (% change) (–7.9) (10.7) (2.8) Earmarked state SAF revenue 10,922 10,817 11,118 11,397 (–5.1) (% change) (–1.0) (2.8) (2.5) RSQE Forecast – State Revenues by Fiscal Year (Millions of dollars) Actual Forecast 2009 2010 2011 2012

26. 2005 40% 2035 35% 30% 25% 20% 15% 10% 5% 0% 0 to 24 25 to 44 45 to 64 65 plus Population Distribution by Age Group Michigan, 2005 and 2035 34.6 29.3 27.5 25.5 24.2 23.1

27. 2005 40% 2035 35% 30% 23.4 25% 20% 12.4 15% 10% 5% 0% 0 to 24 25 to 44 45 to 64 65 plus Population Distribution by Age Group Michigan, 2005 and 2035

28. We are getting much older. By 2035, more than 23 percent of Michigan’s residents will be 65 or older. ● 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. ●

29. Fewer traditional-aged college students ● More older workers ● Labor shortages ● Skill mismatch ● Community leadership ● Implications

30. UNIVERSITY OF MICHIGAN UNIVERSITY OF MICHIGAN www.rsqe.econ.lsa.umich.edu www.irlee.umich.edu/clmr