Special Report: 2022 Michigan Economic Forecast – Destination Unknown

Labor shortages, supply chain disruptions, inflation, government restrictions, and the continuing presence of the coronavirus are clouding the 2022 economic crystal ball. // Illustrations by Michaela Bunger

An economic disruption, like the COVID-19 pandemic, is akin to dropping a bowling ball in a kiddie pool. At first there’s a big wave, then as the wave from the initial splash subsides it bumps into the aftershock waves from the pool’s interior lining.

GDP (in trillions)

Source: U.S. Bureau of Labor Statistics

US GDP 2019 $21.43T, 2020 $20.93T, 2021 $22.7TThat, according to Robert Dye, chief economist at Comerica Bank, is where the U.S. and Michigan economies now stand. Multiple competing and ever-changing factors are making it difficult, if not impossible, to predict what the economy will look like in 2022.

“This is just an incredibly complicated economy,” Dye says. “The tools we have to analyze, make scenarios, and do what ifs — those models don’t work when the data goes haywire like it has over the last two years.”

The big wave was caused by COVID-19 early in 2020 and the economy went into a recession as consumers and businesses entered a lockdown to help mitigate the virus. The smaller waves caused by the virus variants now are colliding with aftershock waves — inflation, labor shortages, and supply chain disruptions — that are the result of government’s uneven efforts to stop the pandemic.

The waves caused the haywire data. The state’s gross domestic product fell 3.5 percent during 2020 due to the pandemic and its lockdowns, and it’s expected to increase 6.4 percent this year as COVID-19 mitigation rules were removed. The unemployment rate in Michigan soared to 9.9 percent in 2020 as people lost jobs in droves during the darkest days of the pandemic, according to the Michigan Treasury. That number is projected to improve and dip to 5.1 percent this year.

For the most part, 2021 was a bounce-back year for the U.S. and Michigan economies. It wasn’t that difficult for 2021’s numbers to outperform last year’s results. But where some economists see positive signs going into 2022, others see red flags.

“Michigan and the country have had a halting recovery in 2021, when we should have had a roaring recovery,” says Patrick Anderson, CEO of the Anderson Consulting Group in East Lansing. “We still have labor shortages. We still have unemployment. And we have sectors like hospitality, and now manufacturing, that are crimped. That’s against a backdrop where we subsidized consumer spending to the tune of over a trillion dollars in transfer payments, on top of payments to people who qualified for pandemic relief.

“When the United States of America gives a trillion dollars to its residents, and still has help wanted signs, numerous businesses closed down, and many people in a crisis of long-term unemployment, that’s a pretty big warning sign.”

Inflation Rate

Source: U.S. Bureau of Labor Statistics

2019 Inflation - 2.3%; 2020 1.4%; 2021 5.4%As difficult as it is for economists to gauge what the future holds, there are some published forecasts. The Michigan Treasury expects U.S. GDP to increase 4.4 percent in 2022 and 2.4 percent in 2023. It expects unemployment in the state to dip to 4.6 percent in 2022, and 4.2 percent in 2023.

According to the Michigan House Fiscal Agency, U.S. real GDP was projected to return to its pre-pandemic level by the middle of 2021, although employment losses are not expected to recover until the third quarter of 2022. The outlook for Michigan employment is less optimistic, says the agency, in that the jobs lost during the first and second quarters of 2021 are not expected to return until after 2022.

In Detroit, which was hit hard by the pandemic, the unemployment rate spiked to more than 38 percent in May of 2020 and averaged 22 percent for the year. So far in 2021, Detroit’s unemployment rate has averaged 9.9 percent and checked in at 8.5 percent in June, according to researchers at the University of Michigan and Wayne State University. The data shows it could decline gradually to 6.9 percent by 2026.

The pace of Detroit’s rebound is supported by several large projects, such as Stellantis’ $2.5-billion Mack Avenue plant expansion, the Gordie Howe International Bridge, and multiple logistics facilities largely set on land that had been blighted for decades.

Consumers in Michigan, arguably those most affected by the economy, have a pessimistic view of the direction it’s going, according to a survey released in September by the Detroit Regional Chamber. Of Michigan voters surveyed, 58 percent said the economy is on the wrong track.

More than half of voters polled are very concerned about inflation, and another 33 percent are somewhat concerned about inflation.

Workforce Crisis

While the House Fiscal Agency credits federal stimulus checks as one reason why the 2021 economy did as well as it did, others blame the extended federal unemployment payments for contributing to what is being referred to in some circles as a workforce crisis.

“We have spent enormous amounts of taxpayer money on stimulus checks, and extended unemployment benefits, and on aid to governments,” Anderson says. “These programs are starting to unwind, with many negative effects still to be felt. The extended unemployment benefits unambiguously encouraged people to stay out of work for months beyond when the most serious months of the pandemic had ended. That’s left us with a crisis of long-term unemployment.

“This is going to make it difficult for these people to get back on payrolls and difficult for employers to train them. We’re going to see a reckoning in the coming months involving a lot of workers who stayed unemployed for six months or more. I expect that a lot of the workers who have been out for more than six months, in many cases encouraged by the extra government benefits, are going to have a hard time getting back into the workforce.”

National Debt

Source: U.S. Bureau of Labor Statistics

U.S. National Debt // 2011 $14.8T; 2019 $22.7T; 2020 $26.9T; 2021 $28.7TAnderson says Michigan has lost more than 200,000 workers in 2021, the largest contraction among all the states in the Midwest; leisure, hospitality, and tourism were the hardest hit. Michigan was particularly crippled because it had one of the harshest lockdowns of any state. “Unfortunately, some of these businesses and jobs aren’t coming back.”

Lisa Cook, professor of economics and international relations at Michigan State University in East Lansing, says she is encouraged by new business creation in the state. Between February 2020 and February 2021, new company formations in the U.S. rose 39.4 percent. In Michigan, that statistic was 55.9 percent.

“This is a real opportunity for the state of Michigan to become more entrepreneurial, for it to embrace innovation and creativity, and to support and promote entrepreneurship,” Cook says. “In terms of employment, we’re certainly doing better, but there have been some ups and downs. Labor force participation is up from where it was in February 2020, but it’s down from where it was in in the last part of 2019.”

Cook says she looks to the employment to population ratio, which she says keeps going up. “It is continuing to climb, albeit very slowly,” she says.

Comerica’s Dye says he thinks the farther the country gets from the enhanced unemployment benefits issued during the peak of the pandemic, the greater the chance for idled workers to return to the workforce. “Some of the others will drop out of the labor force,” he says. “By this time next year, I think we’ll see lower unemployment rates.”

The labor shortage also is contributing to disruptions in the supply chain, which is affecting many industries and contributing to the inflation issue.

Logistics Bottlenecks

Supply chain issues caused by the pandemic, along with rising prices, are holding back economic growth. “We find ourselves, particularly in Michigan, plagued by these ongoing supply chain constraints,” Dye says. “We just can’t get enough components, resources, and labor to make the stuff that we need for other processes, and to make cars and things that we want to buy as consumers.

Weekly Wage Averages for All Industries

Source: U.S. Bureau of Labor Statistics

Weekly Wage Average for All Industries // U.S. Average - 2019 $1,339; 2020 $1,222“Ultimately, I think the supply chain constraints will eventually work themselves out and we’re going to see a period of inventory rebuilding next year, but there’s still a lot of uncertainty out there.”

Anderson says he thinks the microchip shortage in the auto industry will be solved, but he’s concerned about other supply chain issues.

“We’re entering an era which the risks to our supply chain are much higher,” he says. “The No. 1 emerging risk is a reliance on China for components, especially for electric vehicle drivetrains. The increasing trade and political tensions with China are going to mean more of these issues, not fewer.”

MSU’s Cook says patience is required for the supply chain to work through its issues. “We’ll see more normalization of supply chain interactions (in 2022),” she says. “You’ll have some bursts of inflation in certain sectors, but by the end of 2022 we’ll have more clarity about what’s permanent and what’s temporary. The inflation problem depends on how some of these supply chain linkages get re-established. These supply chains can suddenly open back up.”


There’s no question that in the wake of the worst of the COVID-19 pandemic, prices are spiking, which has economists and consumers alike concerned.

“We now have inflation creeping up,” Anderson says. “For the first time in 20 years, the first time in this century, I have to warn people about inflation in the United States of America. The runaway government spending at the federal level has told the whole world that the United States is probably going to see the first serious bout of inflation in recent memory.”

Comerica’s Dye says the inflation is being balanced by an increase in the rate of household savings, but he doesn’t know how long it will last.

Weekly Wage Average for All Industries (cont’d.)

Weekly Wage Average Across All Industries // Michigan Average 2019 $1,257; 2020 $1,225“I’m concerned that when the saving rate normalizes, that households are going to find themselves increasingly stressed due to the year over year inflation rates of 5-6 percent and 7-8 percent,” he says. “My expectation is that there’s going to be an adjustment period for a lot of households. The inflation story is incredibly complex. Some components of it are going to go up and down. Some components are going to be very sticky and not go down. Rent is one.”


Mitigation measures that attempted to contain the COVID-19 virus such as lockdowns and mask-wearing requirements, and subsequent legislation designed to help American businesses and consumers navigate the negative effects of the pandemic, earned praise or scorn — usually depending on what side of the political aisle one sits. Regardless of party alignment, the facts are that both the mitigation measures and generous benefits will continue to have an effect on the economy.

“Given the global pandemic, how could you not have a very strong governmental response?” Dye says. “This is new territory. We did have very large government intervention not only here in the U.S., but worldwide. We’re reeling from two sets of aftershocks, one from the pandemic itself and the other from government intervention. We’re still feeling those and probably will for some time to come. But to say that the government is the singular cause of inflation ignores the fact that there’s lots of other stuff going on right now.”


The overriding issue facing the 2022 economy remains the COVID-19 pandemic. In August, Federal Reserve Chairman Jerome Powell said the U.S. economy had been permanently changed by the COVID-19 pandemic.

Weekly Wage Averages for All Industries (cont’d.)

Weekly Wage Averages for All Industries // Livingston 2019 $1,068 2020 $892; Lapeer 2019 $920 2020 $755; Oakland 2019 $1,473 2020 $1,279; Wayne 2019 $1,391 2020 $1,281; Macomb 2019 $1,308 2020 $1,112“We’re not simply going back to the economy that we had before the pandemic,” Powell said. “We need to watch carefully as the economy continues to get through the pandemic, and try to understand the ways that the economy has changed and what the implications are for our policy. It seems a near certainty that there will be substantially more remote work going forward. That’s going to change the nature of work and the way work gets done.”

More recently, MSU’s Cook says, “The virus continues to govern the economy. It may be the Delta variant, but it is governing the way the economy evolves.

“I’m just hoping that in 2022 these new measures (vaccination and testing mandates) put in place to contain the pandemic will work, make this pandemic manageable, and get people back to school, back to work, (and) back to their lives. Even if it does work, it’s going to take some time for the car to start running again. It’s been sitting in the garage for 18 months.”

Dye is in the hopeful but realistic camp. “We’re still obviously dealing with COVID-19,” he says. “It looks like the surge is cresting in many areas, so I’m encouraged by that, but the final trajectory remains to be seen.”

According to Anderson, the pandemic, from an economic viewpoint, has turned the corner but not quite reached the finish line.

Detroit Area Employment

Source: U.S. Bureau of Labor Statistics (As of June 2021)

Detroit Area Employment // Trade Transportation, and Transport 368.5K +9.2%; Professional and Business Services 382.7K +8.9%; Education and Health Services 294.9K +6.3%; Information 25.2K +0.5%; Other Services 66.4K +13.7%; Mining, Logging, and Construction 82K +8.8%; Financial Activities 126.4K +5.9%; Leisure and Hospitality 170.2K +31.4%; Government 179.9K +1.1%; Manufacturing 2.349K +3.5%“The biggest positive factor is the share of the populous who are vaccinated or who have natural immunity,” he says. “This means, at an existential level, people can feel comfortable going to work, seeing their family members, shopping, and doing other normal activities. It doesn’t mean the end of risk and I’m not going to declare the pandemic is officially over; however, it does mean that for the large majority of Michigan residents and American citizens, they have substantial protection against a deadly disease.

“We have reached the economic definition of the ability to largely, but not completely, return to the kind of work and travel and interaction that we had before the pandemic.”

2022 Economic Forecast

For all the headwinds and setbacks, one of the reasons Michigan has a chance to have a growth economy in 2022 is the auto industry.

“Our cornerstone auto industry came through the pandemic and emerged as strong … as it was before,” Anderson says. “Part of the reason is the auto industry was the earliest major American industry to deal directly with the pandemic. Auto industry facilities were dealing with this at the beginning of March 2020. That was a full month in front of most of the governments. Because labor and management were in discussions with the government early on, they didn’t get the political fallout that so many other industries got.”

Unemployment Rates in Metro Detroit

Source: U.S. Bureau of Labor Statistics

Unemployment Rates in Metro Detroit // Detroit 2020 11.1% 2021 4.3%; Wayne 2020 14.1% 2021 5.9%; Macomb 2020 19.1% 2021 4.5%; St. Clair 2020 10.3% 2021 3.9%; Oakland 2020 9.4% 2021 3.2%Cook reinforced the notion that the economy revolves around the virus. “This is a pandemic-induced economy, a pandemic-circumscribed economy,” she says. “If we can tame it, if we have a chance to look at it through the rear-view mirror, the economy will take off. If we decide that we don’t want to do that — and in many cases, it’s a choice of whether to wear a mask or get vaccinated, then it’s not going to happen.”

Dye predicts supply chain constraints will be worked out during 2022, “and that will allow us to get back into an inventory restocking phase for the economy, and that will be very positive for GDP. At the same time, I expect to have support from a significant fiscal (legislative) package from (Congress).”

He also says he believes there still is a lot of pent-up demand for all goods, including automobiles. “That should be good for the U.S. and for Michigan.”

Like Cook, Dye’s prognosticating is tempered by the pandemic.

“I’m still very concerned about where the COVID-19 pandemic goes from here,” he says. “That’s a big unknown. I’m encouraged by the vaccination rates and vaccination approvals for younger people, and I’m encouraged by our ability as a country to work through some of these challenges. But it remains to be seen how we normalize with respect to COVID-19.”

While both the national and state economies are in far better condition in late 2021 than they were at the same time a year ago, continued improvement into 2022 will be influenced by the course of the COVID-19 pandemic, people getting back to work, and keeping inflation under control.