Michigan will finally snap decade-long streak of job losses

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ANN ARBOR, Mich. – After enduring one of its worst years ever in 2009, Michigan’s economy will flounder this year before showing some improvement in 2011, say University of Michigan economists.

“Take the worst national economic downturn since the Great Depression and add the downward spiral of the domestic auto industry that culminated in bankruptcy for Chrysler and General Motors and the result for Michigan in 2009 was by many measures the most abysmal economic performance in half a century,” said George Fulton, director of U-M’s Research Seminar in Quantitative Economics.

“While no one expects a repeat of the job losses the state suffered a year ago, it is unclear from recent experience whether the Michigan economy is finally on the road to recovery or has just gotten out of intensive care. That will depend on the strength of the national recovery and the viability of the Detroit Three automakers.”

In their spring forecast update of the Michigan economy, Fulton and colleague Joan Crary say the state will lose about 39,000 jobs during 2010, down from job losses of 230,000 last year—the largest recorded drop in the Michigan work force in the 53 years of currently published data and the biggest rate of job decline (5.6 percent) since 1958.

But during 2011, Michigan’s labor market will add about 20,000 jobs, breaking an unprecedented string of 10 consecutive years of shrinking employment, they say.

With diminishing job losses this year and modest job gains next year, the state’s unemployment rate will show little improvement from the current reading of 14.1 percent. Fulton and Crary predict the rate to average 14.1 percent for 2010 and 13.7 percent for 2011.

Manufacturing will show the biggest improvement in Michigan’s labor market this year and next, after losing 152,000 jobs over the past two years. The improvement, however, is only a slowing of employment declines as job losses dwindle to about 9,000 per year during 2010 and 2011. Most of these losses will occur in the motor vehicle industry, which will have lost about a third of its manufacturing workers from the end of 2008 to the end of next year.

Michigan’s private non-manufacturing sector, which lost nearly 234,000 jobs over the past two years, is expected to lose about 17,000 jobs this year before gaining 33,000 in 2011.

The service industries will add about 8,000 jobs this year and nearly 26,000 jobs next year—mostly in professional and business services and in private education and health services.

“The turnaround in business services reflects an improving commercial environment, including a more favorable scenario for a temporary help industry that struggled until late in 2009,” Fulton said. “The health services component has consistently added jobs over the past 11 years and will continue to grow over the next two years, but at a somewhat reduced pace.”

Among other major industry sectors, finance and construction will add a modest number of jobs by the end of next year, while retail trade, transportation and utilities will continue to lose jobs.

Finally, the public sector is expected to lose more than 17,000 jobs over the next two years, thanks to budget-induced cutbacks and further outsourcing of services, especially in local units of government and public schools.

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