Editor’s Note: This article was published in the Record-Eagle’s Economic Outlook 2023 section. For more stories, click here to read the entire section online.
Guilfoyle
It has been three and a half years since the World Health Organization declared COVID-19 a global pandemic.
The pandemic has hit the economy hard. In just one month, in April 2020, the US lost 20 million jobs and Michigan lost one in four jobs. The good news is that the economic recovery has been strong and lost jobs have been restored. Michigan’s unemployment rate has fallen to 3.9 percent, a level reached only a few times in its history.
The Traverse City region’s economy is also strong.
There were 1,600 more jobs in the region in the fourth quarter of 2022 than in the fourth quarter of 2018, an increase of 2.5 percent. Wage growth was also strong, with average weekly wages rising 23 percent over the period, compared with inflation of 18 percent.
While the state and national economies have regained jobs lost during the pandemic, some economic hangover remains.
Supply chain disruptions and other factors caused inflation to rise to levels not seen in 40 years.
The Federal Reserve has aggressively raised interest rates to control inflation. Short-term interest rates, previously near zero, are now between 5 and 6 percent.
Mortgage rates, which fell below 3 percent during the pandemic, are now nearly 8 percent.
The good news is that the Fed’s efforts have largely been successful. Inflation has fallen from a high of almost 9 percent to just 3.7 percent.
However, the Federal Reserve’s inflation target is closer to 2 percent, and Federal Reserve Chair Jerome Powell had indicated his determination to achieve that target.
The near-term challenge for the economy is whether the Fed can achieve a 2 percent inflation rate without plunging the economy into recession, thereby achieving what is known as a “soft landing.”
The early signs are positive as inflation continues to slow while the economy continues to create new jobs. However, soft landings are rarely achieved, so there is cause for concern about the prospects.
Many forecasters believe the Fed can pull it off and are calling for slower growth but not a recession.
Looking at the economy over the longer term, one of Michigan’s biggest challenges is demographic. Michigan’s population growth has lagged the nation’s for decades.
And we are getting older. The University of Michigan predicts that Michigan’s working-age population will grow by 2 percent by 2050, while the 65-plus population will grow by 30 percent.
Increasing Michigan’s working-age population will be necessary if the state is to grow and remain competitive in the future.
The population change was not uniform across the state. Between 2010 and 2020, Michigan’s population growth was concentrated in Southeast Michigan, Grand Rapids, and of course the Traverse City area. Significant population losses occurred in some areas of the state, including Thumb, the northeastern Lower Peninsula, and much of the Upper Peninsula.
Immigration can help Michigan address these demographic challenges, but current immigration trends are not enough.
Approximately 15,000 to 20,000 people obtain legal residency status in Michigan each year, but this represents only about 1.7 percent of the total statewide population, while Michigan is home to approximately 3 percent of the country’s population.
The number of deaths in Michigan now exceeds the number of births, so population growth requires immigration from other states and nations.
Governor Whitmer launched the Growing Michigan Together Council (GMTC) over the summer to address this challenge.
The council is tasked with identifying concrete short-, medium-, and long-term actions that will increase the state’s population, improve educational outcomes, attract and retain talent, and build long-term, sustainable infrastructure that meets the needs of the state’s population.
The work of the GMTC is in full swing.
They have hosted listening sessions across the state to gather opinions from residents about what makes Michigan a great place to call home.
This feedback will be incorporated into the councils’ final recommendations, which will be presented to the governor and Legislature in December.
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