State of Michigan

Michigan 2021 Economic Outlook

Michigan was one of the states hit hardest by COVID-19 initially. However, through effective actions by Governor Whitmer’s administration, Michigan’s COVID-19 statistics have largely remained in check relative to other states. This dynamic plays out in Michigan’s employment numbers. In April of 2020, Michigan’s year-over-year job loses nearly doubled that of the U.S. but as of November, it is one-sixth the percent loss experienced nationally. Not all of this can be attributed to governance, as Michigan benefits from its extensive manufacturing base. Nationally, the manufacturing recovery has outpaced other sectors like government and services. It is interesting to note, that while Michigan currently does not have the job losses experienced nationally, the unemployment rate remains consistent with the nation. This is mostly because Michigan’s labor force has remained more resilient than that of the nation. Michigan workers who found themselves unemployment were more likely to continue to search for work rather than drop out of the labor market.

Looking forward, we anticipate a rocky first quarter. Whether federal stimulus policy is enacted to reverse the negative flows of income or not has a big bearing on how the first quarter of 2021 looks. After that, it is mostly determined by the rollout of and efficacy of the vaccine rollouts in curbing the spread of COVID-19. We are anticipating a relatively smooth rollout with minimal regard to the new virus strains announced in Europe and Colorado. To that end, the potential for new strains to emerge and how the longevity of the vaccine poses risks to the forecast. That is, there is still much we do not know, and it may be anybody’s guess as to how policy, social health and economic implications play out.

With that as our backdrop, we anticipate a steep overall decline in Michigan job numbers for 2020 of about 9.3 percent. These are average annual employment values not end-of-year. We anticipate that 2021 job growth will be positive but not quite enough to get us back on pre-COVID employment trends. That is, 2021 overall employment will be below the 2019 employment and will face increasing headwinds from efficiency gains that allow businesses to do more with fewer workers.

On the income side, we expect all measures of income to be negative in 2020, with a 5.3 percent decline in nominal GDP and 7 percent drop in price adjusted, real GDP. Personal income – a component of GDP – is largely expected to track GDP where earnings is the biggest driver. We anticipate weak wage growth of 2020 to carry through 2021, where GDP growth will fall short of reversing real GDP declines of 2020.

 

 

Updated December 28, 2020