State of Michigan
Michigan 2023 Economic Outlook
We’re optimistic about Michigan’s 2023 Economic Outlook. Michigan’s dependence on the automobile industry puts Michigan’s economy in the national spotlight. Generally, when consumers are concerned about the economy, they curtail big-ticket expenditures like that for cars first, making Michigan’s economy an early indicator of the direction for the national economy. The Bureau of Economic Analysis reports sustained vehicle sales through November 2023, at 14.65 million units, which aligns with trend.
We largely see 2023 as being an unexciting year, as far as the economy goes. In today’s environment, that’s good news, as our projections on the economy are more optimistic than most. If our forecast is wrong, it will likely be too optimistic.
Most of the supply disruptions that interfered with 2022 production cycles have abated and consumers, despite their healthy concern about the strength of the economy, continue to spend. The combined effect is for further economic growth with a risk that the Federal Reserve will over-tighten the financial markets, thereby causing more consumer spending pullback than targeted.
We see gross state product, a measure of all income generated in the state, to grow by 6.9 percent in 2023, down from 8.0 percent in 2022. Once adjusted for inflation, gross state product will only climb by 2.2 percent, down from 4.8 percent projected for 2022. We anticipate relatively strong growth in wages and salaries in 2023, driven largely by employment growth. Still, wage rates are expected to grow across all Michigan industries but is not anticipated to keep pace with inflation. Non-wage sources of income, like dividends, interest and rent are expected to rebound somewhat in 2023 from expected declines to growth of about 7.3 percent. This is assuming much of the stock valuation correction has already taken place in 2022.
suffered under COVID-19, but we anticipate a reversal in 2020 as corporations continue to accelerate distributions of profits and the housing rental markets recover. Overall anticipate that Michigan personal income will get a boost of about 6.1 percent in nominal terms, but only 1.6 percent once adjusted for inflation.
Michigan’s manufacturing employment is on track to record another year of growth in 2022 and we anticipate this growth will continue through 2023. Manufacturing only makes up around 20 percent of Michigan’s jobs and despite long-term trends, where service sector growth outpaces that of goods producing. Michigan’s goods producing sectors appear to be having a resurgence over the last few years, outpacing that of services providing sectors. We anticipate that strength to continue through 2023. It appears that the resurgence of Michigan automobile production is a key component of this growth. We anticipate that growth will taper from 2022 highs in 2023, but remain solid, banning any significant reversal of the national economy. recovered in 2021, we expect these sectors to weaken in 2022.
Construction employment was visibly impacted by the rise in interest and mortgage rates but looks poised to resume growth in 2023. This sector is particularly subjected to the whims of the Federal Reserve, so may reverse course in 2023 if interest rates rise faster than expected. Construction material supply constraints of 2022 are also easing, reducing the costs of new construction but, residential construction largely depends on consumers’ willingness to take out a mortgage and with mortgage rates being at recent highs, consumers may be less willing to purchase new homes.
Michigan’s service-providing sectors are also expected to continue adding jobs. Some sectors appear better poised for growth than others. Wholesale and retail trade employment growth is expected to close 2022 with 4.7 and 2.5 percent expansion, However, 2023 anticipates that retail trade tack on over 17,000 new jobs in 2023, compared with 6,700 wholesale trade. Leisure and Hospitality sectors had an incredible year in 2022, adding some 47,500 new jobs. We anticipate 2023 will generate similar gains.
Other notable service sectors include Professional and Business Services. A long source of employment growth, this sector is expected to see growth of 5.7 percent in 2022 and an additional 6 percent growth in 2023. Informational services expected 2022 employment growth of 7.6 percent in 2022 is expect to taper a bit in 2023 to 5.3 percent growth. Alternatively, anticipate utilities, which largely experienced no growth in 2022, to decrease by around one percent in 2023.
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