Report: Grim Economic Outlook Into 2010

Southfield (WWJ)  -- University of Michigan economists say the state's hard times will stick around for the rest of the year and into 2010.

Economic forecaster George Fulton says he and colleague Joan Crary "see some improvement, but it will continue to be slow and difficult.''

They predict unemployment will average 15.8 percent in 2010, the highest rate since the current counting system began in 1970.

In a midyear forecast of the Michigan economy, the researchers predict jobs will fall at a 5.2 percent annual rate in the second half of 2009.  They say Michigan will lose about 311,000 jobs this year.

In 2010, the report says employment losses will slow from a rate of 2.7 percent at the beginning of the year to zero by year's end—predicated on a stronger national economy and a better-functioning auto industry.

"The light at the end of Michigan's long economic tunnel, which residents have been yearning to see, eludes us still as we encounter yet another bend in the track—the national recession that intensified at the end of last summer, a corresponding collapse in motor vehicle sales and the mushrooming troubles of the domestic automakers," said Fulton, director of U-M's Research Seminar in Quantitative Economics. "We do see some improvement, but it will continue to be slow and difficult."

Next year's projected 36,000 job losses will mark the 10th straight year of employment declines in Michigan. The 10-year downturn from mid-2000 to the summer of next year will cost the state 950,000 jobs, or 20 percent of its work force.

The report says Michigan's private nonmanufacturing sector, which comprises 71 percent of the state's labor market, will account for more than half of the job losses this year, but will register a much more modest decline of 5,000 jobs in 2010. Retail trade, business services and construction will still see job losses, but at a much subdued pace.

Manufacturing will account for 42 percent of the total job losses in the state this year, despite making up only 14 percent of all jobs in the economy.  In all, manufacturing will lose 131,000 jobs this year, but only 23,000 next year, as auto sales and the economy, in general, strengthen and the benefits of auto restructuring take hold. 

"Although Michigan's prospects remain hitched to the outcomes for the auto industry, the state economy cannot recover without a growing U.S. economy," Fulton said.