No Michigan job growth until 2010

1. No Michigan job growth until 2010 Louis Aguilar / The Detroit News September 3, 2008 http://www.detroitnews.com/apps/pbcs.dll/article?AID=/20080903/BIZ/809030378

2. U of M Forecast • The long economic slide that has cut more than 460,000 Michigan jobs this decade is slowly drawing to a close, according to a highly regarded University of Michigan forecast. Sometime in 2010, the study says, the state will see a slight gain of 33,000 jobs -- but only after another 89,000 jobs disappear this year and the next. • It's not the first time these economists have seen a light at the end of Michigan's economic tunnel. But then the tunnel got longer. The economists first predicted the state would see a small net job gain in 2009. But rising food and energy prices and the drastic consumer shift to small cars have prolonged the agony. • "The story line for Michigan's economic prospects seems apparent: some further pain before sustainable gains," according to the forecast of U-M economists Joan Crary and George Fulton.

3. Determinants of Growth • Underlying the forward movement for Michigan's labor market is a strengthening national economy in 2009 and 2010, a still weak but reviving auto sector, and a pickup in homebuilding in the state during 2009, the report says. • The economists forecast job losses of 51,300 this year, dropping to losses of 37,800 during 2009 and then reversing direction to add 33,300 jobs during 2010. • But some of the job gains are temporary government hires who will work on the 2010 census, the forecast added. • "It's cold comfort that we may stabilize, just because the decline has been so severe," said Daniel Luria, research director of the Michigan Manufacturing Technology Center in Plymouth.

4. Largely auto-related • The vast majority of the state's job losses since 2000 came from the continuing decline in market share of Detroit's Big Three automakers and the effects of low-cost foreign competitors on Michigan-based auto suppliers. • The Big Three will continue to lose market share and produce fewer vehicles in North America in the next two years, according to the "The Michigan Economic Outlook for 2008-2010." • The report said "2008 reflects a sales decline of 2 million units in the light vehicle market overall, combined with a loss of 4.5 percentage points in the Detroit Three's share of the market." • In 2009, it predicts a more modest sales decline of 200,000 vehicles as the total market picks up and the Big Three see their market share slip by a more moderate 1.2 percentage points. • A modest upturn finally occurs in 2010, with a gain of 300,000 vehicles from 2009, an expected rebound in the total light vehicle market and a smaller drop in market share, according to the report.

5. Manufacturing base • If Michigan's manufacturing base stabilizes as predicted, the rest of the state has made marked improvement to diversify, said Timothy Bartik, senior economist at The W.E. Upjohn Institute for Employment Research in Kalamazoo. • "We have made dramatic improvement at various local levels in various sectors, but have not yet created the new economic engine that creates tens of thousands of new jobs," Bartik said. • "The data doesn't support that we've driven Michigan business away due to its tax base," Bartik added. "Future economic development will depend much more on funding for universities, funding for roads and creating an environment where talented people want to live and work." • "Those are the issues many are working on now and say much about Michigan's future in the next decade."

6. Tax Impacts on Business – The Economics Factor payment, Return, $ • Think of it in terms of factor demand. MRP = P * MP w* + t • Think of a tax as an increase in factor payment. w* • But what if it pays for infrastructure, public capital which  labor productivity? Final eq’m may be higher or lower employment. L** L* Factor L