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Seeking Economic Sustainability: The Outlook for Michigan

Seeking Economic Sustainability: The Outlook for Michigan. Michigan Community College Association (MCCA) Traverse City. July 25, 2008 Donald R. Grimes University of Michigan. The Economic Outlook for Michigan through 2009. Supported by the State of Michigan

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Seeking Economic Sustainability: The Outlook for Michigan

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  1. Seeking Economic Sustainability: The Outlook for Michigan Michigan Community College Association (MCCA) Traverse City July 25, 2008 Donald R. Grimes University of Michigan

  2. The Economic Outlook for Michigan through 2009 Supported by the State of Michigan and the University of Michigan

  3. 6% 4% 2% 0% –2% –4% National Employment –6% Employment Growth, Michigan and National 1969–2007 Michigan Employment ’69 ’73 ’77 ’81 ’85 ’89 ’93 ’97 ’01 ’05 ’71 ’75 ’79 ’83 ’87 ’91 ’95 ’99 ’03 ’07

  4. 10% 5% 0% –1.2 –5% –9.1 –10% Michigan Per Capita IncomeDeviation from National Average 5.3 1.9 1.1 –2.9 –3.3 ’69 ’73 ’77 ’81 ’85 ’89 ’93 ’97 ’01 ’05 ’71 '75 ’79 ’83 ’87 ’91 ’95 ’99 ’03 ’07

  5. 15% 10% 5% 1.8 0% –4.0 –5% Wages and Salaries per Job Deviation from National Average 13.1 7.4 6.8 6.3 2.5 ’69 ’73 ’77 ’81 ’85 ’89 ’93 ’97 ’01 ’05 ’71 '75 ’79 ’83 ’87 ’91 ’99 ’03 ’07 ’95

  6. Wage & salary employment –461.8 –1 in 10.2 $42,157 Manufacturing –307.3 –1 in 3.0 $58,070 Transportation equip- ment manufacturing –157.5 –1 in 2.3 $72,505 Construction –50.3 –1 in 4.2 $46,561 Education & health services 98.0 +1 in 5.1 $38,543 Michigan Job Change, 2000q2–2007q4 Cumulative Job Change (Thousands) Job Change Ratio Average Wage 2006

  7. % Job Change Per Year 2000–2007 Job Growth in Michigan by Educational Composition 2000–2007 Number of Jobs 2000 2007 Total nonfarm 4,676,900 4,262,000 –1.3 Above-average- education industries 1,814,300 1,830,600 +0.1 Below-average- education industries 2,862,600 2,431,400 –2.3

  8. Labor Force Statistics for Michigan by Educational Attainment, 2006 55.3 17.1 Less than high school 23.9 $19,029 71.9 10.1 High school graduate 12.5 25,710 Associate’s degree or some college 8.3 31,717 79.6 6.9 N.A. N.A. Bachelor’s degree 3.9 45,808 84.4 3.4 Bachelor’s or more N.A. N.A. N.A. N.A. Graduate degree 2.9 61,645 Age 25 and older Age 25 to 64 Income Below Poverty Line (%) Labor Force Participation Rate (%) Annual Earnings Unemployment Rate (%) Educational Level

  9. 75% Market share Sales 12 70% 11 65% 10 60% 9 55% 50% 8 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 Detroit Three: Sales of Light Vehicles and Market Share of Total Sales United States, 1991–2007 Sales in millions of units Market share 72.6 50.4

  10. Employment Location Quotients by IndustryMichigan, 2006 Industry Location Quotient Automobile, light truck, and parts manufacturing 7.15 Detroit Three vehicle and parts manufacturing (end of 2005) 12.29 Manufacturing except autos and parts 1.05 Private nonmanufacturing 0.95

  11. 80% Detroit Three Share 12% Wages & Salaries per Job 70% 6% 60% 0% –6% 50% Wages and Salaries per Job Deviation from National Average and Detroit Three Share Market Share ’79 ’83 ’87 ’91 ’95 ’99 ’03 ’07 ’81 ’85 ’89 ’93 ’97 ’01 ’05

  12. Detroit Three 20 15 8.7 8.1 7.2 7.1 10 53.0 50.4 48.1 47.5 5 0 Annual % Detroit Three market share shown in box. National Light Vehicle SalesTotal vs. Detroit Three Millions of units Total 16.5 16.1 15.1 14.9 2006 2007 2008 2009

  13. 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Michigan Building Permits, 1963–2009 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '65 '69 '73 '77 '81 '85 '89 '93 '97 '01 '05 '09 RSQE: May 2008

  14. 120 90 60 27.3 30 0 –30 –9.1 –16.7 –60 –40.1 –63.1 –90 –66.0 –65.4 –70.9 –76.9 –120 –112.2 –150 ’91–’00 Average Annual Job Growth Job Growth in Michigan, 1991–2010 Thousands 88.0 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

  15. 2008 2009 Earmarked State SAF Revenue 11,153 11,386 11,753 (% change) (0.6) (2.1) (3.2) RSQE Forecast – State Revenues by Fiscal Year (Millions of dollars) Actual Forecast 2007 GFGP Revenue 8,318 9,054 9,299 (% change) (0.6) (11.8) (–2.6) RSQE: May 2008

  16. 1995 $ 12 10 8 6 4 2 0 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 GFGP RevenueFiscal 1995–2009 Billions $ Current $

  17. The Economic and Demographic Outlook for Michigan and Its Counties to 2035 Supported by the Michigan Department of Transportation

  18. Background on the Forecasts

  19. ● ● Included are demographic and economic forecasts for: County results can be added to form any region. 1. Every county in Michigan 2. The state as a whole (a summation of the county results)

  20. Long-term forecasts are intended to identify economic trends ● Forecasts are unable to capture major one-time events ● General Observations on the State and County Forecasts for 2005–2035 — NOT to predict business cycle movements — unless there is prior knowledge of the event and external information is directly introduced into the forecast

  21. General Observations on the State and County Forecasts for 2005–2035 • Some counties have special circumstances that cause • them to deviate from the general trends—for example, a • county with a large college-age population. • The long-term outlook for regions is governed by: • Prospects at the national level 2. Trends in productivity growth 3. The mix of industries within regions (e.g., growing service sector, declining goods-producing sector) 4. Demographic trends

  22. Fundamental Drivers in Michigan’s Long-Term Outlook • The consequences of profound changes in the • auto industry • The level of investment in other activities that show • promise for future growth and prosperity, and for • which the region has supporting assets • The impact of the aging of the “baby-boomer” • generation, and the migration patterns of the • younger and well-educated populace

  23. Forecasts of Population for Michigan

  24. Short-term forecast 11.2 11.0 10.8 per per per 2014 exceeds 2005 population level 10.6 10.4 * + 0.35% – 0.10% + 0.23% 10.2 year year year 10.0 9.8 9.6 Michigan Population, 2000–2035 Millions Long-term forecast Actual ’00 ’05 ’10 ’15 ’20 ’25 ’30 ’35

  25. + + = + = + Natural change in population Total change in population Net domestic migration Net international migration Components of Population Change in Michigan Thousands 1000 800 600 400 200 + + = 0 –200 –400 –600 2000–2005 2005–2010 2010–2035

  26. 2005 40% 2035 35% 30% 25% 20% 15% 10% 5% 0% 0 to 24 25 to 44 45 to 64 65 plus Population Distribution by Age Group Michigan, 2005 and 2035 34.6 29.3 27.5 25.5 24.2 23.1

  27. 2005 40% 2035 35% 30% 23.4 25% 20% 12.4 15% 10% 5% 0% 0 to 24 25 to 44 45 to 64 65 plus Population Distribution by Age Group Michigan, 2005 and 2035

  28. We are getting much older. By 2035, more than 23 percent of Michigan’s residents will be 65 or older. ● Compare this with the situation in Florida today. In the state known as “God’s waiting room,” 17 percent of the residents are 65 or older. ●

  29. Retiree Wish List According to an informal survey, the retiree wish list includes: 1. Warm climate 2. Proximity to water 3. Access to good health care 4. Cultural activities 5. Recreational activities 6. Good restaurants 7. Elder-friendly housing

  30. Forecasts of Employment for Michigan

  31. Short-term forecast based on the Bureau of Labor Statistics definition of wage and salary employment. ● Long-term forecast based on the Bureau of Economic Analysis definition, including self-employed, agricultural workers, and military. Thus, employment numbers are not strictly comparable across forecasts. ● ● CAUTION

  32. Short-term forecast per per per * 2022 exceeds 2000 employment level + 0.26% – 0.40% – 0.24% year year year Total Employment in Michigan, 2000–2035 (BEA definition—includes self-employed, farm, military) Millions 5.85 Actual Long-term forecast 5.80 5.75 5.70 5.65 5.60 5.55 5.50 5.45 5.40 5.35 5.30 ’00 ’05 ’10 ’15 ’20 ’25 ’30 ’35

  33. 1985–2010 2010–2035 Total Employment in Michigan 25-Year Growth Rate 28.1% 6.6%

  34. Industry Employment Forecasts for Michigan

  35. Michigan Average Wage 2006 $42,157 48,216 30,111 68,828 91,798 54,625 49,693 43,403 39,530 High-Education Industries % of U.S. Employment with Bachelor’s or More, 2000 Average for all industries 27.2% Average, all high-education industries Private education services 61.2% Professional & technical services 58.0% Management of companies 49.1% Information 39.1% Financial activities 36.0% Government 33.4% Health care, social assistance 32.7%

  36. Employment Change 2005–35 2001–05 2,222,355 353,829 99,093 2001 73,183 19,170 19,105 366,306 123,108 –2,267 68,848 770 –1,558 87,123 –6,101 –6,409 375,624 26,649 48,933 699,496 –41,821 –12,367 551,775 232,054 53,656 High-Education Industries in Michigan High-education industries Private education svcs. Prof. & tech. svcs. Management of companies Information Financial activities Government Health care, social assistance

  37. % of U.S. Employment with Bachelor’s or More, 2000 Michigan Average Wage 2006 $42,157 37,807 Arts, entertainment, recreation 26.4% 26,135 Other services (repair, personal, civic) 19.5% 25,700 Manufacturing 19.2% 58,070 Trade, transportation, & utilities 16.4% 35,638 Administrative services 15.5% 31,241 Farm, natural resources, mining 13.7% 29,436 Construction 9.7% 46,561 Accommodation, food services 8.7% 12,664 Low-Education Industries Average for all industries 27.2% Average, all low-education industries

  38. Employment Change 2005–35 2001–05 Low-education industries 3,317,532 –120,033 –60,537 2001 Arts, entertainment, recreation 100,369 34,018 6,406 Other services 285,445 12,879 13,638 Manufacturing –142,839 –228,794 843,743 Trade, trans., utilities 1,007,145 –37,912 –62,690 Admin. services 124,911 322,152 33,941 Farm, natural resources, mining –27,869 104,019 –3,658 Construction 304,276 –8,886 –2,923 Accommodation, food 350,383 95,894 13,314 Low-Education Industries in Michigan

  39. Forecasts of Households for Michigan

  40. Households 3,863,662 3,981,427 4,635,109 20.0% Average household size 2.56 2.47 2.31 NA Number of Households in Michigan 2005–2035 % Change 2005 2010 2035 2005–2035 Total population 10,100,833 10,057,256 10,982,682 8.7% Group quarters 224,190 227,781 296,548 32.3% Population in households 9,876,643 9,829,475 10,686,134 8.2%

  41. 40% 2005 35% 30% 2035 25% 20% 16.0 14.1 13.8 15% 11.3 10.0 8.2 10% 5% 0% Distribution of Michigan Households by Size, 2005 and 2035 36.0 33.8 30.4 26.4 1 2 3 4 5+ Number of persons in household

  42. County Population and Employment Forecasts

  43. Growth >statewide average Growth < statewide average Decline Change in Population by Michigan County 2005–2035

  44. Growth >statewide average Growth < statewide average Decline Change in Employment by Michigan County 2005–2035

  45. The fastest-growing counties in Michigan are clustered in four geographic areas: ● The tourist-oriented and retiree-friendly northwestern lower peninsula, particularly the Traverse City area —

  46. Growth >statewide average Change in Employment by Michigan County 2005–2035

  47. The fastest-growing counties in Michigan are clustered in four geographic areas: ● The tourist-oriented and retiree-friendly northwestern lower peninsula, particularly the Traverse City area The urban and suburban Grand Rapids area: more concentrated in the growing industries, including tourism — —

  48. Growth >statewide average Change in Employment by Michigan County 2005–2035

  49. The fastest-growing counties in Michigan are clustered in four geographic areas: ● The tourist-oriented and retiree-friendly northwestern lower peninsula, particularly the Traverse City area The urban and suburban Grand Rapids area: more concentrated in the growing industries, including tourism The suburban Lansing area: more concentrated in the growing industries — — —

  50. Growth >statewide average Change in Employment by Michigan County 2005–2035

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