Michigan economy rebounds faster than expected, but inflation is a problem

(WXYZ) – A new forecast from the University of Michigan has found that Michigan’s economy is recovering from the pandemic faster than previous downturns, but inflation and the supply chain have a poor perception.

According to the university, job growth has been healthy this year and is expected to continue over the next two years. Personal income is also expected to increase, but inflation will reduce purchasing power.

“All things considered, this year’s economic performance provides plenty to be thankful for. As we look ahead, we expect most of the good news to continue, with an almost complete recovery in by the end of 2023 “, Gabriel Ehrlich, UM research director. Quantitative economics seminar, said in a statement.

Ehrlich is co-author of the Michigan Economic Outlook 2022-2023 with Jacob Burton, Donald Grimes, Owen Kay and Michael McWilliams.

According to the outlook, more than 50,000 jobs were created in the third quarter after only 25,000 per quarter at the start of the first half of the year.

Researchers say this is a faster recovery than the state experienced during the long recession of the early 2000s.

The problem is rising inflation. Real disposable income, which explains the rise in prices and taxes, is only expected to be 3.1% higher at the end of 2023 than at the end of 2019, according to the researchers.

The forecast also revealed that the state’s unemployment rate is expected to average around 6% in the last quarter of 2021 and the first quarter of 2022 before dropping rapidly over the remainder of the year. They expect it to be 5% by the end of 2022 and 4.5% by the end of 2023, less than 1% above pre-pandemic levels.

As for the auto industry, experts say tensions in the supply chain could still cause problems if the microchip shortage ends. However, they expect production and sales to start improving with increased vehicle sales.

Labor market participation: Economists expect conditions to start to improve seriously by the end of next year, as the public health situation improves to the point that workers vulnerable feel safe to return to work and that caregiving responsibilities become more predictable. According to them, the activity rate should drop from 59% at the beginning of next year to 60.4% by the end of 2023, still below the rate of nearly 62% recorded at the end of 2019.

“The pandemic has blurred the way we work, play, shop and travel,” McWilliams said, “and it will take time to fully recover. “

Economists say that “although Michigan’s economy has experienced some setbacks this year, we are still hopeful that the state will experience a near-complete economic recovery by the end of our forecast.”

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