West Michigan economy keeps growing despite labor issues, outlook says

West Michigan’s economy remains strong heading into the end of 2021 with expectations of continued growth in 2022, according to a new outlook from The Good Place Inc.

Nearly eight out of 10 businesses in an eight-county region saw increased sales over the past year, while more than 60 percent of businesses said they were growing with new equipment, new technologies or the growth of their activities, according to the economic development organization. The Right Place officials met with executives from 422 companies in 2021.

“First and foremost, without a doubt, we are growing,” The Right Place President and CEO Randy Thelen said this morning during an annual economic outlook. “It’s been a very troubled year. It continues to have challenges, no doubt, on the supply chain and other challenges that we face, but at the end of the day, West Michigan is getting better. is beaten, we’ve grown, our businesses remain very positive, they remain very resilient, and I expect a very strong 2022.

Despite the economic difficulties of 2020 and the COVID-19 pandemic creating an “economic headwind that was too difficult to overcome”, The Right Place exceeded the objectives of a three-year strategic plan which extends until 2022, has Thelen said.

Work by The Right Place has helped create and sustain 2,494 jobs and $397 million in new capital investment. The organization’s three-year goal is to create or retain 3,400 jobs and generate $500 million in new capital investment.

However, a major concern remains: the drop in the activity rate and the shortage of labor resulting from the pandemic.

“As we look to the future, it really comes down to talent. It’s the consistently highest-rated issue our companies share with us, Thelen said.

Nearly 60% of employers told The Right Place they’ve had recruiting challenges, Thelen said.

The region’s labor force participation rate remains below pre-COVID levels, at 62.8% in September, down from 66% in February 2020. This decline represents approximately 33,000 people no longer in the labor force.

“Our workforce is in a condition never seen before, and our businesses are struggling to navigate it,” Thelen said. “We know there are reasons why people are not returning to work, but as companies decide where to grow and where to invest, we have that pool of people. Over the next few months and throughout 2022, frankly, we’re going to have to find ways to invite these people back into the workforce and hire them.

“The workforce is there,” he added. “We have to find a way to get them back.”

There are currently more than 51,000 job openings in the region, the highest number ever, Thelen said.

The labor shortage has also led more employers to invest in employee training: 52% of companies said they had done so in 2021, compared to around 30% a year ago. The increased investment in training “signals that they understand that the job market has changed and they need to respond accordingly,” Thelen said.

‘Fly in the soup’

Statewide, the University of Michigan forecasts moderate growth of around 30,000 jobs per quarter in 2022, followed by 21,500 new jobs per quarter in 2023.

University of Michigan economists forecast average national real GDP growth of 4% in 2022 and 3.1% in 2023. Real GDP is expected to pick up after the first quarter as supply chains improve .

High inflation “is a bit of a problem. It’s kind of a fly in the ointment, as someone would say, but most of the time we’re in pretty good shape,” said Don Grimes, a regional economics specialist at the University of Michigan, in a presentation at The Right Place’s outlook.

Inflation which has reached 30-year highs through the end of 2021 is expected to ease next year, according to the university’s outlook which forecasts a 3.9% increase in the price index to base consumption in 2022 and an increase of 2.7% in 2023.

Despite the labor problem and rising inflation, “the current economic outlook and current conditions are good,” Grimes said. “From an economic standpoint, things are pretty rosy overall in the state and the country, and especially in the Grand Rapids area.”

An aging workforce could worsen the current labor shortage over the next decade, “so attracting workers, attracting people to live in this area and increasing their labor force participation rate… is really important,” Grimes said.