What 2019 Has in Store for West Michigan’s Economy

GRAND RAPIDS, MI -- West Michigan's economy is on track for a strong year in 2019, but steel and aluminum tariffs and a skilled worker shortage continues to hurt businesses, an economist told a gathering of regional business leaders Tuesday.

"I'm seeing good stuff for the economy," said Jim Robey, director of regional economic planning services at the W.E. Upjohn Institute for Employment Research. "The question is: When you're already running fast, how much faster can you run?"

Robey was the featured speaker at The Right Place's regional economic and employment forecast held at the Amway Grand Plaza Hotel in Grand Rapids.

Robey and Right Place President and CEO Birgit Klohs also touched on plans by General Motors to shutter two assembly plants in southeast Michigan, changing leadership in the governor's office and state Legislature, and the need to invest in road and bridge repairs and strengthen high-speed internet access.

Here's a look at what they had to say about those topics.

Economic forecast

The Grand Rapids metro area -- which encompasses Kent, Montcalm, Barry and Ottawa counties -- had an unemployment rate of 2.6 percent in August, lower than the state and national average.

Robey said he expects the region's low unemployment rate to stick around in 2019, though it may not dip much further.

"Is it going to go from 2.7 to 2.0," he asked. "I don't see that necessarily happening. But could it tighten even more? It could if firms start to pay higher wages, which they may feel pressure to do."

The region's low unemployment rate is a good thing, but it highlights another challenge facing employers: access to skilled workers. Employers with job openings have long said it's tough to find applicants with the necessary skills.

"You have low unemployment, high labor force participation -- where are you going to get those folks at," Robey asked, referencing the challenge posed by low-unemployment and the region's relatively high labor force participation rate.

While the region's economy is expected to remain strong next year, Robey said there are looming challenges.

With the U.S. experiencing the second-longest period of economic expansion since World War II, Robey said an economic downturn is likely within the next 24- to 36-months.

"Will we talk ourselves into that recession," he asked. "That may make it come sooner than later."

New leadership in Lansing

Democrats swept Michigan's statewide offices in November, bringing an end to eight years of Republican control and ushering in a new period of divided government. The GOP remains in control of the Legislature.

Is Klohs worried that divide will hurt economic development efforts.

In short, no.

"Economic development by its very nature is nonpartisan," she said, noting that she's worked on economic development during periods when state government was previously divided between Republicans and Democrats. "We work with who is in that office and who is in both houses."

Klohs said she was among a group of statewide experts invited to discuss Michigan's economic development strategy with Gov.-elect Gretchen Whitmer's administration.

Their message to the incoming governor: Ensure that Michigan's economic rebound doesn't lose momentum.

"Every time you change administrations, whether it's in Washington, whether it's in Lansing, or even at the local level, you will have to change," she said. "We have to be flexible to roll with that change, but also make sure that we don't lose momentum."

It's also important that the new administration supports the Michigan Economic Development Corporation, improve the state's K-12 school system, and create more skilled workers, Klohs said, recalling the advice that she and her colleagues gave the new administration.

"It was very positive," she said of the meeting. "I think the group that met with us, many of them understand our work, are deeply involved in workforce and or economic development."

GM plant closures

General Motors dropped a dose of bad news late last month when it announced plans to end production by the end of 2019 at five U.S. plants, two of which are in southeast Michigan.

So what do those potential closures mean to West Michigan manufacturers who work in the auto industry?

"They will impact us because we have a supply chain," Klohs said.

By how much is unclear for now, she said. To get a better idea, her team is analyzing which companies in the region will be impacted by GM's decision to close the plants and end the production of cars such as the Chevy Cruze and Volt.

Tim Mroz, vice president for marketing and communications at The Right Place, wasn't immediately sure Tuesday afternoon how many West Michigan manufacturers create products for the auto industry, but he said the number is "significant."

If the plant closures have a large enough impact to cause layoffs at a West Michigan manufacturer, Klohs expressed confidence that displaced workers could find other jobs.

"We still have a very strong economy around here, and so hopefully these folks can find other jobs at other companies," she said.

Klohs added that steel and aluminum tariffs, implemented by President Donald Trump's administration, are hurting manufacturers.

"There's no question about that," she said. "The second largest conversation we have -- beyond talent -- today are tariffs, because ... so many companies around here are in the metal business."

Infrastructure

Michigan's deteriorating roads and bridges have been well documented. 

On Tuesday, Klohs highlighted the demand for investment in those areas but also discussed another infrastructure need that's receiving less attention but is no less pressing for some businesses: high-speed internet.

It's a challenge that falls especially hard on entrepreneurs who live in rural communities, she said.

"This should be treated no differently than when America electrified the country 70 years ago," she said. "This is the same kind of critical infrastructure. It has to happen."

Klohs said she's disappointed that she has "not seen a national plan" to tackle the issue.

"I'm waiting for the infrastructure president to give us infrastructure," she said, referring to President Donald Trump, who pledged on the campaign trail to strengthen American infrastructure. "I haven't seen the plan yet. And yes I'm being critical, because there was supposed to be investment in infrastructure in the United States and I don't see it happening."


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