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Updated 10:00 AM November 24, 2008
 

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As Big Three struggle, so does state

Related story:
U.S. recession: Things will get worse before they get better >

Auto industry rescue plan or not, Michigan's economy will continue to be stuck in reverse, University economists say.

"The confluence of recession in the U.S. economy and the tenuous position of the domestic nameplate automakers is a troublesome gateway to the year ahead," says U-M's George Fulton. "Regardless of how we feel about it, stability in the state's core industry is essential for the economy as a whole to grow and prosper.

"We do fully expect, though, that some form of rescue package will be approved by the federal government. The potential consequences of myriad alternatives are impossible to predict at this point, but none of them is any good for Michigan. The hard times are here to stay for awhile."

In their annual forecast of the Michigan economy, Fulton and colleague Joan Crary say that unemployment will exceed 10 percent in each of the next two years — the highest rates since 1984.

All told, the state will lose 108,000 jobs during 2009 and another 24,000 jobs during 2010. This comes on the heels of nearly half a million jobs lost this decade, including more than 81,000 jobs lost this year.

Fulton and Crary predict that Michigan, which has lost 74,000 manufacturing jobs over the past two years, will lose 53,000 more manufacturing jobs in 2009 and another 24,000 the year after. Nearly two-thirds of these job losses will be in the auto industry, which by the end of 2010 will employ less than a third of the workers it had just a decade earlier.

Construction, which lost 18,000 jobs this year, will lose the same amount next year, before "improving" to net zero job growth in 2010. The trade, transportation and utilities sector (which includes some auto-related activity but mostly retail trade jobs) will be down about 14,000 jobs next year — the same as 2008 — and another 5,000 jobs in 2010.

While professional and business services, many of them auto-related, will lose about 18,000 jobs over the next two years, education and health services will gain 22,000 jobs — the only industry with employment gains during that time.

Despite their dismal forecast, Fulton and Crary see some signs of hope.

"Many of our current problems persist during 2009, particularly those related to the auto, construction and retail industries," Fulton says. "It will be a rough year, especially the first half, but if there is a silver lining to our forecast, it is that we see the situation improving over the year.

"We expect that 2010, although not an especially good year, will nevertheless be much better, with employment declining at a more modest rate. And an extrapolation of our forecast suggests that we may see modest job gains in 2011."

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