GRAND RAPIDS — The Grand Rapids area’s relatively large number of young people, steady automotive sector and resilient housing market could all help the region avoid a potential recession looming over the nation this year.
These are some of the key findings of the annual Grand Rapids Economic Forecast released today by researchers at Grand Valley State University’s Seidman College of Business. The findings show that — absent other economic disruptions — the state’s second largest city and surrounding area are poised to outpace the U.S. economy.
“Right now, what we’re seeing is that the Grand Rapids area is going to grow at twice the rate as the U.S. economy this year,” said Seidman College Associate Dean Paul Isely. “We’re not going to see the same slowdown (as the U.S.) and if we follow that path, we actually will avoid a recession here.”
The growth is expected despite ongoing workforce shortages and sector-specific slowdowns involving manufacturing and hospitality. The findings also come as the Grand Rapids-Wyoming metropolitan area has reportedly exceeded its level of pre-pandemic jobs, the only metro in Michigan to do so.
Isely and GVSU Associate Professor Kuhelika De presented findings from their economic forecast on Wednesday morning at the State of Grand Rapids Business event, hosted annually by the Grand Rapids Area Chamber of Commerce. Graduate assistant Marcus Lynch also contributed to the report.
Demographics a ‘big deal’
The data for West Michigan still forecast a slowdown in 2023 compared to 2022 as interest rate increases and inflation continue to hamper some sectors of the economy more than others.
However, Kent County has a larger number of residents in their 30s compared to residents 65 and older. The demographic finding is “a big deal,” especially because the U.S. as a whole has the reverse ratio, Isely said.
“If you want to have a growing economy, you bring in young people. Young people are convincing other young people to come here. All of this leads to the ability for your companies to grow as fast as you say you want to grow, and that’s going to take a lot of additional workers,” Isely said at Wednesday’s event.
Even with favorable demographics, talent acquisition remains the No. 1 issue for Grand Rapids business owners this year, Isely said.
Meanwhile, the GVSU report anticipates a slowdown for the area’s manufacturing sector as consumer spending declines. The health care industry also will face its share of challenges as wages and other operating costs continue to climb.
“There will be an increase in demand,” said Dr. Darryl Elmouchi from Corewell Health West, adding that hospitals deal with “massive fixed costs” that don’t fully account for the cost increases they are experiencing. This will likely drive more operating efficiencies and consolidation that’s been building in recent years.
“You will absolutely see more health care consolidation,” Elmouchi said during a panel discussion during the Chamber event.
The regional inflation rate is expected to follow the national forecasted inflation rate of 5 percent, De said. Supply chain issues also will likely persist, though some easing is starting to show compared to 2022.
“We are seeing supply chain pressure easing out and unwinding slowly,” De said. “It has not bounced back to pre-pandemic levels, but it is easing slowly.”
RoMan Manufacturing Inc. President Nelson Sanchez and Orion Construction President Brad Walsh confirmed that they are both seeing an easing of supply chain disruptions.
Orion Construction has countered these disruptions by “frontloading” projects and working with banking partners to procure and keep on hand as much building material as possible, Walsh said.
For its report, the Seidman College of Business surveyed companies in Kent, Ottawa, Muskegon and Allegan counties in November and December 2022. Responses show that 33 percent of the firms expect to cut employment, but one-third of firms still expect to grow at more than 3 percent. The majority of survey respondents also expect their sales to increase this year by 2.3 percent.
As well, the GVSU forecast notes lingering concerns that could stunt growth. For example, if consumer spending drops faster than anticipated, or if inflation lingers longer than expected, Isely said.
China also is starting to lift some of its COVID-19 restrictions, which will have an unknown effect as many companies have built up their supply chain in other countries or have reshored operations in the U.S., Isely said.
“We have to remember that economics is still about people,” Isely said. “(People) are being asked to respond to things they’ve never had to before, times that can have unexpected results.”