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Published in Manufacturing

Manufacturing expected to continue leading West Michigan’s economic recovery

BY Thursday, December 10, 2020 02:06pm

GRAND RAPIDS — West Michigan’s economy sits well positioned heading into 2021 to continue recovering jobs lost from the effects of the COVID-19 pandemic, experts said this week.

Led by the manufacturing sector, the region has recovered well from the deep, unprecedented economic decline in the second quarter when state orders shuttered many businesses, said Jim Robey, director of regional economic planning services at the W.E. Upjohn Institute for Employment Research in Kalamazoo.

Jim Robey COURTESY PHOTO

Robey expects manufacturing will continue to lead the region’s recovery in 2021 and beyond.

Despite the region’s strong position, the Upjohn Institute predicts overall employment in the Grand Rapids area won’t return to pre-pandemic levels until “somewhere between 2023 and 2024,” Robey said. 

At one point earlier this year, the Upjohn Institute’s economic modeling didn’t foresee the region returning to pre-pandemic employment levels until 2025 or 2026, he said.

“The most recent forecast — the most recent inputs from August to November — really create a much more positive picture for the Grand Rapids area,” said Robey, who presented an annual outlook this morning in a presentation to The Right Place Inc., held virtually this year on Zoom.

“As we look at this time period, we’re going to see evolution of thought and actually better and better news. So when you couple that with some of the other things that we’ve looked at, we’re feeling very positive about the long-run trends for the region,” Robey said.

Still, the Upjohn Institute’s annual outlook predicts overall employment to remain below pre-pandemic levels when the region had a “fairly robust economy,” Robey said.

The Upjohn Institute expects manufacturing employment in the region to grow a slight 0.1 percent in 2021 and 3.1 percent in 2022. The Upjohn Institute outlook expects service-sector employment in 2021 to remain 20.7 percent below pre-COVID and 6.3 percent in 2022.

Some sectors involved in personal services will not recover well and “will become increasingly problematic as people will have some reservation to go back,” Robey said.

“Many of these folks — theaters and others — continue to be on the bubble around their ability to re-open and sustain themselves through this long closure period,” he said. “Certainly there’s a fear of illness.”

Overall, employment across the goods-producing, service and government sectors for 2021 will remain 23.3 percent lower from pre-COVID and 5.2 percent through 2022, according to the outlook.

Surge, vaccine dynamics

In a monthly report Wednesday, economist Brian Long said West Michigan’s economy “remains on the recovery track that began in July,” although “with a new wave of COVID-19 now upon us, we should not be surprised if our statistics flatten or even turn slightly negative in the next few months.”

“However, there seems to be universal agreement that when the new vaccine (or vaccines) finally reach a large portion of the population, we should see an economic boom,” Long, director of supply chain management research at Grand Valley State University’s Seidman College of Business, wrote in his December report.

Two of four key industrial activity indexes from Long’s November survey with industrial purchasing managers in Grand Rapids and Kalamazoo improved from October, while the other two declined.

The production index declined sharply from a positive-29 to positive-2, and the index for purchases by manufacturers went down by three points to a positive-9.

The index for sales improved three points to a positive-19 and the index for employment improved to a positive-4 from a negative-2.

“Even after five months of recovery, our survey participants continue to complain that the supply chains, both foreign and domestic, are still far from getting back to normal,” Long wrote. “As a result, some firms have had difficulty maintaining production schedules because of delayed shipments of key materials or components.”

If “all goes well” with COVID-19, including vaccines soon becoming available, “we may see a short economic boom as pent-up demand fuels a round of purchases at both the consumer and industrial levels,” said Long, who hopes that Congress will enact a new economic stimulus package “to assist the vulnerable sections of the economy through the gap.”

“However, it is worth remembering that some retail businesses, some restaurants, some movie theaters, and some segments of the office furniture business will NOT come back,” he wrote.

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