According to the annual report, employment growth is expected to be modest, at best 0.5 percent for 2006. Overall sales are expected to grow around 3 percent a rate comparable to last year. Exports continue to be a bright spot; expected growth is 5 percent for 2006.
The report was written by Hari Singh, Ph.D., and Nancy Boese, M.B.A., of Grand Valley's Seidman College of Business. Singh is chair of the Economics Department. Boese is the regional director of the Michigan Small Business & Technology Development Center.
The forecast is based on a November 2005 survey of businesses in the greater Grand Rapids economy (Kent, Ottawa, Muskegon, and Allegan counties). The survey was mailed to the CEOs of 675 organizations based on a representative sample reflecting different sectors of the regional economy and the geographical diversity of the region. A total of 151 organizations responded.
The survey aims to historically track the overall business confidence of the Grand Rapids metropolitan area by a confidence index. This confidence index is scaled from zero percent (no confidence at all) to 100 percent (complete confidence). The results this year indicate that business confidence of the private sector is 65.3 percent, down from 69.6 percent in 2005.
The pragmatic optimism of recent years has been replaced by the notion that things are not likely to improve for a while. In 2005, expectations of higher interest rates, rising energy prices, the uncertainty due to the war on terrorism, and weak job growth prospects because of restructuring have further depressed expectations, the report says.
Following well-publicized layoffs by major corporations in the West Michigan area, the regional labor market has been repairing at a slow pace. Traditionally, the regional and national economies have followed similar trends in terms of the business cycle. This year the actual economic situation in Michigan is relatively worse compared to the national economy. The manufacturing sector continues to decline as more consolidation in the workforce takes place, particularly in auto and auto-related industries. Consolidation and job losses in manufacturing will still continue in West Michigan but more jobs will be created in the services sector.
So what should Michigan's long-term strategy be? Some industries are able to capitalize on an expanding export market. More firms need to aggressively seek export opportunities. New job opportunities in manufacturing are likely to be limited. At the same time, new industries and opportunities are emerging in other sectors: health care, biotech, construction, and specialized services. State resources need to be leveraged to position Michigan strategically in these growth sectors of the future.
"Whether we are seeking to revitalize the manufacturing sector or expand into the industries of the future, both strategies have a common platform: a highly skilled work force is critical," the report says. "Expanding education and training opportunities should be a top national and state priority."
The full report can be downloaded in PDF format by clicking here. Hari Singh is available for interviews. Contact him at [email protected] or (616) 331-7290
For commentary on the export market, contact Jeffrey Meyer, executive director of the Van Andel Global Trade Center at Grand Valley. Meyer can be reached at (616) 331-6811 or by e-mail at [email protected].
