panelists on stage during the annual Grand Rapids Chamber meeting

GVSU researchers: West Michigan economy continues to rebound but growth will slow

West Michigan businesses will continue to rebound from the pandemic but Grand Valley researchers said growth will slow later this year due to a likely rise in interest rates.

Paul Isely, professor of economics and associate dean in the Seidman College of Business, detailed his benchmark survey of the regional economy and predictions for 2022 during the "State of Grand Rapids Business" presentation February 2, during the Grand Rapids Chamber's annual meeting at the DeVos Place. Kuhelika De, assistant professor of economics, collaborated with Isely on the report. 

Data for the report is based on a representative sample from a survey last fall of 1,000 organizations in Kent, Ottawa, Muskegon and Allegan (KOMA) counties.  

Isely said business leaders are heading into 2022 with less confidence than last year. 

Diana Lawson, dean of the Seidman College of Business, stands on stage, a screen projects her image behind her
Diana Lawson, dean of the Seidman College of Business, introduces Paul Isely and Kuhelika De.
Image credit - Kendra Stanley-Mills
Seidman economics faculty members Kuhelika De, left, and Paul Isely discuss the economic forecast at the Grand Rapids Chamber's annual meeting at the DeVos Place February 2.
Seidman economics faculty members Kuhelika De, left, and Paul Isely discuss the economic forecast at the Grand Rapids Chamber's annual meeting at the DeVos Place February 2.
Image credit - Kendra Stanley-Mills

"This is telling us that the additional year of dealing with COVID has created uncertainty for them," Isely said. "They are worried about how much longer this will go on, and wonder if they will have to worry about inflation, interest rates and finding labor for the next 12 months." 

Several factors, including a short COVID recession and $5 trillion in federal stimulus, contributed to slowing the projected growth rate. Isely said these factors "superheated the economy," which will correct itself and swing back like a pendulum. 

"If you pull it too far in one direction, it will correct in the other direction," he said. "You can accelerate really fast for a short period of time, but can't do it for a long time. The economy corrects itself by using things like increases in prices in order to try to slow down." 

De said supply chain bottlenecks and low labor force participation rates will impact inflation, predicted by the Federal Reserve at 3 percent. However, De said her economic models show inflation measured by PCE (personal consumption expenditures) price index at 3-4 percent while CPI (consumer price index) price index is at 4-6 percent.

The Confidence Index, tracking overall business confidence in KOMA, fell last year to 72.4 percent, due in part, Isely said, to uncertainty, inflation and supply chain issues. 

Other findings from the Grand Rapids Economic Forecast 2022:

  Employment is expected to grow by 2.6% to 3.2%, showing similar growth to 2021

  Wages are expected to increase by 4.4% - 5.2%

  Prices are expected to increase by 5.9% - 7.3%

  The Forecast Business Confidence Index for 2022 is 70.5%, showing reduced expectations. 

The full article is posted online at https://www.gvsu.edu/seidman/sbr2022.

Vice President B. Donta Truss watches the presentation from a table.
B. Donta Truss, vice president for Enrollment Development and Educational Outreach, watches the presentation.
Image credit - Kendra Stanley-Mills
group of students seated at a table.
Seidman College of Business students also attended.
Image credit - Kendra Stanley-Mills

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