Buckle up — economists predict Michigan's recovery could stretch into 2023

Nov 30, 2020 at 11:46 am
click to enlarge Buckle up — economists predict Michigan's recovery could stretch into 2023

Like the hopeful and intoxicated girls huddled in bar bathrooms on New Year's Eve reapplying stubborn eyeliner and lipstick and declaring “this is going to be my year,” economists predicted that 2020 was supposed to be Michigan's year for “slow and steady” growth — and then the pandemic hit.

Now, economists predict an even slower recovery. After nine months of coronavirus, record unemployment, and a lack of a consistent stimulus plan for the jobless and the state's many small businesses, Michigan's economic rebound could stretch into 2023, Bridge Michigan reports.

The annual report from the folks at the University of Michigan's Research Center for Quantitative Economics (RSQE) found that Michigan's recession recovery will depend on “the wide rollout of a COVID-19 vaccine by mid-2021 and passage of a modest fiscal stimulus package.”

“It’s shaping up to be a very difficult winter, but there are glimmers of hope for a decent economic recovery,” the report reads.

That's great, right? Well, right now, even if Michigan gets its hands on vaccines and stimulus, RSQE director Gabriel Ehrlich says coronavirus is “in the driver's seat for the economy” as the state endures an increasing number of confirmed cases — a whopping 8,080 new cases reported on Sunday — and a three-week shutdown of many businesses, including movie theaters, bowling alleys, and dine-in service at restaurants.

“You have to conclude that fatalities are going to continue rising over the next few weeks in Michigan,” Ehrlich said.

The report also suggests that Michigan's job recovery will continue, but slower than when the state first reopened during the summer, which saw Michigan regain 100,000 jobs per month during May, June, and July due to many capable businesses adopting a work-from-home format.

Ehrlich claims the recovery has “slowed down very noticeably over the past few months” and, by 2020's end, 380,500 people will still be without work. In contrast, at the start of the pandemic, Michigan lost 1.o6 million jobs from February through April. However, it's likely that Michigan will see a “substantial” but not a complete recovery during 2021, and by the first quarter of 2022, RSQE predicts Michigan will “still be 152,000 jobs below employment.”

OK, then what is needed to ensure Michigan is able to slowly recover? Simple: Federal stimulus aid.

“Without more aid from the federal government, we’re going to be in serious trouble here in Michigan,” Ehrlich said. “We would expect school systems, health care systems, and local governments to be forced into furloughs [of employees] and likely layoffs if we don’t see more federal aid,” he continues.

“That means teachers, police officers, firefighters, and nurses who are going to be at risk of losing their jobs,” he says. “It would be bad for the economy and bad for communities.”

Michigan benefited from the $2 trillion CARES Act from March, as well as from the Paycheck Protection Program, which offered loans to businesses so they could maintain overhead costs and keep people employed when applicable. Even with the promise of financial aid to offset income taxes, economists predict Michigan's budgets will still suffer a $2.4-$2.7 billion shortfall during the next two fiscal years.

Last week, Gov. Gretchen Whitmer penned a letter to the Republican majority legislature, expressing the urgency of passing a $100 million stimulus package that will aid Michigan's “families and small businesses that have been hit hardest by the pandemic.”

“Michigan families are hurting, and while we must continue to advocate for meaningful support from the federal government, we simply cannot afford to wait,” the letter reads. Whitmer's letter also called for more aid for hospitals and nursing homes, whose resources have been ravaged by COVID-19, as well as a bump in Michigan unemployment benefits.

Though 2020 was supposed to mean a 0.7% boost in Michigan's employment, which actually fell by 9.2%, some 40% of the state's workforce impacted by layoffs or other employment disruptions since March received $25 billion in benefits. All things considered, Ehrlich remains hopeful.

“It could have been a lot worse,” he tells Bridge, “given what’s happened with employment in Michigan.”

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