Isely predicts slower growth for 2016

"Every measure we have indicates continued economic growth for the local region in 2016, only at a much slower rate than 2015," said Paul Isely, professor of economics and associate dean in the Seidman College of Business.

Isely revealed his predictions for the West Michigan economy January 28, during the 2016 Colliers International West Michigan Economic and Commercial Real Estate Forecast event held at DeVos Place in Grand Rapids.

(See the full report here)

His survey of the greater Grand Rapids economy (Kent, Ottawa, Muskegon, and Allegan counties) was conducted in November and December of 2015. 

Isely said export growth will be much weaker in 2016. "Exports have deteriorated the most," said Isely. "Last year, exports were down $1 billion. Increasing exports have been the shining light since mid '90s, but now we are seeing weakness overseas." 

He also said there has been a shift from manufacturing growth to service growth. "Job growth out of the Great Recession was manufacturing up until last year when growth in the service sector out-sprinted manufacturing," he said. "The growth we are seeing now is on the service side and that has a much harder time moving the ball forward; it's not drawing as much money into West Michigan."

Isely added that growth in automotive sales that accelerated West Michigan out of the Great Recession is staying strong, but not growing anymore. He also said there are not enough workers to generate growth. 

"For first time in a long time we are seeing young people, age 25-35, come to the area, but we still have a labor gap, not a skills gap. Plus, the number of high school graduates will be radically dropping in size in the next five years, so we need to draw even more people from outside the region to maintain what we have," he said.

Some economists are predicting the next recession will come in late 2017 to early 2019. "Economists aren't very good at predicting recessions," Isely said. "The recession from 2007-2009 was caused by a direct shock to our economy. The next recession will be smaller, unless we end up with a new shock."

Overall findings for 2016:

• The Forecast Business Confidence Index for 2016 is 76.7% 

• Employment is expected to grow by 2.6–3.0%

• Sales are expected to increase by 2.3–2.7% 

• Export growth is forecast to be much weaker, with expected growth between 2.4–4.4% 

DOWNLOADALBE AUDIO 

* Isely said the economy will continue to grow but at a much slower pace (audio).

* Isely said exports in Michigan are down by $1 billion (audio).

* Isely said automobile sales and production have been flat and won't add growth in 2016 (audio).

* Isely said West Michigan has run out of workers. The number of employed people went up by 30,000 while the number of unemployed people dropped by 20,000, creating a gap (audio).

* Isely said growth out of the Great Recession was from manufacturing, until last year when the service sector out-sprinted manufacturing (audio).