ANN ARBOR, Mich. (AP)-- Dragged down by the domestic auto industry's woes and a weak housing market, the state economy will remain "stuck in reverse" through 2010, University of Michigan economists said Friday.
The state will struggle next year along with the hard-hit domestic automakers and will continue to lose jobs for the next two years, economists at the university's Research Seminar in Quantitative Economics said in their annual forecast.
But the news isn't all bad. The economists expect 2010 will be "much better" than 2009, even though they don't see the state having a net job increase until 2011. And they see a number of increases in businesses making plastics and resins, breakfast cereals and surgical and medical instruments, along with machine shops, that could help lead the state to better times.
The effect of the continued job losses could mean the biggest drop in state revenues since the recession of the early 1980s. The FSQE forecast sees general fund revenue falling 7.8 percent this budget year compared to revenues for the past fiscal year. That's even greater than the 7 percent general fund revenue drop that hit between the 1980 and 1981 fiscal years.
The drop means the state's general fund will take in about $730 million less than the $9.4 billion it received in the fiscal year that ended in September, while the school aid fund will take in about $80 million more than the $11.5 billion it received. Some of the general fund shortfall will be covered by around $400 million carried over from the past fiscal year.
The state also might get around $650 million from a stimulus package Congress is expected to pass after Barack Obama becomes president in January. But economists are saying the state can't rely on those one-time fixes and has to make cuts or raise taxes this year to avoid dealing with a large shortfall in next year's budget. The RSQE forecast says tax revenues for the general fund and school aid fund will drop in the fiscal year that starts Oct. 1 as job losses and Michigan's economic woes continue.
"The hard times in Michigan are here to stay for a while longer," University of Michigan economist George Fulton said Friday.
He noted that Michigan is losing a larger proportion of its high-paying jobs than other states. The forecast says the state will lose 108,000 jobs next year, on top of the nearly half-million lost this decade, and 24,000 more in 2010.
Included in those losses are 53,000 manufacturing jobs in 2009 and 24,000 in 2010, with nearly two-thirds of those coming from the auto sector.
The forecast predicts the state will lose 18,000 construction jobs next year before holding steady in 2010. Professional and business services will lose about 18,000 jobs, many of them white-collar auto industry jobs. The only sector to gain employment will be education and health services, which are expected to add 22,000 positions.
