2011 ECONOMIC FORECAST Hari Singh Seidman College of Business
Truth and Disclosure National GDP in 2010 Our forecast for 2010 was 2% to 3% GDP. Q1: 3.7%. Q2: 1.7%. Q3: 2.6%. Q4: Projected: 2.3%. Average for 2010 could be 2.6%.
Truth and Disclosure Regional employment projections 4 Projected private employment in 2010 was 0.50%. 4 Actual increase of about 0.30% to 0.40%. 4 NSA: Nov compared to Nov Longer drags: Empirical models don’t pick up turning points in a timely fashion. 4 Subjective: CEO forecasts may be subject to exaggerated psychological mood swings. 4 CEO forecasts appear to be more accurate for the last two years..
Broad based recovery gaining momentum The Conference Board Leading Economic Index™ (LEI) is a good proxy for growth in the next six months. Was at in early 2010 (2004=100). Significant increase to in December LEI has five consecutive months of growth. Factors contributing to LEI growth: Improvement in financial indicators, consumer expectations, manufacturing, and early labor market indicators.
Increased growth in 2011 Low dollar and strong growth in Asia will fuel exports. Consumption growth will be modest but significant. Private investment will pick up momentum. Federal and state fiscal policies will be a drag or neutral at best. FED will keep interest rates low.
Employment prospects 4 Productivity has risen significantly as existing workers utilized more intensively. 4 Temporary hiring is up. 4 Job creation will pick up steam in a zigzag fashion. 4 By the end of the year: Monthly growth of 200,000 – 250,000 jobs. 4 Natural rate of unemployment: 6% to 7%.
How will the West Michigan Economy perform in 2011? All indicators point in one direction: West Michigan is having a significant turnaround. Restructuring in manufacturing has bottomed out and beginning to grow again. Growth in health sector, education, and professional services. Overall growth will be significant.
West Michigan Confidence Index 2011
Employment projected at 2% for 2011
Digging deeper into the employment numbers Last year 36% of the respondents indicated that they will hire workers in This year approximately 60% have indicated that they will hire in Of the persons who responded, about two thirds (66%) indicated that they would hire permanent workers. Corroborate a pick up in hiring.
Overall sales growth will be modest (2.5%)
Exports a bright spot: 9% growth
Blue and Red: Perennial Optimists Green (Pragmatic): 2010 (36%); 2011 (42%) Purple (Pessimistic): 2010 (45%); 2011 (37%)
Prospects for West Michigan Employment growth will be 2%. Expected overall sales growth of 2.5%. Export growth is a robust 9%. Health-related services, specialized services, and education will pick up the slack. Importance of positioning: Provide incentives for green technologies. Ensure that our graduates continue work in Michigan.
The outlook in 2011 for the national economy? Monetary Policy: FED impact is minimal. Govt. tightening: Both federal and state. At best fiscal policy is neutral. Growth expected to pick up over the year. Overall GDP growth: 3% to 4%. Employment will improve significantly. Unemployment rate of 7% by Nov. 2012?
Caveat: Gorilla in the Room Pressing Need: Dramatic increases in Basic R&D, Education/Training, Alt. energy innovation. Positive scenario: Credible tax increases (in the guise of tax simplification) and long term entitlement reductions. Negative scenario: Market loses confidence in our long term fiscal viability and there is a run on the dollar. Muddle through: Not enough capital investment. Long term progressive decline of economic foundations.