CHICAGO — Michigan continues to climb out of its devastating 10-year recession and could see its unemployment rate fall to 7.4% by the end of 2014, economists and state fiscal officials said Wednesday at the Legislature’s twice-annual revenue estimating conference.
“The Michigan economy is partway through its third year of recovery after experiencing a debilitating recession at the end of 2009,” George Fulton, an economist at the University of Michigan, told lawmakers. “Michigan does appear poised to continue its recovery, with 2011 going down as a year of solid growth.”
The state is on track to enjoy five years of steady job growth after a decade of heavy losses.
High-wage jobs last year marked the strongest area of job growth, another good sign for the future health of the economy, Fulton said.
The state’s jobless rate in 2011 was 10.3%, and is expected to drop until reaching 7.4% in 2014. Private-sector jobs will offset the shrinkage of government jobs, a sector that has lost jobs every year starting in 2003 and will continue to do so through 2014, the economist said.
But he cautioned that despite the gains, Michigan is unlikely to recover the number of jobs it lost over the past decade. From 2000 to 2009, the state lost 859,000 jobs. Through 2014, it’s expected to create a total of 284,000. “Here the news is more sobering,” Fulton said.
Revenue collections are also expected to improve, though modestly and with some losses in 2013.
Michigan officials said the state will now likely collect $146 million more in fiscal 2012, which ends Sept. 30, than they projected in January.
General fund revenues are projected to come in $34 million higher than January expectations, and school aid revenues $113 million over original projections. Together the general fund and school aid fund are expected to total $19.94 billion in fiscal 2012.
Officials revised downward by $65 million the amount of revenue they expect the general fund to collect in fiscal 2013, and revised up by $115 million the amount the school aid fund will collect. Together the two are now expected to total $20.04 billion, with the school aid fund accounting $11.17 billion and the general fund making up $8.970 billion.
The general fund is projected to rise to $9.25 billion in fiscal 2014 and the school aid fund to $11.47 billion.
The general fund dip in 2013 is due in part to the expected loss of revenue the Michigan Business Tax, which Gov. Rick Snyder eliminated in the current budget.
After the conference, Budget Director John Nixon told local reporters that the administration would use a projected 2012 surplus for one-time expenditures, including possibly a rainy-day fund deposit.
Legislators will use the revenue estimates to craft a fiscal 2013 budget, which they hope to complete by June 1.
“The improvement in economic activity that occurred in Michigan in 2011 has carried over into 2012,” State Treasurer Andy Dillon, one of the panelists at the conference, said in a later statement. “Employment is rising, motor vehicle production is increasing, and tax collections are growing.”
Legislators and fiscal officials noted several risks to the projections, with much talk about uncertainty in Europe. The price of oil also affects Michigan, as it helps drive the purchase of light motor vehicle sales, a key indicator of the state’s health.
Sales of cars made by the Detroit Three are expected to continue to improve through 2014, but at a more modest pace than in 2011, Fulton said.