Great Lakes Wire

Economists are anticipating a slowdown in Michigan's economic growth, influenced by the imposition of steel and aluminum tariffs and federal budget cuts. Gabriel Ehrlich, Director of the University of Michigan's Research Seminar In Quantitative Economics (RSQE), noted that while these factors would impact the economic forecast presented at January's Consensus Revenue Estimating Conference, the effect is not expected to be drastic.

"We do expect incomes in Michigan to keep growing," Ehrlich stated. The RSQE released an updated forecast in February, predicting moderate job growth in Michigan over the next few years. "One of the points I make is that it was always inevitable that job growth would slow down in Michigan as we came out of the pandemic. So a lot of that is mechanical. There’s just not as many people on the sidelines and available to work," he explained.

Job growth forecasts suggest a decline from about 30,000 jobs in 2025 to approximately 18,500 in 2026, with potential losses of around 2,300 jobs due to tariffs affecting transportation equipment manufacturing sectors. Ehrlich emphasized that Michigan's economy is sensitive to interest rates because of its reliance on the automotive industry. He pointed out recent interest rate cuts by the Federal Reserve could benefit auto and housing sales despite earlier rate hikes aimed at combating inflation.

"In some ways, Michigan is where the rubber meets the road," Ehrlich remarked. While no further rate cuts were made by the Federal Reserve recently, two reductions are anticipated this year—one possibly occurring during summer and another later in fall or early winter. "The reality is it’s going to be data-dependent," he added.

Ehrlich also mentioned expectations for short-term interest rates returning to normal levels due to discrepancies seen in what economists call an "inverted yield curve." He predicted that this situation would correct itself: "I do expect the yield curve to un-invert, so to speak."

Regarding personal finances, Ehrlich suggested income could rise as taxes decrease: "We expect to finally get back on the pre-COVID trend as we move forward on both because we expect inflation to moderate even with tariffs...and also we do expect tax cuts in next year or so which will increase disposable income for Michigan residents."

Overall optimism persists within his two-year forecast despite ongoing uncertainties related directly towards trade policies enacted under President Donald Trump; however cautiousness remains evident through statements such as: “I’m keeping my fingers crossed.”

Tim Nash from Northwood University's McNair Center commented during an appearance on 'Michigan’s Big Show starring Michael Patrick Shiels,' suggesting potential challenges ahead but expressing hopefulness overall: “I’m optimistic that by end-of-the-year we'll be on right track though frankly confused regarding President’s tariff policy.” Citing declining consumer confidence alongside predictions from regional Federal Reserves indicating decreased GDP nationwide alongside positive aspects like falling gasoline prices & mortgage rates - Nash concluded businesses remain hesitant given unpredictable nature surrounding current market conditions stating simply how crucial certainty proves essential when considering investment opportunities moving forward ultimately saying “Markets want certainty… Businesses want things they can depend upon.”