Michigan’s 2023 Forecast: Takeaways from the Economic & Business Outlook Forum

Advocacy News – Nov. 16, 2022

The Michigan Chamber of Commerce, in partnership with the Michigan Bankers Association, hosted one of its last signature events for the year this past week – the annual Economic & Business Outlook forum. More than 500 registrants came together virtually to hear from leading economists and experts about the latest key economic trends and data that shed light on what’s ahead for 2023 as well as explore the potential solutions to ongoing business pain points while the recovery from the COVID-19 pandemic and other state, national and global factors continue.

Dr. Roger Tutterow, professor of economics at Kennesaw State University, paved the way into the discussion as the opening keynote speaker. Here are some of his most noteworthy points:

1. What a “recession” is has to be more nuanced now. The key definition for “recession” is a period of diminished activity, especially in trade and industrial activity. Many will define “recession” based on negative quarters of GDP growth, but as he analyzed the quarters of negative growth earlier this year, other factors contributed to these results. The trade sector alone clipped off 3% of growth, which is why the GDP fell rapidly in the first quarter. During the second quarter, an inventory adjustment played part in a dip in growth. There is more nuance to the meaning of “recession” than how we have defined it before; we must assess multiple factors before labeling an economic situation.
2. Consumer sentiment has fallen drastically. Inflation has played a huge part in this statistical change, headed by the leap in gas prices over the past two years. Michiganders are more concerned about income-to-spending ratios than ever before, and as steep prices have persisted, the hope of economic relief has waned.
3. Pandemic job recovery numbers show a mixed picture. The country’s changes in payroll employment have presented the greatest drop in our history. Over a 20-month period, the U.S. shed 22 million jobs, half of which have been added back into the market the past five months. However, we are still working on immense job revival and states like Nevada and Hawaii have exponential growth to achieve in order for citizens to return to a state of financial security they found themselves in pre-pandemic. Michigan was also hit hard by the pandemic and is still a little bit below pre-pandemic levels of employment, but many believe we are making gradual progress. By the spring of 2023, experts are optimistic that many Michigan cities will exceed pre-pandemic levels though.
4. The 2023 crystal ball. A recession is more likely than not, but current predications are that it will be a mild one. Inflation is coming down gradually, federal interest rates will peak and by spring of next year, housing prices should correct themselves. The industrial economy needs some relief in terms of production costs and the value of the dollar.

From there a panel of known authorities jumped in for a panel discussion moderated by WJBK Fox 2’s evening anchor Roop Raj to take a deeper dive into key pain points for businesses and how Michigan employers can best prepare for what’s ahead and adapt to what’s underway. The panelists were: Beth Ann Bovino, managing director, U.S. chief economist, and global economics and research with S&P Global Ratings; Dan Giedman, department chair and professor of economics at Grand Valley State University’s Seidman College of Business; and Jason Tinsley, managing director market manager at J.P. Morgan. Here are a few of their key insights:

1. What can companies do to brace for a recession? The trend is showing that businesses, and households alike, are already starting to brace for a recession. Many have a much healthier balance sheet than previous pre-recession periods. This may be due to the pandemic as spending was down during that time, interest rates were lower and stimulus checks were distributed. All of those factors could contribute to healthier savings accounts.
2. Inflation is the most important thing facing the economy right now. It is suspected that our economy has hit it’s peak inflation point currently, and prices will go down sharply in late 2023 or early 2024. The Feds are closely monitoring, and many say the fight against inflation is what will bring us into a protentional recession.
3. What is causing the inflation? COVID did quite a number on the supply of goods, not only in the US but all over the world. When the demand is high, but the supply is low, we start to see issues with inflation. The Feds can try to bring inflation down until we ease the issues with supply, but what we are seeing now is a different issue than in past recessions. For example, there was an issue with demand during the 80’s, which is something the Feds can much easier control.

Rounding out the event was the closing keynote from Quentin L. Messer Jr., CEO of the Michigan Economic Development Corporation (MEDC), and president and chair of the Michigan Strategic Fund. A copy of his presentation is here with a MI Chamber recap of  his thoughts on how to best build MI’s economic future:

1. What makes economic development so important? Big transformational projects matter, but economic development is much more that than. Supporting placemaking investments, providing buyer/supplier matchmaking opportunities, expanding into international markets, accelerating startup opportunities, helping small businesses to grow, promoting MI as the best-in-class destination for travel and tourism, and protecting and rehabilitating MI’s historic places are all ways to help support MI’s economic growth. We all need to be working collectively on those fronts.
2. What are the biggest challenges facing Michigan currently ? Over the last few decades MI has experienced headwinds that are affecting its economic growth. These include: industry shifts, relevant needs for each part of the state, perception of what it is like to live here, and most importantly, negative population trends – more simply has to be done to reverse that resident decline.
3. How is the post-pandemic world affecting Michigan’s economic development? There aren’t many things that weren’t affected due to COVID. Small businesses need support and recovery more than ever. There is a labor shortage as participation in the workforce remains historically low. MI’s most rural region saw a 2% increase in population, meaning many people moved to more rural cities during the pandemic.
4. Economic opportunity can be strong in Michigan. There are many things to look forward to between now and the end of 2023 when thinking of MI’s economic future. If our state pulls together, we have the opportunity to be more competitive and strengthen businesses and communities within the state, empower our workforce, invest in our infrastructure, and change the narrative of MI to better attract and retain talent.

Check out a recording of the full Nov. 10 event and discussion here:

A special thanks again to our partner the Michigan Bankers Association, and all our sponsors: Horizon Bank, Michigan Works! Association, AKT Peerless Environmental Services, Ann Arbor Spark, Eaton Community Bank, Independent Bank, Michigan CAT, and West Shore Bank. This programming wouldn’t be possible without their support.

For questions or comments regarding this or future MI Chamber Signature Events, please reach out to Wendy Block at wblock@michamber.com.