A respected University of Michigan think tank forecasts a modest uptick in jobs in the coming year, but not without warnings of a lot of uncertainty hanging over economic predictions.
The U of M Research Seminar in Quantitative Economics met Thursday in Ann Arbor, where forecasters presented their short- and long-term predictions (with caveats) for the state and national economic pictures. The big unknown is the scope and direction of policies after President-elect Donald Trump takes office in January.
Gabriel Ehrlich, the director of the Research Seminar in Quantitative Economics, said the Federal Reserve is expected to slowly cut interest rates now that inflation has cooled, and that’s good news for Michigan.
“We have an interest rate-sensitive economy with the auto industry, with manufacturing,” he told Michigan Public Radio, “so we think that’s going to help and we expect job growth to resume over the next couple of years and with some tax cuts coming up in the incoming administration that are going to boost personal income.”
The RSQE winter economic outlook says the election has “amplified the uncertainty surrounding Michigan’s economic outlook” as the next Trump administration takes shape.
That caveat accompanied a prediction that recent job losses will give way to job gains starting early next year and continuing into 2026. The RSQE anticipates Michigan’s unemployment rate will fall from 4.6% in the fourth quarter of this year to 4.3% by the end of 2026.
Ehrlich said interest rate rollbacks and tax cuts would be good for auto sales and manufacturing. But he said most of the growth is expected to be in sectors that are less affected by political fights and changes in government policies.
“We do expect job growth to resume but it’s industries like government, health, leisure and hospitality that are usually not very sensitive to the business cycle and are also not really very sensitive to things like tariffs,” he said.
The RSQE report also said changes in federal immigration policy, including a big increase in deportations, could slow workforce growth.
Ehrlich said the projection assumes that Michigan’s economy would roughly break even if there’s a trade war due to increased taxes on imported goods under Trump.
“Depending on exactly how the tariffs shake out, it can be both a plus and a minus and, so, we’re going to be watching that,” he said. In the event of heightened U.S.-China tensions, Ehrlich said increased business with other global trade partners could pick up the slack.
