GRAND RAPIDS — The Grand Rapids area’s relatively young population, a stable automotive sector and a resilient housing market could all help the region avoid a potential recession hitting the nation this year.
These are some of the key findings of the annual Grand Rapids Economic Forecast released today by researchers at Grand Valley State UniversitySeidman College of Business. The findings show that — absent other economic disruptions — the state’s second-largest city and surrounding areas are poised to outperform the US economy.
“Right now, what we’re seeing is that the Grand Rapids area is going to grow at twice the rate of the US economy this year,” Seidman College Associate Dean Paul Isely said. “We’re not going to see the same slowdown (as the US) and if we follow that path, we’ll actually avoid a recession here.”
The growth is expected despite continued labor shortages and sector-specific slowdowns involving manufacturing and hospitality. The findings also come as the Grand Rapids-Wyoming metropolitan area has reportedly surpassed pre-pandemic employment levels, the only metro in Michigan to do so.
Isely and GVSU Associate Professor Kuhelika De presented findings from their economic forecast Wednesday morning at the Grand Rapids State Business event, hosted annually by Grand Rapids Area Chamber of Commercee. Graduate assistant Marcus Lynch also contributed to the report.
Demography is a ‘big problem’
Data for West Michigan still predicts a slowdown in 2023 versus 2022 as interest rates rise and inflation continues to hamper some sectors of the economy more than others.
However, Kent County has more residents in their 30s than residents 65 and older. The demographic findings are a “huge problem,” especially because the US as a whole has an inverted ratio, Isely said.
“If you want to have a growing economy, you bring in young people. Young people convince other young people to come here. All of this leads to the ability for your company to grow as fast as you say you want to grow, and that will take a lot of additional employees,” Isely said at Wednesday’s event.
Even with favorable demographics, talent acquisition remains the No. 1 issue. 1 for Grand Rapids business owners this year, Isely said.
Meanwhile, the GVSU report expects a slowdown for the region’s manufacturing sector as consumer spending declines. The healthcare industry will also face its share of challenges as wages and other operating costs continue to rise.
“There will be an increase in demand,” said Dr. Darryl Elmouchi from Corewell Health West, adding that hospitals are dealing with “massive fixed costs” that do not fully account for the cost increases they are experiencing. This will likely drive more operational efficiencies and consolidations that have been built in recent years.
“You’re definitely going to see more health care consolidation,” Elmouchi said during a panel discussion during the House event.
The regional inflation rate is expected to follow the national projected inflation rate of 5 percent, said De. Supply chain issues are also likely to persist, although some easing is starting to show compared to 2022.
“We are seeing the pressure on the supply chain ease and relax slowly,” De said. “It’s not rebounding to pre-pandemic levels, but it’s slowly.”
An encouraging view
RoMan Manufacturing Inc. President Nelson Sanchez and Construction of Orion President Brad Walsh confirmed that they both see supply chain disruptions diminishing.
Orion Construction has overcome these disruptions by “front-loading” projects and working with banking partners to obtain and store as much building material as possible, Walsh said.
For its report, the Seidman College of Business surveyed companies in Kent, Ottawa, Muskegon and Allegan counties in November and December 2022. The responses showed that 33 percent of firms expect to cut jobs, but a third of firms still expect to grow at more than 3 percent. . The majority of survey respondents also expect their sales to increase this year by 2.3 percent.
Additionally, GVSU’s forecast notes lingering concerns that could dampen growth. For example, if consumer spending declines faster than expected, or if inflation lasts longer than expected, Isely said.
China is also starting to lift some of its COVID-19 restrictions, which will have an unknown impact as many companies have built up their supply chains in other countries or have restored operations in the US, Isely said.
“We have to remember that economics is still about people,” said Isely. “(People) are being asked to respond to things they’ve never done before, times that can have unexpected results.”
