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What's in the forecast?

Matt DeYoung • Mar 1, 2017 at 10:00 AM

Manufacturing is growing at a staggering rate in Muskegon.

That’s great news for those in Muskegon, but it’s a major concern to manufacturers in Northwest Ottawa County who rely on the labor force north of the Grand River to help fill jobs.

That was one of many key points that came out of the message passed along by Paul Isely, associate dean of the College of Business at Grand Valley State University, during Tuesday’s Economic Forecast 2017 at the Grand Haven Community Center.

Jeff Smith, president/CEO of GHSP, said he was surprised — and concerned — with parts of Isely’s message.

“The one thing (that stood out) was the relationship to Muskegon, how dependent we are at this point in time on the available resources of workers in Muskegon County,” Smith said. “In the past, there’s always been kind of a division between Northwest Ottawa County and Muskegon. For GHSP, we hire a number of employees from the Muskegon area, not only for our Grand Haven location but our Hart location. Going forward, that’s something we have to think about for our growth strategy.”

Isely quoted statistics that every day about 15,000 people drive into Northwest Ottawa County to work, about 7,500 people live here and work here, and about 16,000 people leave the area daily and work someplace else.

“If there’s a negative number, we don’t have enough workers living here,” he said. “And in manufacturing, you can see right now there are 2,800 more people driving in to work in manufacturing, so we have a shortage in this ZIP code to fill those jobs.

“Where are those manufacturing people coming from? Dead north,” Isley continued. “You have 7,000 workers moving in every day. Right now, you’re handling your work force by drawing workers from Muskegon County. … The bad news is, Muskegon County is growing fast.”

Isely also talked about a lack of innovation in local businesses, which he sees as somewhat concerning.

“Most of your workers are working in firms that have been here for a while,” he said. “We’re not seeing a lot of innovation. In this two ZIP-code area, it’s among the lowest innovation level for workers working in new firms that I see in West Michigan. Your community is all about the strong, large old firms. That’s not a surprise considering the density of family-owned businesses. That’s what your strength is. That’s what you do well. It’s not innovation.”

Smith said that’s not entirely true — GHSP has made significant changes over the years.

“If I reflect on where GHSP has been historically, we’ve been a stamping and fabrication plant,” he said. “With our movement into electronics, becoming more of a mechatronics organization, had we not made that move, there’s a question could we have been able to weather the storm through the recession.”

Isely’s message wasn’t entirely bad for local business. The local economic forecast is actually quite positive for 2017.

“We really have to walk through where the economy is right now overall,” he said. “We have to do that because, here in West Michigan, in Northwest Ottawa County, we make stuff. We make stuff for other people to buy, so how well the rest of the U.S. is doing is a big deal on how we’re going to be doing here.”

Isely’s presentation covered many topics, from housing to wages. His most dire warnings revolved around an expected recession in the next few years and our region’s dependence on outside workers to fill manufacturing jobs. He explained that each time the actual gross domestic product (GDP) crosses the potential GDP, a recession follows within 18 months.

But he called 2017 “the year of the consumer.”

“Consumers are going to be really happy in 2017,” he said, adding that the current median income for those working is higher, adjusted for inflation, than it’s ever been.

“We have a job, we’re making more money, so what does that mean? Party time,” he said. “Let’s go buy stuff. And we’re seeing people start to accelerate what they purchase — which is really good, because, what do we do? We make stuff.”

Here are some other highlights from Isely’s presentation:

• The economic growth in the Ottawa-Kent-Muskegon-Allegan counties area is slowing. The main reason? “Because we’re out of workers.”

• Another reason for the slowing growth is because we’re on the shirttails of some very good years in some of our main manufacturing fields — automotive and furniture. “How many new (automotive) units did we sell last year, 17.5 million? We’re not going to sell a lot more units than that. We saw breakneck growth in automotive. People began replacing their cars. But guess what? They’re buying cars that last 2-3 times as long. They cost a lot of money, so they don’t want to buy them as often, and they’re driving less miles. The growth we got from automotive, has it gone away? No, if you’re an automotive supplier, you know you’re still working really hard.”

• A third sector that’s making inroads in Northwest Ottawa County is the aerospace industry. “What I’m being told by manufacturers is that it doesn’t matter how many planes are being built. It matters how many miles they’re being flown, because we’re creating parts. And they’re flying a lot of airplane miles right now.”

• Accommodations and food services are growing industries, averaging 7 percent. “The Chicago folks are making their way farther up the lake. We’re seeing a lot of growth here in Grand Haven. … Muskegon is seeing the same thing. The good news is, people are coming up the lake, they’re no longer stopping in Saugatuck. They’re no longer blowing by to Ludington. They’re stopping here.”

• Manufacturing wages have remained flat since 2000. Why? “Manufacturers compete with the entire world. They compete with Tennessee, with North Carolina, with China. They have a cap with where their wages can go. If your labor prices get too high, we’re not competitive. … The good news is, they still pay a lot, but they’re having a hard time pushing that. Health care had a big increase, but they still get paid a lot less than manufacturing. I would expect that to continue.”

• Local real estate has remained strong. For every $100 you spent on a home in 2000, you’d now need to spend $140. That number well exceeds the previous high-water mark set in 2006. In addition, more people are moving into Kent, Ottawa, Muskegon and Allegan counties than are leaving for the first time since the 1970s.

• President Trump will have very little impact on the economy in 2017. “Whether you’re the hugest Trump supporter or the biggest Trump detractor, Trump will not impact our economy much this year. Why? Because everything he does takes time. Next year, yes. This year, not so much.”

Isely offered his take on President Trump through a strictly economic lens:

“He said we’re going to deal with free trade — we’re going to move away from it. We’re going to deal with immigration — we’re going to move away from it. We’re going to deal with regulation — we’re going to move away from it. We’re going to deal with infrastructure — we’re going to spend money there. And we’re going to deal with the tax code — we’re going to move away from it.

“Two of those things slow the economy — his stance on trade and immigration. Three of them speed economy up — taxes, regulation and infrastructure. We started with immigration and trade, which sort of bogged us down. But with the other three, there’s optimism right now. People are making the assumption that the reduction in regulatory and the changes in the tax code will be big enough to offset those trade issues.”

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