2018 Economic Outlook

By all accounts, 2017 was another record year of economic growth for West Michigan. And already, “2018 is shaping up to be another strong year,” according to Jim Robey, Director, Regional Economic Planning Services, W.E Upjohn Institute. Robey’s message was delivered on December 14 at The Right Place’s 2018 Economic Outlook event, which attracted nearly 400 attendees for an in-depth review of 2017 and a look ahead to 2018.

2017 Results and Insights

Birgit Klohs, President and CEO, The Right Place, kicked off the event with a review of the organization’s work in 2017. Klohs provided a “feet-on-the-street” look at 2017 and what might be ahead for 2018.

The first year of The Right Place’s three-year strategic plan (2017–2019) ended with a record 22 economic development projects. Those projects are estimated to create or retain 1,442 jobs, $70.4 million in payroll, and generate $119 million in capital investments over the next three years.

Interestingly, out of the 22 projects completed, only four were business attraction projects (California Closet, J-Star Motion, Siliconature USA, and Zimmer Biomet/RespondWell). This aligns with our goal of dedicating at least 80 percent of our efforts to companies already located in the region.

Further analysis of these projects reveal several interesting trends and insights into what areas of West Michigan’s economy continue to grow and expand.

When breaking down projects based on industry, jobs, and investment, manufacturing continues to be the big winner in the region. Half of all projects completed in 2017 were in the manufacturing sector, resulting in 545 new jobs and nearly $70 million in capital investment.

Food processing and agribusiness also had a strong year. In 2017, The Right Place completed five food-related projects, resulting in 165 new jobs and $38 million in investment.

On the jobs side of the equation, professional services had a very strong year. Although professional services only accounted for two projects at The Right Place, those projects will result in the creation of 538 new or retained jobs over the next three years.

Looking Ahead

While setting the stage for 2018, Klohs framed her remarks through the focus areas of The Right Place’s three-year strategy.

ADVANCED MANUFACTURING

Coming off a strong 2017, manufacturing is expected to continue growing in 2018, albeit with some possible headwinds. At present time, there remains some uncertainty around vehicle production estimates for 2018. Many industry experts are warning of a decrease in production— into the mid-16 million range or below. Although West Michigan manufactures a wide variety of goods, automotive manufacturing still represents a significant percentage of the total sector.

FOOD PROCESSING AND AGRIBUSINESS

The food processing and agribusiness sectors are expected to continue growing in 2018. However, the rate of growth may not be as high as previous years. The future of NAFTA and international trade are already beginning to impact commodity prices. And the challenges associated with the Food Safety Modernization Act (FSMA) continue to create uncertainty in food processing.

LIFE SCIENCES AND MEDICAL DEVICES

All indications point to another banner year for West Michigan’s medical device industry. The industry already employs more than 2,500 in the region and is growing at an annual rate of five percent. The Right Place intends to support that anticipated growth through MiDevice—a collaborative group of medical device manufacturers in West Michigan.

INFORMATION TECHNOLOGY AND COMMUNICATIONS

No surprise here. West Michigan’s IT and communications industry continues its rapid growth. The region’s industry is one of the fastest growing in the nation, growing at a rate of 18.5 percent—6.5 percent higher than the national average. At this point, the industry’s biggest limiting factor is availability of talent. The region’s talent pipeline is fueled by a network of 17 regional colleges and universities, but the supply of tech talent isn’t meeting the demand.

INFRASTRUCTURE

Without a world-class infrastructure, economic growth comes to a screeching halt, impacting all the sectors mentioned here. That’s why West Michigan must make new investments in water and wastewater capacity to support the food processing and agribusiness industry. The same goes for rural broadband solutions. A solid infrastructure is the foundation on which all industry is built, and it is a critical component in West Michigan’s economic vitality.

WORK-READY TALENT

The Right Place’s strategic partners at Hello West Michigan are making tremendous progress in attracting and retaining work-ready talent for the region. The organization’s ReThink West Michigan event, now in its 6th year, has become a region-wide affair, with simultaneous events in Grand Rapids, Hastings, Holland, Muskegon, and Ludington. In 2017, the event attracted nearly 260 attendees and is expected to grow in 2018. Learn more at hellowestmichigan.com.

QUALITY OF LIFE

West Michigan’s quality of life has an immense impact on attracting businesses and talent to the region. Over the past decade, quality of life has climbed the list of relocation factors, and today, it’s in the top five. Many local organizations are doing incredible work to increase West Michigan’s quality of life. The Right Place was actively engaged with over 77 of those organizations in 2017 and will continue serving and supporting them in 2018.

CHALLENGES AND OPPORTUNITIES

Overall, the picture for 2018 seems bright. All indicators point to continued growth and investment. Talent pipelines at area colleges and universities remain strong. Also, West Michigan has gained national attention as one of the hottest real estate markets in the country. Even so, there are a few challenges ahead.

TALENT

For the fourth consecutive year, talent remains the top concern for businesses and economic development organizations. With an unemployment rate hovering in the mid-three percent range, the region’s labor market is extremely tight.

At the Economic Outlook event, Robey stated that, today, there are only an estimated 21,000 work-ready adults available for employment in the Grand Rapids MSA (Barry, Kent, Ottawa, and Montcalm Counties), which is causing increased employee turnover and “job hopping.”

Given the challenge of finding talent, several West Michigan organizations have implemented initiatives to propel our region in the right direction. Just as this problem did not develop overnight, the solutions will take time to resolve.

REGIONAL COLLABORATION

As West Michigan continues growing and expanding, we must remain committed to regional collaboration. It’s the only way to compete on a global scale. That is why The Right Place is dedicated to building regional partnership throughout the 13-county region.

Currently, we are working on projects with partners in Muskegon, Oceana, Lake, Barry, Newaygo, Montcalm, and Ionia Counties. As these counties grow and prosper, so will West Michigan. Many of these counties have assets that complement those in Kent County.

NAFTA AND INTERNATIONAL TRADE

The final issue presented by Klohs was a larger challenge at a national level—the North American Free Trade Agreement (NAFTA).

In 2018, few other national issues will have more of a direct impact on West Michigan business than a potential renegotiation of NAFTA. And while there is always room for improvements and revisions, a full renegotiation – or the rhetoric surrounding a complete pullout of the agreement – could be disastrous to Michigan’s economy.

Canada is Michigan’s largest trading partner. Michigan exports $23.5 billion in goods every year. There are few products and industries that wouldn’t be affected by a NAFTA breakdown. Agricultural commodities, office furniture, medical devices—name a product or industry and the chances are it is impacted by NAFTA. In fact, Michigan would be the number one most impacted state in the country by NAFTA. It is estimated that over 50,000 jobs in West Michigan are supported by international export business.

WHAT CAN BE DONE?

When it comes to NAFTA, it’s up to all of us here in the region to raise our concerns. At The Right Place, we’re doing our part through the International Economic Development Council (IEDC), our industry association, and strategic partnerships. However, you can also make a difference.

By educating our elected officials on the importance of international trade and NAFTA, we can work to ensure Michigan’s international trade for the future.

2017 was a strong year for West Michigan’s economy. Companies showed growth, invested broadly, and created jobs in our community. We’re planning for the same – and more – in 2018.

Like always, there are challenges and opportunities in front of us, but the difference is how we react and address them. That’s what will define the future for West Michigan.

We look forward to working with you and supporting your individual company growth in 2018, and we wish you continued success in the year ahead.