More than five million new jobs will be created in the next two years and unemployment will soon fall to its lowest rate since before the recession, according to projections released yesterday by University economists.
Speaking at the University’s 51st annual Economic Outlook Conference, Saul Hymans, director of the Research Seminar in Quantitative Economics, said 2.1 million jobs will be created nationwide next year and 3.1 million jobs will be created in 2005.
According to forecasts produced by the Research Seminar, the unemployment rate will fall from the current rate of 6.1 percent to 5.4 percent next year, Hymans said. By the end of 2005, the unemployment rate should drop down to 4.8 percent, he said.
With the turnaround in the job market, “the summer of ’04 should feel much better than the summer of ’03” for college graduates seeking employment, Hymans said.
Gross domestic product, which is the total value of all goods and services produced in the United States, is projected to grow by 5.1 percent in 2004 and 3.9 percent in 2005, said Hymans, an economics professor at the University.
The forecasts indicate that economic growth will level off from the 7.2 percent-increase in GDP achieved in the third quarter of this year, which was the highest quarterly increase since 1984. But even a 3.9 percent growth rate is “still healthy,” Hymans said.
The announcements kicked off a full day of lectures and presentations by various economists from the University, other colleges and the private sector. The conference, which is being held at the Michigan Theater, will continue today starting at 9:30 a.m. with a presentation on the outlook of Michigan’s economy.
One of the reasons unemployment is expected to fall is that businesses can no longer increase the productivity of their workers, Hymans said. Therefore, companies that want to produce more goods and increase profits will have to hire new employees.
“The economy produced more output than expected and did so while leaving more workers behind,” he said. “Employers have about hit the limit in terms of their ability to tease productivity out of workers.”
At the same time, Michigan’s economy continues to struggle. The state Department of Career Development announced yesterday that Michigan’s unemployment rate rose to 7.6 percent in October, the highest rate in 11 years. Last year, only 6.1 percent of the state labor force could not find jobs.
But on the national level, increased confidence in the economy should lead to GDP growth of at least 4 percent, University Surveys of Consumers Director Richard Curtin said during a presentation on the outlook of consumer spending next year. He said that in October, more consumers said they supported instead of opposed current economic policies.
Curtin said this is a positive sign, because the last time a majority of consumers supported national economic policies over the course of a year was 1997, and before that 1984.
“It is quite rare that consumers report, on balance, more favorable economic news than unfavorable,” Curtin said.
Curtin added that the economy could still turn south if businesses decide not to invest their profits in the hiring more workers, but he said this scenario will not likely occur.
William Dunkelberg, a professor at Temple University’s School of Business and Management, spoke about the perspective of small businesses on the economy. He said the primary concern of small businesses is growing insurance costs.
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