Moderate job growth and gains in income anticipated over the next two years.

Michigan’s current economic soft spot is expected to return to growth over the next years according to a new report from University of Michigan economists.  Here are highlights from their report on the outlook for 2025 and 2026.

Moderate job growth

It’s difficult to say how policy decisions directed by the incoming presidential administration and the subsequent market responses will affect job growth, but economists foresee moderate job gains in 2025 and 2026.

Industries expected to see the most growth in jobs are healthcare, leisure and hospitality and government. Manufacturing and professional and business services are expected to “tread water over the next two years.”

In numbers, this job growth means Michigan is projected to add 19,000 payroll jobs in 2025 and an additional 26,700 in 2026. Job growth is expected to be accompanied by relatively low unemployment.

Optimism about income

Economists are optimistic about personal income, pegging 2026 per capita income at $68,500, or 41% higher than in 2019.

Real disposable income is expected to get a boost due to cuts in federal income taxes. It’s projected to gain 0.9% in 2025 and 1.6% in 2026. With this level of growth, real disposable income will be 8.1% above 2019 levels.

Expectations for tariffs

Tariffs on imported Chinese goods are expected to take effect in early 2026. Economists expect them to be three times larger than the tariffs enacted during the first Trump administration. (Shortly after the U-M Department of Economics report was issued, Donald Trump announced his intention to also impose tariffs on Canada and Mexico after he takes office in January.)

EV tax credits

Economists anticipate that the tax credits for electric vehicle (EV) purchases enacted in the Inflation Reduction Act of 2022 will end early.

Expected renewal of tax cuts

Substantial personal and corporate tax cuts are projected with an expected renewal of the Tax Cuts and Jobs Act of 2017. Economists also foresee a partial tax exemption for Social Security benefits, tips and overtime income.

Read the full economic outlook for Michigan report here.  

 

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