LANSING – Economists testifying at Friday’s Revenue Estimating Conference saw good signs of economic growth in Michigan going forward, but concerns about the national economy and the debt crisis in Europe, which affects the state, are ever present.

George Fulton of the University of Michigan’s Research Seminar in Quantitative Economics said the state is more than two years into a sustained recovery. What has been typical of that recovery is that the job growth has been led by manufacturing and has been more robust than the nation’s.

But this time the recovery has been at a more subdued pace than after past recessions.

That is due to a surge in employment in manufacturing in early 2011 that is not sustainable, and that light vehicle sales are expected to increase at a slower pace from 2012 to 2014. There is also subpar growth expected in the national economy during the next three years.

His colleague at RSQE, Joan Crary, said the momentum behind the national economy has been slow.

“It still hasn’t found its footing,” she said.

She also said foreclosure rates remain high, and consumer spending has been muted.

The government’s direct contribution to the output of the economy has been slowing, she said.

“The government sector has been a drag on the economy over the past year,” she said.

Several signs of optimism included the pent up demand for new vehicle purchases, given that the average vehicle age in the country is 10 years. She is also seeing some growth in housing starts and in business capital spending due to healthy corporate profits and generous tax incentives for equipment purchases.

In Michigan, Mr. Fulton said the good news is that Michigan is adding jobs after a decade bleeding them.

“I’m not used to getting good news here, it’s disconcerting,” quipped Rep. Chuck Moss (R-Birmingham), Appropriations chair.

In 2011, Fulton estimates the state added 63,500 jobs, but he is still waiting for the December numbers. At last year’s conference Fulton forecasted the state would see a growth of just 16,000 jobs.

For 2012 to 2014, he is expecting to see job growth continue, but at a much more subdued pace. He is forecasting 26,000 jobs in 2012, 28,500 in 2013 and 46,800 in 2014.

He said the darkest days are in the books and things are turning around, but there is much work to be done, due to the depths of the recession and the 857,000 jobs losses in the past decade. If his projections hold true, by 2014, the state will have recovered a quarter of those jobs lost.

Nationally, Crary said she does not believe the economy will be able to sustain robust growth in the next two years.

She forecasts that the unemployment will go from 8.9 percent in 2011 to 8.1 percent in 2014. Exports are expected to slow, and foreclosures are still a threat, as well she said.

And the debt crisis in Europe and the effect that could have on the global banking sector is causing real worry, she said.

Nigel Gault of IHS Global Insight said he also has concerns over the crisis in Europe and said it is no longer unthinkable that countries could exit the Eurozone. Those global worries, combined with domestic political risks, have left him to peg U.S. recession risks at 30 percent.

He is forecasting real gross domestic product growth of 1.8 percent in 2011, 2 percent in 2012 and 2.4 percent in 2013.

Gault expects the Federal Reserve to try another round of quantitative easing this year and he also said a tax increase would also be warranted. He said that could come by eliminating tax deductions like those on the mortgage interest of second homes.

He agreed with Crary that housing starts are showing growth, and said there is pent up demand for housing, given that in 2011 when compared to 2007, there were 2.1 million more households with at least one additional adult.

That could be adult children living with their parents after college or couples who cannot afford to get a divorce.

The failure of the super committee to come up with a solution last year, has added a big fiscal uncertainty and said January 1, 2013, could be another crisis deadline.

Budget Director John Nixon agreed there are many risks out there, and also noted the failure of Congress to do anything meaningful to reduce its debt.

“I don’t know whether to feel good or bad,” Nixon said.

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