ANN ARBOR – Michigan’s residents should continue to see modest but steady economic growth over the next two years that will lead to job growth, lower unemployment rates, a larger automotive market and modestly improved state finances, an economist forecast on Friday.

Still, even with two additional years of growth, Michigan will be a long way from recouping all that it lost during the decade-long economic slide that ended with the end of the Great Recession.

George Fulton, director of the Research Seminar in Quantitative Economics at the University of Michigan, at the annual conference the RSQE holds, questioned whether the lost economic decade may have done permanent damage to Michigan’s economy.

So devastating was the decade that, if the RSQE forecast for 2013 and 2014 is right, by the end of 2014, Michigan will have recaptured 276,000 jobs since the end of the Great Recession. While that will have been some of the stronger growth many states have seen since the Great Recession’s end, it is still just about one-third the total 858,000 jobs Michigan lost during the first decade of the 21st Century, he said.

And by the end of 2014, the state’s unemployment rate may finally come down to its overall historic average, he said.

Because Michigan’s economy has historically been, and is still, more dependent on manufacturing, that has created some anomalies to the state compared to the entire nation, both hurting the state more during its economic troubles and helping during its economic recovery.

For example, Fulton said, Michigan has been more dependent on larger companies, those employing more than 500 people, than the entire nation. In 2001, large companies employed nearly 908,000 people in Michigan, 24 percent of the total jobs. Nationally, 18.9 percent of all jobs were in large firms.

By 2010, large firms had lost 329,500 jobs in the state, more than one-third its total. In contrast, large firms across the nation had lost about 18 percent of its jobs. That statistic alone drew an astonished whispered, “Jesus,” from one economist in the audience.

However, large firms on their own have hired more people as the state has recovered, Mr. Fulton said, adding 88,800 jobs since 2010. By the first quarter of 2012, they had 20.4 percent of all jobs in the state, at 667,200. However, nationally, large firms account for 16.6 percent of all jobs.

Manufacturing, particularly auto manufacturing, has been major reason for the state’s steady if sometimes shaky rebound, and Fulton said the auto industry will continue to drive economic improvements. This year, some 14.3 million cars and trucks will be sold. That should increase to 15 million in 2013 and 15.6 million in 2014, more than 50 percent better than the some 10 million vehicles sold in 2009.

But it still falls more than 1 million short of the number sold in the 1990s, he said.

The American manufacturers’ share of the market, expected to be 44.4 percent this year, should climb to 45 percent in 2014, he said.

All of the main industries should see increases in jobs during 2013 and 2014, Fulton said, except government. Professional and business services should see the most growth, by 27,000 jobs during the two years.

But government, particularly local government, will lose another 10,000 jobs in 2013 and 2014, he said. That means the state will have 91,000 fewer total government employees in 2014 than it did in 2002, Fulton said.

Overall, the RSQE is expecting the state to add 50,000 jobs during 2013 and another 62,000 jobs in 2014.

Should that hold true, the state’s unemployment rate will average 8.7 percent in 2013 and 8 percent in 2014.

That, along with the changes the state enacted in 2011 to include pension income in the state’s income tax, means some growth in the income tax. But changes to the state’s business taxes mean small growth in state revenues.

The RSQE is forecasting total general fund revenues for the 2012-13 fiscal year of $8.77 billion, down 3.4 percent from the $9.08 billion expected for the 2011-12 fiscal year.

In the 2013-14 fiscal year, that should improve to $9.24 billion, an increase of 5.3 percent.

School Aid Fund revenues should increase by 2 percent in FY 2013 to $11.10 billion and by 2.6 percent in FY 2014 to $11.39 billion.

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