The state economy could see a small turnaround in 2009 and 2010 after two more years of rising unemployment and job losses in the state’s manufacturing and construction sectors, according to a forecast presented by University of Michigan economists at a conference on Friday.

University Economics Researcher Joan Crary said the state has made some advances since the state and national economic collapse of 2001, despite the struggles of the auto industry and a climbing employment rate that is the nation’s highest.

“The state’s job market has been running at a pace that could be described as two steps forward, three steps back,” Crary said at the University’s Annual Conference on the Economic Outlook. Crary said the steady decline makes it appear as if there is no hope for progress, but there is forward momentum that shows signs of an economy that will eventually break through.

Although the economists predicted that Michigan will continue to lose salaried jobs in the 2007 and 2008 fiscal years, Crary said they expect to see the number of jobs stabilize in 2009 before swinging toward job growth of about 1 percent in 2010.

They also forecast that unemployment will begin to drop in 2009 after two years of climbing jobless figures. Michigan’s unemployment rate currently stands at about 7.5 percent, up roughly 1 percentage point from this time two years ago. According to the economists, that figure will rise to about 8.2 percent next year.

Crary said the effect of current Big Three restructuring efforts like the negotiation of new union contracts will play a large role in whether Michigan’s economy will rebound.

“As in past years, the prospects for the state economy over the next few years will be tied in large part to the outcome of the sweeping changes in the domestic auto industry,” Crary said.

According to the report, the state of Michigan has faced a 36 percent decline in transportation equipment manufacturing jobs since 2000, much of which results from the loss of jobs during restructuring.

And it’s not just that Big Three factories and offices are being moved out of Michigan. Crary said the American auto industry’s slipping market share has forced auto companies to cut costs and eliminate jobs entirely. According to projections by the economists, American cars will make up less than half of cars sold in the United States by 2008.

On Thursday, University economists issued predictions for the U.S. economy as a whole.

In spite of rising oil prices, weak automotive sales and increasing unemployment, University economists predict that the U.S.’s economy will show signs of recovery within the next two years.

A national economy forecast, released by the University’s Research Seminar in Quantitative Economics on Thursday, foresees the rate of national economic growth increasing from 2.1 percent this year to 2.4 percent in 2008 and 3.4 percent in 2009.

Despite the recent spike in oil prices in the U.S., with current prices nearing $95 per barrel, the forecast predicts oil prices to drop 15 percent to around $80 per barrel in 2009.

University economists predict that national unemployment will increase from 2007 to 2008 – from 4.8 percent to 5.1 percent – but will decrease to 4.8 percent by the end of 2009.

According to the forecast, home sales will decrease from 4.94 million sales this year to 4.14 next year but will rebound in 2009 to 4.84 million sales.

Andy Kroll contributed to this report.

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