Michigan’s Economy to Grow Roughly in Line with the U.S. Economy in 2025
Michigan’s economy is anticipated to grow by 1.7% in 2025, slightly slower than last year but still keeping pace with the national economy. Tariff volatility and high interest rates continue to weigh on the Great Lake State’s economy, as do spillovers from national and global headwinds. On the back of trade uncertainties and supply chain disruptions, the auto sector has slowed year-to-date, but production is expected to rise in the coming quarters as auto producers rebuild low dealer inventories.
Payroll employment is expected to grow around 1.0% in 2025. Michigan’s unemployment rate, which rose rapidly from early 2024 through mid-2025, is forecast to peak in the second half of 2025 and gradually decline through 2026, though remaining somewhat higher than the national unemployment rate. The elevated unemployment rate and slower growth of labor incomes are expected to weigh on total personal income, which is projected to rise at a moderate pace of 4.2%—still comfortably outpacing inflation. Tax cuts like the larger deduction for seniors legislated in the One Big Beautiful Bill Act (OBBBA) will boost disposable incomes next year and support consumer spending in 2026.
While expensive by historical comparison, Michigan’s housing remains among the most affordable in the nation. Housing construction and sales rebounded in 2024 after precipitous declines in the prior year. After a surge in single-family construction in the second quarter of 2025, 17,500 single-family units are forecast to be added to Michigan’s housing supply this year. Multifamily construction is anticipated to rebound robustly in 2025 after steep declines in the prior two years, and add around 5,000 multifamily units to supply. As housing demand and housing supply come into better balance, house price increases are forecast to moderate to a low-to-mid-single-digit pace in the rest of 2025 and 2026.
For a PDF version of this publication, click here: 2025 Michigan Mid-Year State Economic Outlook
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