University of Michigan economists updated the Consensus Revenue Estimating Conference on the U.S. and Michigan outlook, saying the national economy is likely to keep growing at a modest pace while inflation and labor‑market changes will shape monetary policy and state outcomes.

Danielle Maniankoff, an RSQE U.S. forecasting specialist, told the panel that private consumption and business investment have been the main engines of growth and that the pace of U.S. GDP growth remained solid into the fourth quarter of 2024. She said core inflation has stopped falling recently but that “we still expect these metrics to keep trending down,” a dynamic RSQE expects will influence Federal Reserve decisions on the timing and pace of rate cuts.

RSQE Director Gabe Ehrlich presented the Michigan outlook and emphasized differences in prosperity across the state. Ehrlich said the University’s regional income analysis shows “Residents with a bachelor’s degree or higher formal education are almost 5 times more likely to reside in a higher income household as those with a high school degree or less,” and cautioned that geographic and educational gaps mean gains in statewide averages do not reach all households.

Both presenters said their baseline assumes some tax‑cut provisions will be implemented and that tariffs, if enacted, are likely to begin in 2026 in RSQE’s scenario. That combination, RSQE said, would have roughly offsetting short‑run effects on growth in early 2026 but could push inflation modestly higher later in the year. RSQE also flagged several upside and downside risks: revisions to recent data, the uncertain scope and timing of trade policy, the pace of population growth and possible productivity changes driven in part by technological adoption.

On labor markets, RSQE noted hiring has slowed from 2023’s very strong pace; the presenters expect payroll gains to moderate and the unemployment rate to drift slightly higher in 2025 before resuming a gradual decline as monetary policy eases and growth steadies. For housing, RSQE said high mortgage rates and affordability constraints will keep existing‑home sales subdued while creating an opening for new construction in specific price niches.

The economists said their forecast is intentionally cautious about policy promises and that their baseline does not assume immediate, economy‑wide tariff shocks or wholesale repeal of major tax provisions. Instead, RSQE built scenarios that assumed a mix of targeted corporate tax cuts and later tariff implementation, producing a modest rise in deficits and interest costs at the national level.

The RSQE presentation and question period provided technical detail on the drivers of inflation, the outlook for interest rates and the sensitivity of Michigan’s manufacturing‑heavy economy to rate and trade shocks. The presentation informed the conference’s economic assumptions used by state revenue forecasters later in the session.

Ending: RSQE’s outlook underpinned the conference discussion of risks to the revenue forecast: trade policy, the timing and scope of federal tax changes, and the pace of labor‑market softening were cited repeatedly as the most consequential uncertainties for the next two years.