Michigan’s economy will enjoy moderate growth and more job gains over the next two years, University of Michigan economists said Friday in their widely watched annual forecast of the state’s economic outlook.

U-M economist George Fulton and colleagues Joan Crary and Donald Grimes forecast that the state will add 111,000 jobs during 2013 and 2014 — coming on the heels of 165,000 job gains since the end of 2009.

“For many reasons, it’s not hard to feel upbeat about the Michigan economy,” Fulton, director of U-M’s Research Seminar in Quantitative Economics, said during the annual forecast conference in Ann Arbor.

“Our signature auto sector has been strong, housing is showing signs of turning around, the highest wage sectors have recorded the most rapid growth and the unemployment rate has dropped 5 percentage points since the end of 2009. Most important, the fundamentals seem to be in place for the economy to keep expanding.”

But for other reasons, he added, “it’s hard not to feel a little disappointed as well. The rebound from the recession has not been nearly as robust as most past episodes of recovery, unemployment remains historically high and the state has regained only one-fifth of the jobs that had been lost since mid-2000. It’s a long haul to crawl out of a deep hole — but at least we’ve stopped digging in deeper.”

The U-M economists expect Michigan to add nearly 50,000 jobs over the next year and more than 61,000 jobs during 2014, due mainly to a resurgent auto industry and high-wage sectors such as professional, business and scientific services.

All forecasts face a risk that unforeseen events will scramble the outcome. The U-M forecasters said the main risks to its moderately upbeat outlook come from national and international events and trends.

Important sources of uncertainty include risks related to the housing market and the sharp political differences in Washington that threaten to bring on the “fiscal cliff.” The fiscal cliff refers to possible deep cuts in government spending and big tax increases if Congress and President Barack Obama cannot agree on a debt-reduction plan.

In addition, uncertainty in the economies in Europe and the possibility of a slowdown in China’s economy worse than anticipated could also worsen Michigan’s outlook because the state’s economy is so tied to national and international events.

But there are also positive risks that would make the U-M forecast less accurate. In Michigan, these stem mainly from the auto sector.

“To the extent that Detroit Three sales show greater strength than we expect, due to the effects of pent-up demand and the aging fleet now on the road, as well as some easing of credit standards, the auto sector could outperform our forecast,” Fulton and his colleagues said.