Maine’s economy will lag the U.S. employment recovery by more than a year because the state is not well-positioned in growing industries such as business and professional services and manufacturing, an economic report says.
While the United States has recovered almost two-thirds of the jobs lost during the recession, Maine has recovered only 17 percent of the jobs lost, according to a report by Charles Colgan, professor of public policy and management at the University of Southern Maine’s Muskie School of Public Service.
“Essentially the Maine economy has been almost flat for the better part of the last three years,” Colgan said in the report prepared for the Fall Economic Outlook Conference hosted by the New England Economic Partnership. “Why is Maine lagging so badly? The simplest answer is that Maine is not well-positioned in the industries that are recovering employment in the U.S.”
The state has declined more than the United States as a whole in finance and government and has exceeded the nation in employment growth only in one sector: retail.
Statewide, retail hiring tends to see peaks and valleys, with employment picking up around the holidays, as well as during summer tourism season and the back-to-school season, according to the Retail Association of Maine’s executive director, Curtis Picard.
Seasonally adjusted employment in retail totaled 82,200 in October, up from a low of 80,800 jobs in September 2010, according to the state Department of Labor.
Maine’s manufacturing industry has dropped even below the worst quarter of the recession. The woes in the sector will be compounded by the closing of Hostess Brands’ bakery in Biddeford, Colgan said. Hostess directly employed 500 workers in Maine and could account for another 200 jobs indirectly.
Manufacturing in the state employs less than half of the people it did 40 years ago and the sector is unlikely to return to pre-recession levels, Colgan said.
Professional and business services in Maine is another lagging sector. While this sector is expected to grow by 6.6 percent by the end of 2016, that is less than half the growth projected for the United States.
Maine will recover to its pre-recession employment level of 620,700 at the end of 2015. At the end of 2016, Maine is projected to have 629,000 jobs, a 1.3 percent gain over the pre-recession peak. The United States overall will outpace that growth and recover to pre-recession employment levels a year earlier than Maine, Colgan said.
“Maine’s demographics will begin to be something of a speed limiter on the economy in the coming years not only because of the aging of the population but because of the drop in the number of young people in the state,” Colgan said. “Maine’s population growth will have to accelerate after 2016 if adequate labor is to be available for an expansionary period.”
In the New England region, the economy will continue to see slow growth and sluggish recovery of the jobs lost in the recession, according to the New England Economic Partnership.
The economists cited the overall weakness in global and U.S. economic conditions as the reason for the tepid forecast, rather than concerns about the implications of the fiscal cliff in the United States and the weak overall European economy.
The fiscal cliff , a combination of tax increases and spending cuts due to begin in January unless lawmakers reach a new agreement, could affect both the national and state economy.
“Any significant effect on national economic growth would effectively strangle Maine’s nascent recovery just as it was finally beginning to show some real possibility of happening,” Colgan said. “Most other states would see a slowing of a recovery under way; Maine’s weak recovery to date would be completely reversed.”
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