Maine’s economy barely grew in 2014, with the state’s output of goods and services edging up just 0.2 percent for the year, a performance both unexpected and unwelcome.
“Overall, it’s very, very disappointing,” said Michael Dolega, a senior economist with TD Bank. “I’m shocked at how bad it was.”
The negligible growth, from $54.6 billion in 2013 to $55.8 billion in 2014, put Maine’s economic growth 47th in the country and last in New England, according to figures released Wednesday morning by the federal Bureau of Economic Analysis. Last year, the national economy grew at a 2.2 percent rate and New England’s rate was 1.6 percent.
Declines in construction, finance and insurance, real estate and non-durable goods manufacturing all figured significantly in Maine’s slow growth. Only management and the wholesale and retail trades grew relatively strongly during the year, although the latter two were slightly below national levels of growth.
Adding to the bad news, the bureau also revised downward its gross domestic product growth figures for Maine in 2013. Those figures show that Maine’s economy grew just 0.5 percent that year, a cut from the previous estimate of 0.9 percent, putting Maine at No. 40. The national economy grew by 1.9 percent in 2013, revised up from an initial estimate of 1.8 percent.
Dolega said Maine’s poor performance in 2014 will lead him to cut his forecast for Maine’s economic growth this year.
At a Portland conference in January, Dolega forecast that Maine’s economy would grow by about 1.7 percent in 2015, but the new GDP figures have led him to cut that forecast to about 1.3 percent.
He said signs that the Maine economy was struggling appeared in March, when the Bureau of Labor Statistics revised its preliminary estimates on the state’s job growth for 2013 and 2014. He said the revisions shaved job growth in 2013 from an original estimate of 6,300 to 5,100 and chopped the figure for 2014 from 5,100 jobs added to just 1,900.
“The picture completely changed,” Dolega said, and 2015 started off badly as well, with Maine losing 3,000 jobs in January. However, the economy reversed course from February through April, with preliminary estimates of 7,700 jobs added during those three months. Dolega said that’s why he’s not cutting his 2015 forecast even more.
Dolega said the GDP and job figures “do not espouse much enthusiasm from firms dependent on growth” that might be thinking about locating or expanding in Maine.
“This is further complicated by the demographics, with both population and labor force on a decline in the state, which makes finding workers for an expanding firm all the more challenging,” Dolega said.
On the other hand, he said, some firms seeking highly skilled workers might still be attracted to Maine, along with those that are in industries catering to older customers, such as health care and hospitality, which could see growing markets.
Other analysts were also troubled by the state’s slowing economy.
“We’re essentially treading water,” said Ryan Neale, program director for the Maine Development Foundation, which monitors the state’s status on a variety of social and economic factors in an annual report called “Measures of Growth.”
The standing benchmark in that report has been for the state to outpace the growth in GDP for both the nation and the region, but it hasn’t come close to doing so.
Neale said Maine needs to do a better job of loosening its reliance on traditional industries that are in decline, such as paper manufacturing, and shift to newer, faster growing sectors, like finance and insurance. However, he noted that the finance and insurance sector declined sharply in Maine last year, according to the BEA, while it grew modestly nationally.
Amanda Rector, the state economist, said she wasn’t sure why that sharp decline took place.
She said a primary reason for Maine’s slow growth is the state’s aging population – the state has the highest median age in the country of 43.9.
“This demographic is not well-suited to strong economic growth,” she said, but officials are looking into ways to attract more young adults to the state.
Rector said there are some bright spots on the horizon, including the growing container shipment business in Portland by Eimskip, an Icelandic steamship line that has begun carrying freight to Europe. And, she said, as the national economy picks up, that should “filter down to the state” and lead to stronger growth in the future.