Maine’s shrinking labor force appears to be a key factor driving the decline in the state’s unemployment rate.

Unemployment data released Friday by the Maine Department of Labor shows a 4 percent drop in the state’s civilian labor force over the two years that ended in February, and a 5 percent decrease from the state’s recent high in August 2013. The labor force is the combined number of workers and job-seekers.

Preliminary estimates also show that Maine’s seasonally adjusted unemployment rate dropped to 3.6 percent in February, its lowest rate since March 2001 and a decline from 3.8 percent in January and 4.7 percent in February 2015, according to the labor department’s Center for Workforce and Information.

However, Maine had roughly 3,300 fewer employed workers in February, a decline from about 653,000 a year earlier, the labor department said. The unemployment rate went down because the size of the state’s labor force decreased more, by 11,600 to 673,800 during the same period.

Economists have been warning that the state’s shrinking unemployment rate masks a deeper problem: a long-term decline in the number of available workers.

At a panel discussion at the University of Southern Maine last week, Labor Commissioner Jeanne Paquette said, “2013 was the year we had more retirees than new entries into the labor force.” The state has been encouraging employers to consider hiring retirees, immigrants, veterans, the disabled and others to fill projected job vacancies.

Economists in Maine have been warning for years that the state is headed for a significant labor shortage that could spell trouble for its economy and opportunity for tomorrow’s job-seekers. The exact size of the shortage remains unknown, but predictions that it will occur are based on simple math.

In 2012, the number of Maine residents between the ages of 45 and 64 totaled roughly 411,000. Most members of that group are expected to exit the labor force by 2032. There were 302,000 residents under age 20 in 2012, most of whom are expected to enter the workforce by 2032.

Even if none of those young people left the state, the aging of Maine residents would generate a shortfall of up to 109,000 workers – a significant problem in a state where the labor force totaled about 673,800 in February.

Ed McKersie, the founder and president of Pro Search, a Portland recruiting and staffing firm, said his tactics have changed because of the lack of local workers.

Now, he needs to tell his clients that he has to cast a wider net to find the workers they need and, consequently, they need to pay more to get those workers to come to Maine.

Clients will tell him what the “market rate” is for a particular job, but “that doesn’t matter anymore,” said McKersie, who has launched a new recruitment website called Live + Work in Maine.

It used to be, he said, that people would come to Maine for a job and be willing to accept less pay because of the beauty of the state and a better quality of life. But the lack of local workers means that’s no longer the case.

“It’s a reality check,” he said. “But if we get a level playing field from a compensation standpoint, we’ll win all the time.”

McKersie also said the impact of the looming worker shortage might be found in what doesn’t happen, rather than what does.

“Projects get shelved or a company’s going to branch out or launch a new project, and that doesn’t happen,” because the workers aren’t there, he said.

“We’ve got a bit of a crisis on our hands,” McKersie said. “And it can be scary because of the numbers.”

The latest labor report also shows a 0.5 percent decline in the number of employed workers in Maine over the 12-month period ending in February, and a 1.7 percent decline since February 2014. But the center’s chief economist, Glenn Mills, questions the accuracy of that data.

Employment data is based on surveys of a relatively small number of households by the U.S. Census Bureau, Mills said, and that method of data collection can cause artificial upward and downward swings in the short term.

“These are quirks – they can move in one direction for a while, and then move back in the other direction,” he said. “The sample’s small enough that those ratios can be kind of inaccurate.”

The number of non-farm payroll jobs, based on much broader employer surveys, shows a less dramatic swing. Jobs have risen fairly steadily since 2011, according to the data. Maine added 5,800 payroll jobs over the 12 months ending in February, bringing the number to 613,300. But that is still 1.2 percent fewer non-farm payroll jobs than the 620,700 it had in December 2007, before the Great Recession.

The bulk of those job losses has occurred in manufacturing, which went from 59,400 jobs in 2007 to 50,583 in 2015, a decline of almost 15 percent. In the past five years, the paper industry alone has lost 2,300 jobs.

The nation as a whole had a seasonally adjusted unemployment rate of 4.9 percent in February, down slightly from 5.5 percent a year earlier. In New England, unemployment rates ranged from a low of 2.7 percent in New Hampshire to a high of 5.5 percent in Connecticut.

Staff Writer Edward D. Murphy contributed to this report.

Related Stories