March 16, 2010

Maine's economy:BAD, BUT COULD BE WORSE


— By . KIM

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Jack Milton/Staff Photographer: Ken Hume and Jos� Sandinha install flooring at Mercy Hospital's new Fore River facility Thursday, July 31, 2008.

Jack Milton

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Jack Milton/Staff Photographer: Ken Hume and Jos� Sandinha install flooring in the chapel at Mercy Hospital's new Fore River facility Thursday, July 31, 2008.

Jack Milton

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Staff Writer

Opinion polls show that Mainers harbor grim feelings about the economy, but people who make their living studying commercial activity have a somewhat more positive view.

Maine's economy has its problems, they say, but the state has so far avoided the severe problems associated with the housing crisis and beleaguered industries in other parts of the country. And today's slowdown is not as severe as the one it endured in the 1990s.

The state economy is fairly stagnant, but not going through the turmoil of states like California and Florida, where housing prices have plummeted, or Michigan, which is dependent on the hard-hit automobile industry, according to Charles Colgan, an economist at the University of Southern Maine's Muskie School of Public Service and chairman of the state's economic forecasting committee.

''At the moment, I don't anticipate big problems here because we're not as exposed to a lot of the industries that are having problems nationally,'' he said.

While Mainers may fear that the economy is crashing, economic experts have noted somewhat consoling, if not upbeat, information:

n Maine's gross domestic product is still growing, albeit slowly.

n The unemployment rate has not increased drastically; in June it was 5.3 percent, whereas it reached 8.7 percent in early 1991.

n Housing prices have not fallen precipitously in Maine; in June, the median sale price in Maine was down 6 percent from the year before, compared with a 17.2 percent dive in the West, 12.6 percent decline in the Northeast and 6.7 percent drop nationally.

According to one recent poll, 91 percent of Mainers believe the economy has gotten worse over the past year and 55 percent believe the economy will get worse over the next year. The Critical Insights' survey was conducted in June and had a margin of error of 3.4 percentage points.

Another June poll indicated that 22.3 percent of Mainers count jobs and employment as their top concern. The Pan Atlantic SMS Group survey had a margin of error of 4.9 percentage points.

''It's hard out there right now. Everything's tough -- jobs, gas, oil, cost of food,'' said Karen Gagne, a South Portland resident who works in a print shop. ''I don't know what it's going to come to.''

Gagne, 48, recently moved in with her elderly mother to care for her, but the arrangement has helped Gagne cut her expenses as well. She's already given up simple pleasures like eating out and visiting shops. She doesn't stop at corner stores for milk because of the higher prices there.


It's not surprising that Mainers are so pessimistic about the economy, said Christopher St. John, executive director of the Maine Center For Economic Policy. Median-income households and median-income workers have seen their buying power decline because wages are not keeping pace with sharp cost increases for fuel, heating, health care, food and other items, he said.

''That doesn't mean that, overall, the economy is really bad,'' St. John said.

Figures from Maine Revenue Services indicate a slowdown in the incomes of state residents.

Wages appear to be up 3.5 percent for the first half of the year, compared with 4.5 percent for the same period last year, said Michael Allen, director of economic research. Income for wealthier taxpayers, who rely less on wages because of capital gains, business income and dividends, are estimated to be up 4.5 percent for the first half of the year, compared with 13 percent for the first half of last year, he said.

Signs of a slowing economy are evident from the drop in commercial traffic on the Maine Turnpike -- down 1.8 percent in the first half of the year -- to the rising number of Mainers on food stamps -- up 7.6 percent in June.


Jason Mowery, a 23-year-old facilities worker at the Portland Museum of Art, has resigned himself to foreclosure on a home he hoped to flip, and bankruptcy. He bought a home in Bethel a couple of years ago with an adjustable-rate interest-only mortgage, thinking he would fix it up and sell it for a profit within months.

But the market slowed, his tenant lost his job and Mowery fell behind on the house payments.

''It's frustrating, but a lot of other people are worse off,'' he said.

While St. John characterized the state's economy as ''sluggish and worrisome,'' he said the situation is not nearly as bad as it was in the early 1990s, when the state economy was less diverse. In that recession, banks failed, workers were laid off in larger numbers, housing prices fell dramatically and the economy shrank.

This year's economic forecast, which calls for a recession and the gradual loss of up to 3,000 jobs, looks like it is on track, Colgan said. The small movement of the unemployment rate -- which has hovered around 5 percent -- is a reflection of uncertainty in the economy, but also of a basic stability, he said.

Construction and the lumber industry, which relies so heavily on construction around the country, are down, but other sectors of the economy appear stable, Colgan said. In May, there were 29,600 construction jobs in Maine, down from 30,600 the year before, according to a report by the Federal Reserve Bank of Boston.

Rufus Deering Lumber Co. in Portland is operating with fewer employees and leaner profit margins, said sales manager Darryl Raven. People's difficulty in getting loans, the cost of transportation, the rising price of petroleum-based products and demand for steel in China are just some of the factors Raven said are hurting the building industry.

''It probably hasn't hit bottom yet,'' he said.

It's too early to assess the state of tourism, Maine's largest economic sector. Sales tax revenues from May, including the Memorial Day weekend, were up 4 percent for restaurants and 9 percent for lodging, according to Maine Revenue Services. However, traffic on the Maine Turnpike, one indicator of tourism activity, was down 2 to 3 percent in June.


Growth in health care has slowed somewhat as that sector has reached labor market capacity, Colgan said. The kind of expansion that Mercy Hospital is pursuing on the Fore River in Portland got under way before it became more difficult to borrow money for such capital investments, he said.

Exports represent a bright spot for the state economy. The weakness of the U.S. dollar has meant that domestically made products are more competitive, said Janine Bisaillon-Cary, president of the Maine International Trade Center.

In the year ending in May, exports in Maine were up 16 percent from the year before. Exports of electric machinery, primarily comprising semiconductors, are up 17 percent, pulp exports 66 percent, vehicles and parts 55 percent, seafood 80 percent and optics 32 percent.

Laurie Lachance, president of the Maine Development Foundation, is paying attention to the role of consumer pessimism in the economy.

''If they are feeling that way, they are consciously or subconsciously making a choice, whether they're going to invest, whether they're going to make big-ticket purchase -- even the smaller choices, like are they going to go out to eat,'' said Lachance, a former state economist.

Those consumer concerns are reflected in the slowdown in tax revenue figures for automobile and building supply sales.

Auto sales and sales from big-box stores have been flat over the year and building supplies sales are down 1 percent, according to Allen of Maine Revenue Services.

''If you think about it, inflation is growing. If something is flat, even with higher prices, that means in real terms, you're down,'' he said.

The high price of heating oil and gasoline have made customers at Morong Falmouth more cautious, said Peter Sowles, vice president of the dealer of Volkswagens, Mazdas, Porsches and Audis. They're still interested in buying, but are being more careful about their choices, particularly regarding fuel efficiency, he said.

''They're not as quick to jump into a new vehicle as they might normally have been,'' he said.

Staff Writer Ann S. Kim can be contacted at 791-6383 or at:

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Doug Jones/Staff Photographer, Thursday, July 31, 2008: Workers labor on sidewalk construction after a road widening project at the South Portland Rt. 295 ramp construction on Western Ave. at Broadway.

Doug Jones


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