September 29, 2013

Charles Lawton: Economy too dependent on one hot quarter

Every April, the question for Red Sox Nation is: "Will we be playing in October?"

For generations, much the same question has bedeviled Maine's leisure and hospitality industry: "Can we keep the visitors coming after the days get cooler, the days get shorter and the kids go back to school?"

The holy grail in this industry has always been the goal of building up the so-called shoulder seasons of late spring and early autumn, thus reducing our dependence on the critical July, August and September quarter that has long been the peak of Maine's visitor year.

We haven't made much progress on that front over the past decade, at least not in relative terms. While sales and employment have grown, the share accounted for by the July-to-September quarter remains dominant.

In Maine as a whole in 2004, total taxable retail sales in the third quarter (July, August and September) amounted to 147 percent of first-quarter sales (January, February and March).

By 2012, that ratio had fallen to 143 percent, indicating a slight "smoothing out" of the state's total retail sales. For the leisure and hospitality industry, however, the opposite occurred. Relative dependence on third-quarter sales increased from 232 percent to 241 percent.

For employment, the pattern of seasonality remained virtually unchanged over the period. For Maine as a whole, the number of jobs available in the third quarter in both 2004 and 2012 was 10 percent more than in the first quarter. For the leisure and hospitality industry, the third-quarter to first-quarter ratio was far higher -- a 49 percent jump in the third quarter -- but the relative differential remained the same.

In short, we are playing (and spending and employing) in October, but we still depend overwhelmingly on the games in July, August and September to get us through the year.

As important as it is and as much as we depend on it, the leisure and hospitality industry is still inextricably linked to our natural seasons. If we wish to decrease the overall seasonality of our economy, we must focus on building year-round, full-time jobs.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:

clawton@planningdecisions.com

 

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