Maine’s economy has finally turned a corner and is poised for steady growth this year, but a demographic crisis could limit job growth in the future, one of the state’s leading economists said Tuesday.

Charles Colgan, a professor at the Muskie School of Public Service at the University of Southern Maine, said economic growth in the state has been sluggish since 2009, even as the country began to dig out of the deep recession and financial crisis of 2008.

“Boy, those four years of recovery felt good, haven’t they?” Colgan joked to about 250 people who attended his annual forecast, put on by the university’s Corporate Partners program.

Colgan said his prime cause for optimism is employment, with positive job growth in every quarter in 2013. That is the first time in four years the state had been able to string together more than two quarters of increasing employment, he said.

Colgan expects Maine employers to add 4,000 jobs this year. Despite that growth, however, he said it will take another three years for the state to recover nearly 30,000 jobs that were lost in the recession.

“That’s a completely lost decade in terms of the output of the Maine economy,” he said. “Once that hole is filled, that’s not the end of the problems.”


Colgan said the state’s recovery has been uneven. He expects the professional and business services and leisure and hospitality sectors to add the most jobs in the coming years, with strong growth in health care jobs starting to level off.

Colgan said housing prices will also continue to rise, but he expects the pace to slow as interest rates rise from the rock-bottom rates of the last few years.

Part of the reason for the slow pace of the recovery is the conflict between the country’s monetary policy and its fiscal policy, Colgan said. Monetary policy has been aggressively pro-growth, he said, with interest rates near zero and the Federal Reserve Board’s policy of buying up bonds to stimulate the economy. At the same time, Congress’ fiscal policy has been to cut federal spending.

The result is like driving a car in which one person is pressing on the gas pedal and another is jamming on the brakes, he said.

Associate professor James Breece, an economist at the University of Maine, said Colgan’s forecast of very mild job growth for the next year is one most economists would agree with, depending on whether the national economy stays on track.

Breece said the continuing decline in manufacturing in the state is acting as a drag on the economy and, as in the nation as a whole, there’s a disconnect in Maine between strong economic growth and high corporate profits and the very slow return of jobs that were lost in the recession.


Colgan said the biggest dark cloud on the horizon for the Maine economy is demographic – an aging population that is not growing and soon may require businesses to rely on recruiting workers to the state to fill jobs.

Colgan said the state needs new residents not just to fill jobs, but also to fuel the economy by buying homes, furniture and cars. To achieve that, he said, employers forced to lure employees from elsewhere might need to suffer some sticker shock.

“Maine is going to have to learn to pay national wages,” which it largely doesn’t do now, he said, and which will result in a rise in labor costs.

Maine businesses are likely to start feeling that pinch by the end of the decade, he said, and may have to get creative to find the employees they need.

Colgan noted that a Belfast hospital recently ran an ad looking for doctors. The ad, which touted the town’s coastal setting, ran in SAIL magazine.

Edward D. Murphy can be contacted at 791-6465 or

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