The word stagnant has appeared several times recently in stories about the Maine economy. Recently released figures for change in total production (real GDP) for 2014 put all three of Maine’s Metropolitan Areas well below the national average.

In Bangor, real GDP fell 1.1 percent, ranking the area 328th of the 381 national areas; in Lewiston-Auburn, the change was -0.3 percent, producing a rank of 294; and even Greater Portland could muster only a break-even rate of 0.0 percent and a ranking of 279. All these figures fell well below the U.S. rate of +2.6 percent and the Greater Boston rate of 2.6 percent growth.

Last week’s estimates of personal income for the second quarter of 2015 were somewhat more encouraging – putting Maine’s estimated growth at +0.9 percent, just equal to the national rate. But even here, this growth merely offset the -0.9 percent drop recorded in the first quarter and left Maine behind national growth over the past four quarters. In addition, even our +0.9 percent growth was due largely to a +1.5 percent increase in dividends, interest and rent that reflects rising housing costs. Both earnings and transfer payments grew less than the overall total.

It is understandable, therefore, that “stagnant” appears to be the most apt description of our economic situation. But in fact, the barely changing surface masks a great deal of change going on below the surface. To my mind, the term “dynamic inaction” is a better descriptor. We’re doing a lot, but not getting ahead. Many actions on one side are offset by countervailing actions on the other. The best example is the labor market.

Over the last 19 quarters, running from 2010 Q1 to 2014 Q3, firms in the Greater Portland metro area have added an average of 15,018 new jobs per quarter, ranging from a low of 8,604 new jobs in 2014 Q1 to a high of 31,836 in the very next quarter, 2014 Q2.

That sure seems like a lot of change, and a lot of variability in that change – anything but stagnation.

But then look at the other side of the coin – job losses. Over that same period, firms in Greater Portland cut an average of 12,830 jobs per quarter, ranging from a low of 8,246 in 2014 Q 2 to a high of 20,439 in 2013 Q4. Again, lots of change, lots of variability, not much net difference in the end – dynamic inaction.

Still the difference between job gain and job loss is positive, averaging 2,188 added jobs per quarter over the nearly four-year period. Isn’t that positive?

Well, maybe. We still have to delve a little deeper into those new jobs. How many are replacement hires, not a “new” job but an existing job that someone else left? Turns out that new hires to fill an existing job averaged 14,426 in the Greater Portland economy over the last 19 quarters. This figure is far less volatile – it doesn’t change greatly from quarter to quarter – and it is trending upward.

The average number of replacement hires over the first nine quarters of the period was 13,226, and the average over the last 10 quarters of the period grew to 15,507. Overall, average replacement hires per quarter (14,426) amounted to 96 percent of the average quarterly total job creation of 15,018. While there is no way of telling what caused the need for a replacement-hire – death, retirement or departure for another job – my suspicion, given Maine’s aging demographic structure, is that retirement plays a major role. Yet another dramatic change that isn’t revealed in stagnant overall totals.

Before writing off replacement jobs as an insignificant metric, however, it is useful to look at our prosperous neighbor to the south – the Greater Boston metro area.

Over the 18-quarter period from 2010 Q2 to 2014 Q3, replacement jobs averaged over 135,000 per quarter. This amounted to 31 percent more than the 102,000 new jobs created per quarter. How can this be? How can the number of replacement jobs exceed the number of new jobs? The answers – job churn, career advancement, moving up the ladder. In Greater Portland, average quarterly replacement jobs are only 12 percent more than average quarterly job loss. In Greater Boston, the average number of replacement jobs per quarter is 64 percent higher than the number of jobs lost.

Replacement jobs in Greater Boston mean far more than filling in for someone who is retiring. They mean career advancement. They mean a dynamic, bubbling labor market.

And for Maine, they mean we need to focus on creating more startup businesses which will create more new jobs. Our economy isn’t stagnant, but it certainly needs to do more than simply replace those who are leaving the workplace.

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

clawton@planningdecisions.com.

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