Inflation is falling, unemployment is low and central bankers are expected to start bringing down interest rates, a move that would help spur economic growth, an economist told a real estate development conference Thursday in Portland.

But wars in Europe and the Middle East, attacks on shipping in the Red Sea and an unprecedented federal debt cloud forecasts, James Marple, managing director and senior economist at the TD Bank Group, said at the conference sponsored by the Maine Real Estate and Development Association.

“There’s an election, there’s issues in the South China Sea around Taiwan that don’t look like they’re really going away, obviously what’s happening in the Middle East,” he said. “I think those are the kind of things that could push the thing off course. You know they’re there, but you hope that nothing worsens.”

Closer to home, commercial real estate vacancies remain high as employees choose to work from home a few years after the COVID-19 pandemic has eased, and leases and mortgages face renewal at higher interest rates, he said.

Still, the U.S. economy is benefiting from “resilient economic growth” in contrast with other countries, Marple said. “The U.S. has been the one exception.”

The Commerce Department said Wednesday the U.S. economy expanded at an annual rate of 3.2% in the fourth quarter of 2023, down from 4.9% in the third quarter. The economy grew by $334.5 billion in the three months from October through December, to $27.9 trillion.


Economic growth stemmed from increases in consumer spending – which accounts for about 70% of economic activity, exports, state, local and federal spending, and other factors.

Maine’s economy grew 4.9% in the third quarter of 2023, the most recent period for which data were released in December by the U.S. Department of Commerce. The rate was the fastest among New England’s six states and was helped by robust activity in retail, construction, health care and social assistance, and manufacturing.

Maine’s $91.8 billion economy was the fourth largest in New England, after Massachusetts, Connecticut and New Hampshire. Vermont’s economy was the smallest in the region, at $43.4 billion.

Inflation continues to slow. The personal consumption expenditure – a measure of prices paid by U.S. consumers and a preferred gauge among officials at the Federal Reserve – rose 2.4% in January, down from 2.6% in December, according to the U.S. Department of Commerce. The Fed’s target inflation rate is 2%.

“I think it’s a good news story, but there are still some risks and uncertainty around that,” Marple said.

Attacks on ships in the Red Sea by proxies of Iran contribute to rising prices for goods being transported and will “slow some of the progress perhaps that we have seen. So something to watch for. Obviously, we’re nowhere near where we were and fingers crossed that there isn’t a major conflagration or exacerbation of some of the existing geopolitical risks,” he said.


Also contributing to a strong economy is low unemployment in Maine, at 3.2% in December, ticking up from 3.1% in November. It was lower than the U.S. jobless rate of 3.7% in each of the two months.

“The labor market is still running very hot,” Marple said. In addition, more jobs are open than there are available workers, he said, contributing to accelerating wage growth as employers look to induce prospective workers.

The state’s aging population presents challenges to the labor force with a large number of workers in their 60s ready to retire. All population growth in Maine, an aging state where deaths outstrip births, will be from residents moving in, Marple said. Maine’s population is projected to increase by 0.9% from 2020 to 2025 and 1.7% from 2025 to 2030, according to the Office of the State Economist.

Population growth in Maine is the strongest since the mid-1980s “and that’s keeping pace with the country as a whole despite being the oldest state in the union,” Marple said.

Building more housing will be required to accommodate new residents. However, housing prices have been rising faster in major metropolitan areas in Maine than in the U.S., he said.

“That means that the deterioration in affordability in the state is worse than we see even on the national basis,” he said.

Economic growth could slow as higher interest rates cut into consumer spending, he said. In addition, mortgage rates of about 7% have “resulted in a deterioration in housing affordability” that followed a rise in housing prices during the pandemic, Marple said.

He also warned of the federal government’s record $34 trillion debt. Costs to service the debt are 3% of the economy “and will only continue to move higher as long as deficits are where they are,” he said.

Even as interest rates decline, higher debt levels crowd out investment and reduce government flexibility to confront future crises, Marple said.

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