Economist expects slow job growth as Maine recovers from recession

Economist: Maine job growth to be slow in recovery

PORTLAND, Maine — Job growth in Maine should start this summer, but it will take two to three years before employment reaches levels seen in 2008 before the start of the recession, a leading Maine economist said Wednesday.

Maine is partially out of the recession but has a long way to go, said Charles Colgan of the University of Southern Maine’s Muskie School of Public Service.

“Recessions have two elements to them: One is the fall in output and the other is the fall in employment,” Colgan said. “We have reversed the fall in output but not yet the fall in employment. We have another half year or so in both the U.S. and Maine economies before employment will begin any robust growth.”

Colgan’s comments came during his annual forecast on the state’s economy, dubbed “Breakfast with Charlie,” at USM to about 350 business leaders in the Portland area.

A former state economist, Colgan titled this year’s presentation, “At the Edge of the Woods.” The economic recovery is under way, he said, but will be slow for years to come.

Job growth should occur sometime between May and September, but unemployment will remain high by historical measures.

A year ago, Colgan predicted the number of jobs in Maine would fall by about 20,000 to a low of 600,000. But the recession has been more severe than anticipated, and Maine’s job count fell to 588,000 in November, according to the Maine Department of Labor. The state has an 8 percent unemployment rate, which is 2 percentage points lower than the national rate.

When the jobs do come back, Colgan said, the biggest gains through 2013 will be in health and education, leisure and hospitality, and professional and business services. Job growth will be slower in the construction, government, manufacturing and retail sectors.

The housing market remains bleak, he said. Median home prices in Maine will fall 25 percent from their peak by the time they start going up, but they are expected to rise by less than 12 percent in the next four years.

He expects about 2,000 new homes to be built in 2010, down from 9,000 at the peak of the housing expansion in 2005. Building permit numbers will rise slowly until they reach normal yearly levels of about 4,000 two years from now.

“The housing market that got us into this mess will not be what gets us out of this mess,” he said.

Colgan said Maine’s population should remain stagnant in 2010 and grow in 2011, following a decline in 2009. Colgan blamed last year’s population drop — Maine was one of three states that lost population — on both the recession and the ongoing closure of Brunswick Naval Air Station. The base closing resulted in thousands of Navy personnel and their families moving away.

Looking back, Colgan said the past decade was dismal.

Maine’s job count rose 10 percent in the 1970s, 28 percent in the 1980s and 13 percent in the 1990s, but declined 1 percent in this latest decade, he said. Wages fell and the stock market declined, and government revenues are now at the same level they were in 2004, he said.

“That was the decade that wasn’t,” he said.