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Fiscal Horizons: The Economic State Of Maine

Photo Courtesy Maine State Department of Economic and Community Development

In December, Maine’s Office of the State Economist released its monthly edition of its Maine Economic Indicators report. According to its findings, the Pine Tree State is outpacing the rest of New England and the country in terms of economic growth. 

One of the key factors to look at when analyzing a state’s economy is its gross domestic product (GDP), or the market value of all its final, domestically produced goods and services. GDP can be calculated via the “expenditure approach” by adding the total value of all household and individual spending on goods and services, investment spending on real estate, equipment, and business inventories, government spending on domestically-produced goods and services, and net exports, with imports subtracted out. 

Essentially, it theorizes that the economy’s final output is consumed by households, businesses, governments, and foreigners, so adding up their expenditures should lead us to its GDP. Real GDP, from which the effects of inflation have been removed, enables better comparisons across different periods of time than nominal GDP. 

In the third quarter of last year, Maine’s real GDP was $77.8 billion, representing an annualized percentage increase of 3.6% from the second quarter.

It ranked third in New England and outpaced the region as a whole, whose percentage increase was only 2.9%. Meanwhile, it ranked 17th in the United States and outpaced the country as a whole, with an overall percentage increase of 3.1%. 

It also represented a larger percentage increase quarter-over-quarter than the state has seen recently. The second quarter’s annual percentage change was 1.7%, the first quarter’s was 2.8%, and the fourth quarter of 2023’s was 3.5%. 

Photo Courtesy Maine Department of Labor

There are a lot of factors that contributed to this growth. Amanda Rector, the state economist for Maine, told Vermont Public that the state has seen “above-average GDP growth” since the COVID-19 pandemic, which brought more people to work in business and financial services. “A lot of those are higher wage, higher productivity jobs, and so those contribute more to income growth and also to GDP growth,” she said

According to Rector’s report, other industries also had a role in generating this GDP. For example, retail trade grew by 1.71%, state and local government by 0.54%, and healthcare and social assistance by 0.33%. 

These industries were also some of the ones that generated the most employment. Healthcare and social assistance, in particular, grew 0.4% from October and 3.9% year over year to reach 113,300 jobs this November. 

According to the Portland Press-Herald, this is a recent pattern reflecting the state’s aging population. Indeed, related positions are thought to be some of the fastest-growing in the state through 2032. Nurse practitioners are expected to grow 35.4%, trailed by 28% for epidemiologists, 22.1% for physician assistants, 20.8% for medical and health services managers, 17.4% for occupational therapy assistants, and 14.9% for physical therapist assistants. 

The other big driver of private sector jobs was the leisure and hospitality industry, which shrunk 1% from October but has grown 3.2% year-over-year to reach 69,900 jobs.

Becky Jacobson, executive director of Hospitality Maine, told the Portland Press-Herald, “high-end restaurants are looking for chefs and sous-chefs as much as the local diner is looking for a breakfast cook.” Cook positions are expected to grow 16.2% by 2032, no doubt boosted by the incredible amount of tourism in the state. Meanwhile, local government was the biggest contributor on the public side, growing 0.2% from October and 3.1% year-over-year to reach 62,700 jobs. 

In total, there were 657,300 non-farm jobs in Maine in November, an increase of 4,700 over the course of the year from 652,600 last November, or approximately 400 jobs added per month on average. 

Photo Courtesy Maine.gov

Unemployment, representing the percentage of people in the labor force who do not currently have a job but are actively looking for work, reached a seasonably adjusted rate of 3.1% in the state, higher than the 2.9% seen in October. However, the Maine Department of Labor attributes this to an unusual pattern in the past two years — one that is not expected to last indefinitely — of seasonally adjusted unemployment rates “trending lower through spring, stabilizing at annual lows in summer, and moving higher thereafter.”

Plus, this November’s rate was still lower than the 3.4% seen by Maine last November, as well as the 3.5% seen in New England and the 4.2% seen in the overall U.S. this November

However, this is no surprise: Maine’s unemployment rate has been below the U.S. average for every month except two over the past 17 years, with the most recent blip in 2022. It has also been below Maine’s long-term average of 5.4% since January 1976, when the current system of measurement was established. In fact, the rate has been below 4% for three years. 

“The additional strength of the labor market has led employers to hire more people who have historically faced greater widespread unemployment, especially Mainers without a college education, people of color, and Mainers with disabilities,” James Myall, economic policy analyst,  wrote in a report for the Maine Center for Economic Policy. 

Shifting the lens a little wider to the labor force participation rate, the share of people in the labor force in the first place dropped to 60.1% in November from 60.2% in October. However, the three-month average from September to November was 0.3% higher than the three-month average from June to August, with 60.1% versus 59.8%. 

Photo Courtesy Maine Department of Labor

Shifting to how all this affects individuals, Maine’s total personal income, or the sum of all income in the state, saw an annualized percentage increase of 3.8% from the second quarter, compared to 2.5% for New England and 3.2% for the U.S. from the second quarter and 1.9% for Maine from the first quarter. Maine’s per capita personal income, or the total personal income divided by the state’s population to get the average income in the area, saw an annualized percentage increase of 3.3% from the second quarter, compared to 2.2% for New England and 2.6% for the U.S. from the second quarter and 1.4% for Maine from the first quarter. 

The same trend was seen in Maine’s wages and salaries, with an annualized percentage increase of 4.6% from the second quarter compared to 3.1% for New England, 3.7% for the U.S. from the second quarter, and -1.2% for Maine from the first quarter. 

In fact, in each of the industries listed by the state’s Center for Workforce Research and Information, ranging from construction and manufacturing to education and health services, the average weekly earnings in November were higher than they had been a year before, with only one exception in the hospitality sector. 

However, that trend began before this year. According to Myall’s Maine Center for Economic Policy report, wage growth actually “outpaced inflation by 4% between 2019 and 2023,” with the lowest-earning citizens in the state seeing the greatest growth rates: “For workers in the bottom 25% of the income distribution, hourly wages have risen 12–14% above inflation since the pandemic.” 

Photo Courtesy Governor Janet Mills

This reality has also translated into positive national sentiment, according to Rector’s report. The University of Michigan’s Index of Consumer Sentiment jumped to 74 points in December, its highest since April, representing an increase of 3.1% from 71.8 points in November and 6.2% from 69.7 points last December. Meanwhile, the National Federation of Independent Businesses’s Small Business Optimism Index jumped to 101.7 points in November, its highest since June 2021, marking a jump above the 50-year average of 98. 

It also represents an increase of 8.5% from 93.7 points in October and 12.3% from 90.6 points last November. Rector attributes the small business optimism, at least, to a typical phenomenon that follows elections. Given the general economic conditions in the state, the optimism seems well-founded. 

Photo Courtesy Maine State Department of Economic and Community Development

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