ROCKLAND — Maine State Economist Amanda Rector did not have a lot of good news to offer when she provided a snapshot of Maine’s economy during a talk at the Rockland Public Library Nov. 3.

The event was organized by the Camden Conference. Rector, of Union, has worked as the State Economist since 2011. She grew up in the area and noted in her discussion that several of her family members were in attendance.

Rector said that while wages have increased in Maine due to the shortage of workers, rising inflation has eroded those gains. She cited the war in Ukraine as one of the driving factors for fuel, energy and food price increases. She also said projections are that inflation may remain with us up to at least 2027.

The shortage of workers is caused largely by the retirement of the baby boomer generation, and in some cases retirement plans were expedited due to the COVID pandemic. There are not enough workers from other generations entering the work force to replace them.

One of her slides in the presentation stated: “The Maine Department of Labor finds that …the persistently lower [Labor Force Participation] rates through the summer of 2022 are mostly caused by aging and retirement decisions that may have been accelerated during the pandemic and not by lower participation among people between the ages of 20-54.”

Maine is the oldest state per capita in the U.S. with a median age of over 44. The death rate in the state is higher than the rate of births, but despite that fact, Maine’s population has increased. This was in part due to the influx of people who moved to Maine for a better quality of life during the pandemic.

People moving to Maine may be one of the most hopeful trends for the future of our economy, but they need housing, child care and broadband. Rector noted that the ability to work remotely creates flexibility for workers so they can move to Maine.

The increase in demand on housing in Maine coupled with the dwindling stock of houses, however, has led to skyrocketing home prices. At this point, Maine homes are out of reach for many working and middle class families, especially young people just starting out.

In addition, to combat the rising inflation, the Feds are increasing interest rates and she anticipates that will continue through the end of the year.

Not a lot of new houses are being built, but building supply businesses have been going strong, fueled in part by people renovating their houses during the pandemic.

She noted that one solution to the lack of workers may be increased automation, a trend we had already been seeing prior to the pandemic.

Maine State Economist Amanda Rector’s presentation at the Rockland Library included slides with data on the state’s economy. Photo by Daniel Dunkle

The question that remains to be answered is whether we are in a recession or going into one. She said some economists predict a recession for 2023 and some disagree. The economic picture is not conforming to the normal pattern in part due to the unique factors brought on by the pandemic.

One of her slides said, “We’re not officially in a recession, but short- and medium-term conditions remain at a higher-than-usual level of uncertainty; the CEFC [Consensus Economic Forecasting Commission] recognized an increased possibility of an economic slowdown in 2023.”

She said high energy prices and heating oil prices going into the fall are troubling, as are volatile food prices. When people are paying more for groceries, gas and to heat their homes, they are less likely to go out and spend in the economy.

Compared to the rest of the country, Maine is more reliant on fossil fuels due to the use of heating oil.

If you look up the definition of recession, it is identified by a fall in Gross Domestic Product in two successive quarters.

“National real GDP declined at an estimated annual rate of 1.6% in the first quarter of 2022 and 0.6% in the second quarter of 2022,” Rector states in one of the slides. However, that is not the end of the story. “In the U.S., recessions are officially declared by the National Bureau of Economic Research: [which defines it this way…] a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.” She added, “The advance estimate of GDP for the third quarter of 2022 is growth of 2.6%.”

She acknowledged that definition is vague. It remains for economists and others to argue about whether we are in a recession.

She noted that prior to the pandemic and the federal funds that were sent out as relief, Maine had placed itself in a better position by creating a long-term economic plan designating what areas needed investment, including things like broadband, housing and work force development. This put us ahead of some of the other states, where such planning had not taken place.

Maine also has $900 million in the Budget Stabilization Fund, sometimes referred to as the rainy day fund.

The question now for state leaders and economists may well be, when do we decide it is raining?

For more information, visit maine.gov/dafs/economist.

The 36th annual Camden Conference set for Feb. 17-19 will be on the topic of “Global Trade and Politics: Managing Turbulence.”

It will be held at the Camden Opera House and “highlight the importance of global commerce and how it impacts our everyday lives. Speakers will explore alternative ways in which the interdependence of commerce, global politics and national security could be successfully managed for both competition and cooperation.” The organization will hold several other talks in the months leading up to the main event and offers recommendations for books to read on these topics. Visit camdenconference.org to learn more.