Will economy grow in 2009?

Posted Dec. 29, 2008, at 9:33 p.m.

From $4-a-gallon gas to the lobster price crash, from the housing bubble collapse to the state revenue shortfall, 2008 was a banner year for economic news in Maine — much of it grim.

Continued global financial uncertainty, more job losses and only occasional bright spots to lighten the gloom will mark 2009, say Maine’s economists, officials and infrastructure experts as they make their predictions for the coming months.

Job losses

The national economy likely will start growing again toward the end of 2009, said economist Charles Colgan, a professor at the Muskie School for Public Research in Portland. However, Maine will lag behind the national recovery and hasn’t seen the bottom of this recession yet, he said.

“We’ve still got a ways to go in terms of job losses,” Colgan said Monday. “It’s going to be a fairly steady drip, drip, drip every month through 2009.”

Maine’s retailers will take the biggest hit in terms of job losses, he said, with the construction, government and education sectors also vulnerable. An infrastructure stimulus package from President-elect Obama would help construction, he said, and thanks in part to the state’s aging population, the health care industry is still sta-ble. Colgan thinks that some good news also may come from proposed energy projects throughout the state, including a large wind project in Aroostook County.

This recession is the worst one in 15 years, but it’s not unprecedented — though it may feel as though it is, Colgan said. He’s forecasting that this recession will be most comparable in terms of the percentage of jobs lost to the recession of the early 1980s, and said that the recession of ’91 and ’92 was by far the worst in Maine.

“This one seems so jarringly severe. It’s hit with real suddenness,” Colgan said. “From a Maine point of view, 2008 was almost a pretty boring year, until it fell off a cliff — and then things got exciting.”


Over at the Maine Office of Tourism, director Pat Eltman said that she could do with a little less excitement next year — but she’s still trying to stay positive.

“When the 2008 numbers are all said and done, if we’re flat with last year, that’s a huge success for us. ’09 will be challenging, no question about it,” she said.

According to Eltman, her office will be spending more money on its Web site and on marketing — and focusing on promoting the state in innovative ways, including a winter “staycation” ad campaign.

Lower gas prices should help tourism in Maine, Eltman said, and she expects that tourists will be making shorter trips more spontaneously.

“I’ve got to be optimistic,” she said. “I know we live in the best place in the world. We live in a four-season, world-class destination.”


David Farmer, spokesman for Gov. John Baldacci, said that Maine’s biggest challenge in 2009 would be the national and international economic uncertainties.

“We’re not certain we’ve reached the bottom of the economy,” he said. “We have to be prepared for that.”

Farmer said that 2008 has been a year of difficult policy decisions in the state, including the push for school reform.

“These kinds of changes have helped us have a head start on where we need to go for economic recovery,” he said.

The governor also hopes that the new resident of the White House will stimulate Maine’s economy through infrastructure spending, including help for health care, Medicaid and roads.

“We’re hopeful that a robust spending package from the federal government will allow us to hold our own,” Farmer said.


Commissioner David Cole of the Maine Department of Transportation said that staff members there are looking for projects that could be ready to go in the next six months, in hopes that the infrastructure stimulus package is passed.

“We want to be sure that Maine can utilize every dollar that it can access,” Cole said. “Our hope is for an aggressive stimulus package for infrastructure. It just makes so much sense.”

There’s lots to do — for example, the state’s bridge system just got its AARP card, joked Cole, because more than half of them are at least 50 years old.

Keeping Maine’s roads, bridges and ferry system in good working order would create jobs and invest in the future, he said.

But the department is facing short- and long-term funding challenges. The agency has made a plan to submit to the governor’s mandate to slice 10 percent from each state agency’s budget and its fuel tax funding source is shrinking along with gasoline consumption in Maine.

Cole said that the department has worked to become leaner and more efficient, but that an infusion of money from the federal government will help.

“We’ve had to cut back,” he said. “We have a lot of projects that have been delayed and deferred.”

George Markowsky, computer science professor at the University of Maine, said that he hopes that expanding broadband access in the state will be part of the infrastructure stimulus package.

“Once you bring high-speed Internet, it makes it easier for companies to come in and for people to telecommute,” he said, likening high-speed Internet service to the “interstate of the future.”

“If the plan is to spread high-speed broadband Internet service throughout the state, it should certainly help areas that are underserved at this time and make them more attractive to economic development,” Markowsky said.

No depression

If the bad news seems to be too much, don’t despair, says University of Maine economics professor Philip Trostel.

“Things might not be as bad as they seem,” Trostel said.

He looks at numbers — unemployment numbers among them — and said that the national average unemployment rate of 6.3 percent is not so high when compared to the 8.8 percent unemployment rate of the early 1980s. And it’s certainly got nothing on the Great Depression of the 1930s, when the national unemployment rate topped a massive 25 percent.

“We’ve never seen anything like that since or before,” Trostel said. “What happened in the 1930s was unique in American history. Any serious economist would say that there’s almost no chance we’re going into a depression.”


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