Economist: Maine won’t hit pre-recession employment levels until 2017

PORTLAND, Maine — Job growth in Maine will be flat in 2012 and employment won’t reach pre-recession levels until 2017, a top economist said Tuesday in pushing back his forecast by three years on when the state would fully recover from the economic downturn.

In his annual Breakfast with Charlie economic outlook presentation, Charles Colgan said he doesn’t see a full recovery from the recession for five more years. For his 2011 economic outlook, Colgan anticipated that Maine would reach the 2008 peak of 620,000 jobs in the second quarter of 2014.

For the past couple of years, Colgan has forecast economic struggles but with the hope that the economy would turn around relatively quickly. But given the negative indicators ranging from high unemployment and weak income growth to what he calls the “fiscal follies” in Washington, Colgan this year pushed back his prediction on when employment would reach pre-recession levels.

“Under the best of circumstances, 2012 won’t be a rip-roaring year because the pessimism forces are simply too deep and entrenched for a quick turnaround,” Colgan told a crowd of about 300 business and community leaders at the University of Southern Maine. “But we could do better than I’m forecasting, and I really hope I’m wrong.”

Between the low point in September 2010 and November 2011, Maine gained 8,100 jobs in the private sector and lost 2,700 government jobs for a net gain of 5,400 jobs, said Colgan, a professor at USM’s Muskie School of Public Service. For 2011, Maine lost 1,400 jobs through November, for a job count of about 594,500.

Maine’s job market has been volatile — up 4,000 jobs one month, down 3,000 in another month — and overall, there are no signs of an upward trend, he said.

“I’m now looking at 2012 in Maine to look an awful lot like 2011,” Colgan said. “Job growth will be meager. It could be up 1,000 or 2,000 jobs net, it could be equally down 1,000 jobs year over year. A sustained recovery, in this forecast, won’t begin until 2013.”

There are signs of optimism, Colgan said: Unemployment claims are down, housing vacancies have peaked, U.S. businesses are in good shape financially and consumers are slowly starting to spend again.

But there are also signs of pessimism: Long-term unemployment is well above nonrecession averages, income growth is sluggish, the percentage of people in the work force is low and consumer confidence is weak.

There are also the “wild cards” that include the European debt crisis, political tensions with Iran and Congress, he said.

He expects partisan battles in Washington to continue throughout 2012 on payroll tax cuts, unemployment insurance, the 2013 budget and tax cuts from George W. Bush’s administration that expire at the end of the year.

“The ‘fiscal follies’ 2012 edition promises to be one of the really great shows in American civic life and will not likely do much to inspire consumer confidence,” he said.