Maine only New England state to lose ground in GDP

By Mal Leary, Capitol News Service
Posted June 12, 2012, at 6:45 p.m.

AUGUSTA, Maine — Experts say the closure of Brunswick Naval Air Station was the most likely reason that Maine was the only state in New England in 2011 to see a reduction in an important measure of the economy — the gross domestic product.

“It is the primary measure of [overall] economic growth for each state,” said Mike Allen, associate commissioner for the Department of Administrative and Financial Services and an economist who serves on the state’s revenue forecasting committee. “This report does show that the state [GDP] contracted in 2011.”

As a matter of fact, Maine’s economy shrank 0.04 percent while the national economy grew 1.5 percent and New England grew 1.8 percent, according to the Bureau of Economic Analysis in the U.S. Department of Commerce, which issues an annual GDP report on the states.

A State Planning Office study estimated the closure of the Brunswick base would result in the loss of 2,700 military jobs and 700 civilian jobs.

“We saw the last of those jobs go last year,” Allen said. “That had a big impact.”

Allen said the downturn will affect state revenue projections in the fall because the forecasting commission will start with a lower base on which to project tax collections.

University of Southern Maine economics professor Charles Colgan also attributed the decrease in the state’s GDP to the base closure. He said the state saw some growth in 2010, even as the base was reducing its work force, but 2011 lacked the private-sector growth to offset job losses at the base. No other New England state had a base close in 2011.

“All of the small New England states had a weak year,” he said. “Massachusetts accounted for most of the growth in New England with some improvements in technology and manufacturing.”

Colgan said the difference between 2010 and 2011 was there was some private-sector growth in 2010 that offset the loss and actually provided a slight boost.

Allen said the latest numbers indicate to him that Maine was hit hard by the recession early and started a slow recovery evident in 2010. He said the state’s economy would have continued to improve if the base had not closed.

“The energy-producing states and states with large agricultural sectors are the ones that are showing the best improvement,” Allen said. For example, Texas grew at a rate of 3.3 percent, more than twice the national average, and states in the far west with large agricultural sectors, including California, Oregon and Washington, grew at a rate of 2.1 percent.

Colgan said the GDP measure is considered a “very good indicator” of what is happening with the economy, even though employment numbers are more readily available. He said while employment estimates are released monthly, the GDP is yearly and sometimes it takes months longer for the indicators to be compiled.

“When you look at 2009 through 2011, they were pretty dismal years for the economy,” he said.

Allen agreed and said some of the revised numbers indicate that Maine went “sooner and deeper” into the recession than first thought and was hit hard during the depth of the recession by high energy prices, which had a major impact on the state’s economy.

“You don’t want to be 46th in the country for ranking, and you certainly don’t want to be in a position of having negative growth,” he said.

http://bangordailynews.com/2012/06/12/business/maine-only-new-england-state-to-lose-ground-in-gdp/ printed on October 24, 2014