PORTLAND, Maine — Maine likely will see slow job growth as employment becomes part of the recovery, but the newly passed payroll tax holiday might improve the picture for the state, University of Southern Maine economist Charles Colgan said Wednesday.
The recovery from the recession has been largely jobless to date, said Colgan, speaking to a crowd of several hundred business people at his annual “Breakfast with Charlie” forecasting event, sponsored by USM Corporate Partners.
Colgan is a research fellow at the United States Bureau of Labor Statistics and chief economist for the National Ocean Economics Program, and also chairs the Maine Consensus Economic Forecasting Commission, which prepares an economic outlook report for state budget preparation.
Nationwide, the number of unemployed has remained fairly constant at around 16 million for the past two years, despite six quarters of growth in the gross domestic product.
“This pretty much defines the concept of jobless recovery,” said Colgan.
Maine has done better than the nation, in terms of unemployment, Colgan noted.
The latest state unemployment rate of 7.3 percent in November is better than the national rate of 9.3 percent. Colgan noted, however, that those numbers don’t include those who are unemployed but have stopped looking for work. If those people were included, Maine’s rate would be about 9.1 percent, and the U.S. rate would be at about 11.2 percent, he said.
There are global factors affecting the economy, most notably the currency crisis in the European Union, said Colgan. But he does see predictors that job growth is coming.
The number of hours worked by employees has increased into 2010, and that tends to lead to hiring. Also, he said, as corporate profits grow, jobs tend to follow three to four months later. Profits have surged over the last year without the accompanying hiring growth, he said.
“It’s about time that businesses, with adequate cash reserves, can start to start looking for hiring,” said Colgan.
Nationwide, and in Maine, the payroll tax holiday may speed that job growth.
In the fall of 2010, Colgan had predicted Maine job growth of 0.6 percent in 2011, 2 percent in 2012 and 2.9 percent in 2013.
But the December tax deal between Congress and President Barack Obama may improve the situation, said Colgan. In particular, the payroll tax holiday will reduce workers’ social security taxes in 2011 from 6.2 percent to 4.2 percent. The national economic estimates see that holiday as stimulating spending and job growth, said Colgan. And while the economic models around the holiday haven’t yet filtered down to state levels, Colgan said he’s upped his job growth estimates.
In 2011, he said, he expects Maine employment growth of 1.2 percent, followed by 3 percent in 2012 and 2.9 percent in 2013.
The state’s prerecession employment peak was 620,700 wage and salary jobs, said Colgan. This fall, he expected Maine to return to that number in the second quarter of 2014. But if the payroll tax holiday stimulates the economy as expected — and no other major problems crop up — he expects Maine employment may return to that level by mid-2013.
Not all sectors will return to those levels as quickly, said Colgan. He expected three sectors to grow more rapidly than others, however, and those were health care, leisure and hospitality and professional and business services. He called those three areas the “drivers of job growth in Maine.”
Edward McKersie, president and founder of ProSearch Inc., a Portland recruitment and staffing firm, said he thought Colgan was being “cautiously optimistic” in his Wednesday presentation.
McKersie said he was struck by how Maine seemed to be in better shape than the country as a whole, both statistically and from a momentum and trend standpoint. While the state hasn’t grown as rapidly as others, it hasn’t suffered as big a bust, he suggested.
And, said McKersie, his firm is seeing the kind of employment growth trends that Colgan talked about, and in the same sectors.
“We’re certainly seeing that in our business. The statistics he showed kind of mirrored our read, as far as the employment situation,” said McKersie. “And the areas of growth he highlighted — those are our clients.”