More jobs, better wages, lower taxes, active home sales and stable energy prices are on the horizon for many Mainers in 2018, experts say.
The economy continues on a strong pace and there are no signs of inflation or a dip in consumer confidence, according to several Maine experts. The state for the first time in years saw its population rise slightly from 2016 to 2017, largely because of a robust job market attracting job-seekers, and that’s expected to continue into 2018, economists and financial experts said.
Here are their major predictions for Maine’s economy for 2018.
The new tax law
It will take a while to sort through all the new federal tax law’s implications, according to Amanda Rector, state economist with the Maine Department of Administrative and Financial Services in Augusta.
“There is potential for increased economic activity with the tax cuts for industry. If the national economy is doing well the Maine economy will do well,” she said.
Peter Vigue, chairman and CEO of The Cianbro Companies in Pittsfield, expects the tax law to benefit employees at his construction firm.
“There are a lot of pieces to this, and it is beneficial to our people and to the state of Maine,” he said. “There are far more positive than negative things in the tax law.”
The company, which has 4,000 workers from Bangor to Kittery, is growing with a number of large projects including the new Bangor Savings Bank buildings in downtown Bangor. Vigue said he’s in the process of hiring 300 people in Maine.
However, Rector cautioned that Maine’s Legislature still has to decide whether to conform with different pieces of the new tax law.
“Tax reforms are on the federal level and the state can see where they will conform or where they will make changes,” she said.
Most consumers will benefit from tax credits in 2018, according to Jessamyn Norton, principal at wealth management firm Spinnaker Trust in Portland.
“Individual changes in tax credits will benefit large portions of the population, though most people won’t get a windfall,” she said. “And the average person won’t see anything until they do their 2019 taxes.”
Norton added, “the average Mainer with a healthy 401(k) balance will be happy with this year and next year. Wages will probably rise and the tax law should benefit them. They should feel slightly better next year.”
However, changes related to property taxes may cause part-time residents with seasonal homes to declare their permanent residence out of state, she added.
Jobs and wages
Rector said Maine’s 3.3 percent unemployment rate is very low. And while Maine is faced with a tight labor market, there’s some good news in the fact that companies still are searching for qualified workers.
Maine’s population grew 0.4 percent from 2016 to 2017, according to U.S. Census data released Dec. 20. That’s the 28th highest among states for growth.
“That’s much higher than it has been in quite a few years,” she said.
Rector attributed the growth largely to people attracted by available jobs in the state.
“With the strong employment growth in the past couple years we did see population growth. Private-sector jobs reached an all-time high. There’s also been some upward movement on wages as the labor market tightens.”
There still were population declines year-over-year earlier in the decade and Maine still has more deaths than births.
“So any population growth is due to migration domestically or internationally,” she said. “We saw a 1,600-person net gain in international population and 5,400 domestically from 2016 to 2017.”
Homes and heat
According to Chris Nelson, chief investment officer at Bangor Savings Bank, among the key drivers average consumers will think about for next year are energy prices and the housing market.
“There is some stability in heating oil prices and at the pump this winter,” he said. “We don’t see anything that would cause changes in that trend. But we’re carefully watching energy prices, because any big change could have the same effect as a tax hike, with people having less to spend on other things.”
Rector said she’s seen oil prices for gas and heating trending up, so they could rise by the end of 2018. “But they still will be well below the higher levels of a few years back,” she said.
Nelson said house sales have seen another strong year, with 2017 on pace to be a record year.
“I didn’t see any pockets of weakness this year and don’t expect anything to turn that trend, which, if it holds, could see a strong spring residential market,” he said.
He added that consumer spending is following healthy trends at the national level. However, he cautioned consumers to watch their credit cards or mortgages that have floating rates, as the Federal Reserve is expected to raise rates three or four times next year, which would in turn hike mortgage and credit card rates.
Norton expects an eventual mortgage rate rise. “When they do, applications will rise for refinancings or new mortgages.”
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