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AUGUSTA, Maine — Maine economic forecasters on Wednesday projected a slow recovery from a coronavirus-induced recession that has hit the state’s tourism-dependent labor force harder than most other states.
The Consensus Economic Forecasting Commission was charged by Gov. Janet Mills to revise a rosy February forecast after it became apparent that the virus would devastate employment and state revenue. Its July report says the economy will slowly rebound over the next two years, assuming new cases are effectively managed and that more federal aid comes.
Those expectations are tempered with uncertainty of a vaccine and the possibility of a second wave. Workforce recovery could be hamstrung if parents are forced to stay home due to schools not reopening or scarce childcare.
“Overall, the commission maintains that the success and speed of the economic recovery are dependent on public health outcomes,” the report reads.
The report projects a $135 million shortfall in the fiscal year that ended Tuesday, lower than the $200 million projected earlier this year. The amount is split between a $65 million shortfall from sales and use and service provider taxes and a $70 million deficit from individual and corporate income taxes. The latter was partially offset by federal unemployment benefits.
The commission said it is likely the economy will see a quick rebound in the immediate future as states reopen and some people return to work, followed by a slower recovery if infections increase. Infection spikes have occurred in over a dozen states that have reopened earlier than Maine, including Florida, California and Arizona.
The damage peaked in the April state revenues, with businesses reporting an overall 25 percent decline in taxable sales. Restaurants and lodging were hit hardest with year-over-year declines of 58 percent and 80 percent, respectively.
“Dependence on summer tourism and a slightly higher share of jobs in high risk industries puts the labor market in a more vulnerable position in Maine than nationally,” the report reads.
The employment outlook was grim. The commission said the real unemployment rate in the state is around 18 percent, contrasting with the official rate of 9.3 percent because fewer unemployed people are counted. It noted a projection from the Congressional Budget Office over 3 million less people in the national work force by the fourth quarter of 2021.
Employment in Maine is expected to remain lower than it was entering the recession into 2022, when forecasters said there will be more than 15,000 fewer jobs in Maine then than there were in 2019, not counting a pool of workers that includes self-employed people and farm workers.
Wages and salaries are expected to decrease by 5 percent this year, rather than increase by 4.1 percent. They will grow by 2 percent in 2021, down from an anticipated 3.7 percent.
But projecting employment is hampered by the uncertainty of the public health situation, whether child care or extended unemployment compensation, data collection issues and whether consumers feel safe in returning to normal activities, the report notes.
Further economic projections are coming. Mills’ economic recovery committee plans to have its initial mapping of how to get the state back on her 10-year economic plan by mid-July. The state’s revenue forecasting commission is expected to have a report this summer. And a revised look at the out years, as well as a new stress test, is anticipated from the economic forecasting commission in October.