Maine’s economy will recover in 2021 as long as the state receives federal help and the pandemic remains under control, according to a new Colby College report.
If Maine receives a modest federal stimulus, the COVID-19 vaccine is rolled out successfully and people continue adhering to safety guidelines like wearing face coverings and avoiding large gatherings, the huge negative economic impact of the virus won’t last too far into next year, the report found.
However, if the assumptions that the report makes do not hold true — for example, if there is no federal stimulus package and the current state of emergency continues with the virus raging across the country and forcing stay-at-home orders — all the sectors that are on their precarious way to a recovery might lose their footing, leading to a secondary recession in early 2021 that could last possibly into 2022.
That makes the next few weeks and the early actions of President-elect Joe Biden administration’s COVID-19 strategy crucial to setting the trajectory of the economic recovery.
“It appears that the only way to get a handle on the economy is to handle the pandemic,” economics professor Michael Donihue, said in the report. Donihue put together the economic analysis that includes a county-level look at various factors influencing the overall financial position of the state with six Colby students.
The report states some of what we already know: Maine was hard-hit like most other states but the economy has already started recovering in the later part of the year.Maine has recovered 86 percent of its pre-pandemic economic activity, according to CNN’s Back-to-Normal index, compiled in a partnership with Moody’s Analytics. This rate is higher than the nationwide average of 80 percent.
“While the shock of the pandemic was intense, Maine has found its way out of the pandemic lows and is on its way to see strong growth,” the report said.
The model Donihue’s team put together includes employment in various sectors, income and wages, and other measures of economic activity unique to the structure of Maine’s economy such as restaurant and lodging sales, retail sales and turnpike traffic.
The state overall is expected to recover almost all of its lost economic activity within the next year and a full recovery for all counties might come by 2022. Due to a better latter half of the year, the annual economic activity change in 2020 is expected to be 0.68 percent decline, which is impressive considering the steep drop in March and April.
Different sectors have reacted differently to the pandemic, with the service sector being the hardest hit, the Colby report found, which is especially bad for Maine because its economy is reliant on tourism.
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For tourism industry employees in general, the report is optimistic about a strong return to normal. Next year is on track to completely offset the decline Maine tourism faced in 2020, with a 26 percent increase in tourism employees as businesses gear up for the new normal.
Hotel and restaurant income — which took a big hit as travel slowed to a crawl for much of 2020 — will also recover in the next two years by 33 percent next year and 8 percent in 2022, bringing the state back to pre-pandemic levels, the report predicts.
Unemployment across the state and the country plummeted at the beginning of the year as companies laid off and furloughed non-essential workers and thousands of businesses shut down, but in Maine has been slowly recovering since June.
It will take two years for employment to fully bounce back, with the report predicting Maine’s employment drop of just over 7 percent in 2020 to be made up with 4 percent growth in 2021 and 3 percent growth in 2022.