Maine’s economy expected to be best in New England over next 2 years

A recent report on the New England economy contains some good news and some bad news. The bad news is that the economy of the six-state region will perform poorly through 1992; and, when it does recover, it is unlikely to regain the vigor it had during the mid-1980s.

The good news is that the Maine economy should turn in the best performance in the region between 1990 and 1992.

The report was written by Kristen C. Garnett, an associate economist with Fleet-Norstar Financial Group in Providence, R.I. It was based on forecasts prepared by the New England Economic Project.

Maine’s economy has not deteriorated as sharply as those in the other New England states. For example, the state’s unemployment rate in June was 4.5 percent, the same rate recorded in June 1989. Manufacturing jobs have fallen by the smallest amount in the six states. They were down 0.7 percent between June 1989 and June 1990, compared with a 4.8 percent decline for the same period across New England.

In 1990, Maine’s increase in personal income is expected to be the best in the region, up 7.4 percent versus an all-New England gain of 5.7 percent.

“Maine, which suffered more than the New England average during the last downcycle in 1981-82, will likely turn in the best economic performance in the difficult 1990-92 period ahead,” wrote Garnett.

But the prognosis for New England is anything but encouraging. Garnett outlines the region’s “difficult” transformation from the “miracle,” or “boom” period of the mid-1980s through the current “adjustment” phase to a period of underperformance, relative to the U.S. economy, in the mid-1990s.

According to Garnett, New England will be burdened with higher energy costs, tax increases, real-estate problems, and federal defense spending cutbacks.

Real estate has been one of the harder-hit sectors in New England. According to the figures in Garnett’s report, new housing starts in the six states likely will fall to 49,600 units in 1990, off 57 percent from the peak in 1986. And demographic factors, specifically fewer young adults and therefore fewer people needing houses, indicate that the industry will have trouble rebounding in the mid-1990s.

During New England’s boom in the 1980s, service jobs increased at an annual rate in excess of 4 percent. That’s history. Forecasts show these jobs increasing 1 percent this year, and a mere 0.7 percent in 1991.

And the decline in manufacturing jobs is expected to continue. New England’s manufacturing sector has posted job declines of 2 percent or greater every year since 1984. In 1989, the losses became a bit more severe, when a 3.4 percent decline was recorded. This trend is expected to continue this year, with a decline of 3.6 percent.