Maine’seconomy sluggish Yearly growth rate only 45th in nation

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BANGOR – Maine’s economy is among the slowest-growing in the country.

In a report by the U.S. Bureau of Economic Analysis, annual growth in the gross state product in Maine averaged 2.6 percent between 1992 and 1999. That was well below the national average of 4 percent for the same time period. Maine is ranked 45th, with only North Dakota, Wyoming, West Virginia, Alaska and Hawaii falling below its level.

“Discouraging, isn’t it?” Laurie Lachance, the state’s chief economist with the State Planning Office, said Monday.

The gross state product indicator records the market value of goods and services produced by labor and property.

Dana Evans, an analyst with the state Labor Market Information Services, acknowledged that job losses in manufacturing industries and slower growth in other nonfarm jobs caused Maine to “fall below the U.S. rate of growth.”

“Well, obviously we’ve had problems in the manufacturing sector,” he said.

The numbers show the state is stuck between its old, traditional industries and new, high-tech ones, Lachance said. The manufacturing sector continues to decline, she said, even in the 11/2 years since 1999, the last year reflected in the government’s report.

“We still have that erosion going on,” Lachance said. “We’re still struggling under the weight of older industries.”

But the state’s push in recent years to a new economy, with high-tech call-center jobs as the key, has shown it’s vulnerable, too, Lachance said. The state was “lulled into believing” that employment growth would continue in this sector while traditional manufacturing jobs would decline, she said.

“The reality is the so-called new economy is starting to experience business fluctuations like the old industries used to,” Lachance said. “The reality is the new economy is going to have cycles just like the old one.”

Steven Levesque, commissioner of the state Department of Economic and Community Development, did not return a telephone call for comment on the federal report.

The state’s tight labor market, with an unemployment rate below the national average for the last couple of years, may be contributing to a slow growth rate in the value of goods and services.

The metals industry, Lachance said, has between 1,400 and 2,000 unfilled jobs for machinists, welders and other positions.

“They have to turn down contracts because they don’t have enough workers,” Lachance said. “Labor is taking its strain, which is not allowing us to grow as we’d like.”

Gross state product numbers are tied to population growth figures, said Michael Montagna, an economist with the State Planning Office. States with the highest GSPs are those that appeal to young people who are energetic, educated and likely to have children.

“Maine doesn’t have a population growth,” Montagna said. “We’ve been going at about a half-percent growth. We’re half the national average.”

According to the report, “of the 12 slowest growing states, seven were in the eastern part of the nation; all 12 states had population growth below or near the national average of 1 percent.”

“Population growth and economic growth are not two independent variables,” Montagna said. “Every new consumer, every new mouth to feed, fuels a demand” for products and services.

Investment in research and development is one answer to economic growth, he said.

“The economy, to some extent, is all about ideas,” Montagna said.

But so is improving the quality of life to make it attractive for young people to move here, he said.

“We need the investment,” Montagna said. “Up until five years ago, it was all about attracting the businesses and the people will come. Now it’s about attracting the workers to your area and the businesses will follow.”

He said cities want to have a good population base so that “workers won’t hold you over a barrel” – if a company needs to let go of some employees, it can advertise for new ones who have better skills because it has a pool to draw from. Now, some businesses are stuck with the workers they have because they can’t find new ones, he said.

Economists call an area’s quality of life the “amenity value,” Montagna said. Seven of the 12 top growth states were in the West – wide open spaces near mountains, waterways and metropolitan centers.

“Why are all these places in the West booming?” Montagna asked. “The West is a place people want to move to. It’s the same that it was 100 years ago during the frontier age. You can start a new life there. You have a lot of new energy moving in.”

The State Planning Office repeatedly has said that a highly skilled work force, an investment in research and development projects, and tax and environmental policies that encourage business growth are needed.

“There’s many answers, and many are politicized,” Montagna said. “We need to get a faster population growth. The investments from production will come from that.”

States with the highest gross state product rating were Arizona, Nevada, Oregon, Colorado, Idaho, New Hampshire, Utah, New Mexico, Georgia, Texas and North Carolina. Their growth rates averaged between 5.1 percent and 7.3 percent.