Expert delivers forecast for ’06 Outside factors may affect state’s overall economy

PORTLAND – The state’s economy won’t show any dramatic swings among key economic indicators in 2006, but could be shaped by factors that don’t show up in the numbers, a leading economist said in his economic outlook for the year.

Maine’s employment growth will lag the nation’s, unemployment should remain flat and personal income growth will slow, Charles Colgan, professor at the University of Southern Maine and a former state economist, told a group of business leaders Wednesday.

But the more important influences on the economy could be things that won’t show up in statistical tables, he said.

If the timetable to close the Brunswick Naval Air Station – now set for 2010 or 2011 – is stepped up during the year, it could have an effect on the economy sooner than expected, Colgan said.

The year could also be a decisive one in determining the future of Maine’s forest lands and how they are used, especially given Plum Creek Timber Co.’s proposal for a huge development for the Moosehead Lake area.

This is also an election year, and the outcomes and the balance of power in the State House could affect the economy, he said.

A fourth factor, he said, will be public spending trends on health care and education and how they might affect the economy in the future. He said 60 percent of all new spending in the state’s General Fund since 1999 has gone toward health care, with 32 percent going toward education.

“The outlook on the one hand is statistically slow and steady. But outside the statistics a lot of key events will transpire in 2006 that will shape where Maine is going in perhaps more dramatic ways than the statistics will show,” he said.

Colgan, a professor at USM’s Muskie School, presented his 2006 economic forecast at a breakfast meeting hosted by USM’s Corporate Partners program, a group of about 150 businesses.

On the employment front, jobs will grow at less than 1 percent a year in both 2006 and 2007, Colgan said.

Construction jobs in particular will take a hit because of the slowing real estate market, he said. New housing permits and existing housing sales are expected to decline.

“The commercial real estate sector is going to be key to keeping the construction sector stable or even growing in the next few years because the housing industry is going to cool off,” he said.

An estimated 41 percent of the job growth in Maine between 2004 and 2008 will be in education and health services, he said. Leisure and hospitality jobs will make up 22 percent of the new jobs, and professional and job services will account for 16 percent of job growth.

Manufacturing jobs will decline, he said.

Regarding unemployment, the rate in Maine is projected to mirror the national rate through the rest of the decade at about 4.8 or 4.9 percent, he said. Maine’s jobless rate in recent years has been far lower than the national rate, but the gap closed in 2005.

“We’ve lost our ability to say that our unemployment rate has been consistently below the U.S.,” he said. “That’s mostly because our economy simply isn’t growing as fast.”

A positive indicator for Maine’s economy is that the state’s population is growing faster than it was in the late 1990s, when the slow growth severely limited the work force and the potential for economic growth.

Between 2000 and 2005, Maine’s population growth has been third-fastest among the six New England states, Colgan said.

During that time, Maine’s population increased by 46,582, he said. By comparison, Massachusetts’ population increased only 49,638 – even though it has five times as many people as Maine.