Maine s Economic Outlook: 2009 and Beyond

Maine s Economic Outlook: 2009 and Beyond January 2009 James Breece, Ph.D. University of Maine System

Outline 1. External Economic Drivers 2. Current Conditions 3. Economic Projections 4. Long-term Trends 5. An Opportunity for the Future

External Economic Drivers Global Recession Global Financial Crisis Volatile Oil Prices Meltdown in Mortgage Market Depressed household wealth Fall in Consumer confidence Weak Credit Markets Volatile Stock Market Weak Dollar Transitioning Economy The War Effort AT True Economic Recession

Current Conditions Taxable Sales Employment, Unemployment and Unemployment Rates Bankruptcy Filings Foreclosures

$17,800,000 Total Taxable Sales January 2001 to Date 8% $17,300,000 7% $16,800,000 6% Thous sands of Dolla ars $16,300,000 $15,800,000 $15,300,000 $14,800,000 5% 4% 3% 2% 1% Gro owth Rate $14,300,000 000 0% $13,800,000-1% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

Total Consumer Taxable Sales January 2001 to Date 8% $15,100,000 7% 6% $14,600,000 5% lars Thou usands of Dol $14,100,000100 000 $13,600,000 $13,100,000 4% 3% 2% 1% Grow wth Rate $12,600,000 0% -1% $12,100,000-2% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$3,375,000 $3,275,000 $3,175,000 General Merchandise Taxable Sales January 2001 to Date 8% 7% 6% 5% Thous sands of Dolla ars $3,075,000 $2,975,000 $2,875,000 $2,775,000 4% 3% 2% 1% 0% Grow wth Rate $2,675,000-1% $2,575,000-2% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$2,625,000 Building Supply Taxable Sales January 2001 to Date 20% $2,525,000 $2,425,000 15% Thous sands of Dolla ars $2,325,000 $2,225,000225 $2,125,000 $2,025,000 $1,925,000 10% 5% 0% Grow wth Rate $1,825,000 $1,725,000-5% $1,625,000-10% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$3,850,000 Auto/Transportation Taxable Sales January 2001 to Date 12% $3,750,000 $3,650,000 10% 8% 6% Thous sands of Dolla ars $3,550,000 $3,450,000 $3,350,000 $3,250,000 000 4% 2% 0% -2% -4% -6% Grow wth Rate $3,150,000-8% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$2,375,000 Business Operating Taxable Sales January 2001 to Date 15% $2,275,000 $2,175,000 10% Thous sands of Dolla ars $2,075,000 $1,975,000 $1,875,000, $1,775,000 $1,675,000 5% 0% -5% -10% Grow wth Rate $1,575,000-15% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$1,525,000 Food Store Taxable Sales January 2001 to Date 8% $1,475,000 $1,425,000 6% 4% 2% lars Thou usands of Dol $1,375,000 $1,325,000 $1,275,000 0% -2% -4% -6% Grow wth Rate $1,225,000 $1,175,000-8% -10% -12% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

Lodging Taxable Sales January 2001 to Date 10% $675,000 9% 8% lars Thou usands of Dol $625,000 $575,000 $525,000 $475,000 7% 6% 5% 4% 3% 2% 1% 0% Grow wth Rate 12 Month Moving Total Growth Rate Data: Maine Revenue Services

$1,975,000 Restaurant Taxable Sales January 2001 to Date 6% $1,925,000 $1,875,000 5% lars Thou usands of Dol $1,825,000 $1,775,000 $1,725,000 $1,675,000 $1,625,000 4% 3% 2% Grow wth Rate $1,575,000 1% $1,525,000 $1,475,000 0% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

Other Retail Taxable Sales January 2001 to Date $2,125,000 12% $2,025,000 10% $1,925,000 8% Thous sands of Dolla ars $1,825,000 $1,725,000 $1,625,000 $1,525,000 Previous Economic Stimulus Package 6% 4% 2% 0% Grow wth Rate $1,425,000-2% 12 Month Moving Total Growth Rate Data: Maine Revenue Services

Current Conditions Taxable Sales Employment, Unemployment and Unemployment Rates Bankruptcy Filings Foreclosures

1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 Monthly Total Employment Index January 1969 November 2008 US, New England & Maine US ME Jan-08 Jan-69 Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Data: Federal Reserve Bank of Boston

1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 Monthly Total Employment Index January 1969 November 2008 US, New England & Maine 5 yrs 8 yrs 10 yrs 10 yrs 5 yrs US ME Bubble Flat Current declines Jan-69 Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Data: Federal Reserve Bank of Boston

100,000 95,000 Maine Manufacturing Employment 1990-2007 1990-2007 Total Manufacturing Change -35% (-34,288) 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 50,000000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2,000 2001 2002 2003 2004 2005 2006 2007 Source: Bureau of Economic Analysis

10,000 8,000 6,000 4,000 2,000 0 Unemployment Bangor, Lewiston-Auburn, & Portland-South Portland-Biddeford Portland-South Portland-Biddeford Bangor Lewiston Auburn JAN - 2000 MAR - 2000 MAY - 2000 JUL - 2000 SEP - 2000 NOV - 2000 JAN - 2001 MAR - 2001 MAY - 2001 JUL - 2001 SEP - 2001 NOV - 2001 JAN - 2002 MAR - 2002 MAY - 2002 JUL - 2002 SEP - 2002 NOV - 2002 JAN - 2003 MAR - 2003 MAY - 2003 JUL - 2003 SEP - 2003 NOV - 2003 JAN - 2004 MAR - 2004 MAY - 2004 JUL - 2004 SEP - 2004 NOV - 2004 JAN - 2005 MAR - 2005 MAY - 2005 JUL - 2005 SEP - 2005 NOV - 2005 JAN - 2006 MAR - 2006 MAY - 2006 JUL - 2006 SEP - 2006 NOV - 2006 JAN - 2007 MAR - 2007 MAY - 2007 JUL - 2007 SEP - 2007 NOV - 2007 JAN - 2008 MAR - 2008 MAY - 2008 JUL - 2008 SEP - 2008 NOV - 2008 Data: ME Dept. of Labor

7 6.5 6 5.5 5 4.5 4 35 3.5 3 2.5 2 1.5 Unemployment Rates US & Maine US Maine JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV - 2000-2000 - 2000-2000 - 2000-2000 - 2001-2001 - 2001-2001 - 2001-2001 - 2002-2002 - 2002-2002 - 2002-2002 - 2003-2003 - 2003-2003 - 2003-2003 - 2004-2004 - 2004-2004 - 2004-2004 - 2005-2005 - 2005-2005 - 2005-2005 - 2006-2006 - 2006-2006 - 2006-2006 - 2007-2007 - 2007-2007 - 2007-2007 - 2008-2008 - 2008-2008 - 2008-2008 Data: ME Dept. of Labor

Unemployment Rates Bangor, Lewiston-Auburn, and Portland-South Portland-Biddeford 7 6.5 Lewiston-Auburn 6 5.5 5 4.5 Bangor 4 3.5 3 Portland-South Portland-Biddeford 2.5 2 1.5 JAN - 2000 MAR - 2000 MAY - 2000 JUL - 2000 SEP - 2000 NOV - 2000 JAN - 2001 MAR - 2001 MAY - 2001 JUL - 2001 SEP - 2001 NOV - 2001 JAN - 2002 MAR - 2002 MAY - 2002 JUL - 2002 SEP - 2002 NOV - 2002 JAN - 2003 MAR - 2003 MAY - 2003 JUL - 2003 SEP - 2003 NOV - 2003 JAN - 2004 MAR - 2004 MAY - 2004 JUL - 2004 SEP - 2004 NOV - 2004 JAN - 2005 MAR - 2005 MAY - 2005 JUL - 2005 SEP - 2005 NOV - 2005 JAN - 2006 MAR - 2006 MAY - 2006 JUL - 2006 SEP - 2006 NOV - 2006 JAN - 2007 MAR - 2007 MAY - 2007 JUL - 2007 SEP - 2007 NOV - 2007 JAN - 2008 MAR - 2008 MAY - 2008 JUL - 2008 SEP - 2008 NOV - 2008 Data: ME Dept. of Labor

12/20/2008 Unemployment Claims California Michigan Pennsylvania New York Ohio Illinois Texas Indiana Kentucky North Carolina Florida Washington Georgia Wisconsin Missouri Oregon New Jersey Virginia Alabama Minnesota South Carolina Iowa Tennessee Massachusetts Arkansas Nevada Arizona Maryland Connecticut Kansas Mississippi Colorado Louisiana Idaho Utah Oklahoma Nebraska Montana West Virginia i i Hawaii Maine New Hampshire Alaska New Mexico North Dakota Rhode Island Delaware Vermont South Dakota Wyoming District of Columbia Claims Change from last year -2,000 8,000 18,000 28,000 38,000 48,000 87,877 Data: US Dept. of Labor

Current Conditions Taxable Sales Employment, Unemployment and Unemployment Rates Bankruptcy Filings Foreclosures

Quarterly Change in Bankruptcy Filings 70.0% 60.0% 50.0% New Regulations in 06 40.0% 30.0% ME 20.0% 10.0% 0.0% NE US -10.0% -20.0% Dec- 06 Jan- 07 Feb-0 7 Mar-0 Apr-07 May- 7 07 Jun-0 7 Jul-07 Aug- 07 Sep- 07 Oct-07 Nov- 07 Dec- 07 Jan- 08 Feb- 08 Mar- 08 Apr-08 May- 08 Jun- 08 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 US 3.8% 9.0% 8.7% 4.0% 3.4% 8.5% 12.5% NE 11.0% 15.5% 5% 15.7% 06% 0.6% -2.9% 29% 17.7% 7% 12.5% ME 5.8% 21.3% 40.1% -14.9% -2.3% 4.3% 44.2% Data: Federal Reserve Bank of Boston

Maine Bankruptcy Filings 2,500 2,000 1,500 1,000 500 0 Data: Federal Reserve Bank of Boston

Current Conditions Taxable Sales Employment, Unemployment and Unemployment Rates Bankruptcy Filings Foreclosures

Properties with Foreclosure Filings in November, 2008 United States MI MI VA VA Data: RealtyTrac.com Data: RealtyTrac.com

Properties with Foreclosure Filings in November, 2008 Maine Data: RealtyTrac.com Data: RealtyTrac.com

Projections Consensus Economic Forecasting Commission Revenue Forecast Committee Federal Reserve Past Recessions

Consensus Economic Forecasting Commission Projections of Annual Employment and Population Growth Wage & Salary Employment (Annual Percentage Change) Actual Forecast 2008 2009 2010 2011 2012 2013 November 2008-0.2-0.7 0.4 1.0 0.8 0.7 Personal Income (Annual Percentage Change) November 2008 37 3.7 26 2.6 39 3.9 40 4.0 43 4.3 43 4.3

Revenue Forecasting Committee Summary of December 2008 Revenue Revisions General Fund Summary FY08 Actual FY09 FY10 FY11 FY12 FY13 Current Forecast In millions $3,087 $3,095 $3,146 $3,168 Annual % Growth 23% 2.3% 02% 0.2% 16% 1.6% 07% 0.7% Net Increase (Decrease) In millions ($140) ($177) ($152) Revised Forecast In millions $3,087 $2,955 $2,969 $3,016 $3,106 $3,196 Annual % Growth 23% 2.3% -4.3% 43% 05% 0.5% 16% 1.6% 30% 3.0% 29% 2.9%

Revenue Forecasting Committee Summary of December 2008 Revenue Revisions General Fund Summary FY08 Actual FY09 FY10 FY11 FY12 FY13 Current Forecast In millions $3,087 $3,095 $3,146 $3,168 Annual % Growth 23% 2.3% 02% 0.2% 16% 1.6% 07% 0.7% Net Increase (Decrease) In millions ($140) ($177) ($152) Revised Forecast In millions $3,087 $2,955 $2,969 $3,016 $3,106 $3,196 Annual % Growth 23% 2.3% -4.3% 43% 05% 0.5% 16% 1.6% 30% 3.0% 29% 2.9% As demand for services continue to grow

Fed Predicts Worsening Economy (December 2008) GDP to decline through mid-year 2009 Slow recovery to begin second half of 2009 Unemployment to rise into 2010 Current recession could be the longest since the Great Depression

Fed s Options: Interest rates already near zero Can buy more financial assets (print money) But the risks are: Inflation Devaluation Smart Fiscal Stimulus Needed

Past Recessions Business Cycle Reference Date Net Job Loss in US Net Job Loss in Maine Start of Recession # of Months # # % (000's) (000's) % Dec 69 11 831 1.2% 1.1 0.3% Nov 73 16 1,260 1.6% 6 1.7% Jan 80 6 968 1.1% 12.2 2.9% Jul 81 16 2,824 3.1% 6.4 1.5% Jul 90 8 1,2311 1.1% 11% 18.2 2 3.4% 34% Mar 01 8 1,599 1.2% 4.8 0.8% Dec 07 11 Months & Continuing 1,911 1.4% 8 1.3% Data: National Bureau of Economic Research

Past Recessions Business Cycle Reference Date Net Job Loss in US Net Job Loss in Maine Start of Recession # of Months # # % (000's) (000's) % Dec 69 11 831 1.2% 1.1 0.3% Nov 73 16 1,260 1.6% 6 1.7% Jan 80 6 968 1.1% 12.2 2.9% Jul 81 16 2,824 3.1% 6.4 1.5% Jul 90 8 1,2311 1.1% 11% 18.2 2 3.4% 34% Mar 01 8 1,599 1.2% 4.8 0.8% Dec 07 11 Months & Continuing 1,911 1.4% 8 1.3% Data: National Bureau of Economic Research

Past Recessions Business Cycle Reference Date Net Job Loss in US Net Job Loss in Maine Start of Recession # of Months # # % (000's) (000's) % Dec 69 11 831 1.2% 1.1 0.3% Nov 73 16 1,260 1.6% 6 1.7% Jan 80 6 968 1.1% 12.2 2.9% Jul 81 16 2,824 3.1% 6.4 1.5% Jul 90 8 1,2311 1.1% 11% 18.2 2 3.4% 34% Mar 01 8 1,599 1.2% 4.8 0.8% Dec 07 11 Months & Continuing 1,911 1.4% 8 1.3% Data: National Bureau of Economic Research

Long-Term Trends Value-added added Economic Activity Relative value-added State Rankings

$70,000 Value-Added Economic Activity (real GDP per Worker) NE $65,000 $60,000 US $55,000 $50,000 ME $45,000 $40,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Data: Bureau of Economic Analysis

Value-Added Economic Activity (real GDP per Worker) $70,000 $65,000 $60,000 Portland-South Portland-Biddeford $55,000 $50,000 Bangor $45,000 Lewiston-Auburn $40,000 2001 2002 2003 2004 2005 2006 Data: Bureau of Economic Analysis

2007 Value-Added Economic Activity (real GDP per Worker) District of Columbia Delaware New York Connecticut New Jersey California Massachusetts Alaska Illinois Washington Virginia Maryland Texas United States Rhode Island Oregon Nevada Colorado North Carolina Michigan Arizona Georgia Minnesota Louisiana Pennsylvania New Hampshire Ohio Hawaii Florida Indiana Tennessee New Mexico Wisconsin Wyoming Nebraska Kentucky Iowa Alabama Missouri Kansas Utah South Carolina South Dakota Vermont Oklahoma Arkansas West Virginia i i Maine Idaho Mississippi North Dakota Montana $48,033, 47th $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 Data: US Dept. of Labor

Relative Value-Added (real GDP per worker compared to national average) 1997-2007 New England States 140 130 CT 120 MA 110 100 90 National Average RI NH 80 VT ME 70 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Data: Bureau of Economic Analysis

Relative Value-Added (real GDP per worker compared to national average) 1997-2007 Maine and Local Areas 140 130 120 110 100 National Average Portland South Portland Biddeford 90 80 70 ME Bangor Lewiston Auburn 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Data: Bureau of Economic Analysis

State Rankings Maine 2006 2007 th th Personal Income Per Capita 35 th 36 th Gross Domestic Product 44 th 44 th Value-Added Activity 47 th 47 47 th Data: Bureau of Economic Analysis

Outline 1. External Economic Drivers 2. Current Conditions 3. Economic Projections 4. Long-term Trends 5. An Opportunity for the Future

How Can Maine Jump-start its Economy? Generate more high VALUE-ADDED economic activities iti

Examples of High Value-Added Precision manufacturing not just welding Coated publication papers not tjust pulpwood Eco-tourism not just lodging Building materials not just logs Furniture not just stump wood Composites not just lumber Financial services not just banking Telecommunications not just phone-lines Yachts not just boats Yogurt not just milk Vodka not just potatoes

What is required? Entrepreneurial management R&D activities based on Maine s natural resources Reverse brain-drain ; generate a brain-gain Skilled/educated workforce in critical areas Based on a strong higher h education system In partnership with businesses, government, and non-profits

An Opportunity for Bangor s Economic Future Bangor currently has the ability to establish a High Value-Added Development Park The Park could be available this summer for immediate economic impact Where is this you might ask?

Home Depot

Home Depot Wal-Mart Shaw s

Target Home Depot Wal-Mart Burlington Coat Factory Shaw s

High Value-Added Development Park

High Value-Added Development Park Global l Selling Points of the Park Conveniently located between an international airport and a research university Turn-key ready (with utilities, parking, etc) Of significant size to draw international interest (approximately 600,000 sq. ft) Access to a skilled labor market, affordable housing, and quality of life amenities

High Value-Added Development Park Film studios Conceptual lactivities i i Financial processing center Global distribution center Networks and communications Medical/pharmaceutical research or distribution Aerospace technologies Computer software and systems Precision engineering and manufacturing Alternative energies

High Value-Added Development Park Economic Benefits (Similar to the North Carolina Research Triangle Park) Increased employment Higher paying jobs Vibrant economy Global recognition We have the opportunity; lets take it!