Although Maine reached the top ranking in Moody’s Analytics/CNN’s “Back to Normal Index” from the pandemic, the Pine Tree State faces a host of economic challenges.
Jacob Posik, director of communications for the Maine Policy Institute, expects the state’s economy to slowly rebound over the next year if there are no new lockdowns.
“Uncertainty still exists for businesses because they do not know what actions Governor [Janet] Mills would take if there’s a resurgence of COVID-19 cases this winter during the traditional flu season,” Posik told The Center Square.
Former state economist Charles Colgan told attendees at a recent Maine Real Estate and Development Association Conference that the earliest economic recovery will be late 2021 continuing into 2022, depending on federal stimulus and the effectiveness of a vaccine.
Maine’s unemployment rate peaked at 10.4% in April. It dropped to 6.1% in September, below the national rate of 7.9%.
While most industries have recovered, including the booming real estate sector where home values in Maine have soared more than 7%, some businesses are still experiencing rough times.
Industries with the highest unemployment rate include the arts, entertainment, professional services, retail, and especially hospitality.
Hospitality accounted for one in 11 jobs in Maine last year, and now the sector is expected to lose more than $1 billion this year in direct taxable revenue.
Restrictions against large gatherings have made it difficult for hospitality businesses, such as restaurants and bars, to survive.
While outdoor dining during the summer months alleviated some of the pain, Posik says that “Maine’s brutal winters prevent outdoor dining from being a reality for much of the year.”
“Maine’s tourism and hospitality industries will likely be in the worst shape for the next 12 months,” Posik says. “Until people feel comfortable traveling to Maine, the tourism and hospitality sectors will suffer the most.”
The pandemic has also forced some businesses to cut employee pay. The Maine Consensus Economic Forecasting Commission revised its wage forecast from a 4% increase in February to a 5% decrease in July.
Lower wages have resulted in decreased personal income taxes. Maine now faces a projected revenue shortfall of $1.4 billion over the next three years. Without additional federal stimulus, Maine lawmakers could be forced to slash the state budget.
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