Annual economic forecast: Long recovery ahead, rough prospects for pulp and paper

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AUBURN — With the caveat that it has been a tough few years to predict, Charlie Colgan sees most of Maine’s growth in 2013 happening in Lewiston-Auburn, Portland and Bangor. He has short-term worries for Bath Iron Works and long-term ones for the paper industry.

And his message to tourism: Don’t wait for the end of the recession to come to you.

Colgan, a former state economist and professor of public policy and management at the University of Southern Maine’s Muskie School of Public Service, gave his annual Maine economic forecast at the Androscoggin County Chamber of Commerce breakfast Thursday to a full banquet hall at the Hilton Garden Inn.

He delivered the ugly news first: In recovering from recession, the U.S. has regained 57 percent of jobs that were lost.

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“Maine has managed to return 9 percent,” Colgan said.

He estimated a full recovery will take the U.S. 78 months and Maine 93, “that’s late 2015.”

“In this recovery period we don’t have a lot of momentum from the previous growth cycle to pick up on, that’s part of the problem,” Colgan said. “It’s like we’re hitting ice as we spin forward.”

Community banking and the reinsurance industry, companies such as UNUM, have been strong, he said. Professional and business services have added jobs, as has health care. Construction has been hit with building permits sharply down.

He said manufacturing continues to lose jobs, in part because of the closure of Biddeford’s Interstate Bakeries, which wasn’t even recession-related.

“I’m still trying to figure out how you can screw up selling Twinkies — they managed to do it,” Colgan quipped.

For 2013 he forecast the state adding 7,000 jobs, 3,900 of those to be self-employed, and that the unemployment rate will remain nearly unchanged, between 7.2 and 7.4 percent.

If the U.S. Congress can’t agree on impending spending cuts, Colgan warned Maine could be vulnerable, losing thousands of jobs.

“We are more dependent on defense spending,” he said. “If something happens at BIW, Lewiston-Auburn is in trouble.”

The last three summers leisure and hospitality have been flat, according to Colgan, with about the same number of visitors and spending down slightly. Cruise ships carry many passengers from New York and Boston, he said, people who would have driven here anyway. He likened the boats to “kind of a big RV.”

The larger issue: “We’re a tourist economy” heavily dependent on a short summer season, he said, and yet aren’t carving a niche in the global tourism market.

Colgan said after his presentation that he has concerns about tourism’s prospects for growth, tucked up in wealthy but aging New England.

“Maine really needs to be doing some investment in IT and apps and servicing a younger crowd,” Colgan said. “Right now we scrape by with the bare minimums; many of our tourist attractions are barely able to put up a website, let alone a mobile app.

“We really need to improve our product, not just hang around waiting for the recession to end or the recovery to get really going because we’ve got a long-term competitive challenge there,” he said.

With the world turning online to more iPads and apps, he also has long-term worries for Maine’s pulp and paper industry.

“They have apps like Zinio, which are consolidating online the electronic versions of magazines,” Colgan said. “Magazine printing paper is a major thing that we produce. This is going to be a real challenge to the industry. Not only is it a question of finding a niche in a hyper-competitive market, now the underlying demand for their very product is changing.”

Demand for printing paper could stabilize but he forecasts the industry to lag the rest of the state in recovery.

“The real question — I don’t know the answer, I don’t know if the paper industry even knows the answer to this — is how they will reconfigure themselves to meet this competitive challenge from the electronic media,” Colgan said.

kskelton@sunjournal.com

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