Steady as she goes…


AUBURN – When it comes to fortifying yourself against bad economic trends, size really does matter.

That’s what Lewiston-Auburn has in its back pocket, as indicators like falling housing prices, a looming recession and minute job growth cast an expected pall across the national economy.

“Where the national economy is going, we’re going, too,” said Charles Colgan, economist with the Muskie Institute, who presented his annual Maine forecast at the monthly Chamber of Commerce breakfast meeting at the Hilton Garden Inn.

Several indicators – staggering public debt, the falling dollar and a yield curve that forecasts a recession – give the pessimists plenty of fodder. But locally, there are bright spots, he said.

Combined, the two cities have the second-largest population in the state, moderate housing prices and a local economy based on health care and finances. That should serve L-A well as Colgan expects most of the projected job growth in Maine to occur in the service sector and in metro regions. That means the possibility of more jobs here will attract more people to the area and help stabilize things like the local real estate market.

“Maine – in particular L-A and Bangor – has not seen the large price hikes in housing that have happened in Portland and Boston,” he said. “The diversification of job growth here will keep the real estate market healthy in this region.”

Across the country, the slowdown in the housing market has had a widespread ripple effect. Construction jobs are drying up, which has significant impact here in Maine, where nearly all construction is done by small businesses, many of whom hire on a “casual” basis, Colgan said. Much of the money for the housing boom came from foreign investors, who have been spooked by the decline in the dollar. He expects the housing effects will level off by the third quarter of this year.

While the losses in the construction sector could be “significant,” Colgan projects a modest increase in jobs in Maine overall in 2007, about 0.5 percent – essentially the same rate jobs grew in 2006. He doesn’t expect the projected 2,000-to-3,000 job loss from the closure of Brunswick Naval Air Station to affect employment numbers until 2009-2010.

“That will be purely negative,” Colgan said, noting it took Loring 10 years to recover the jobs lost from the base closure there.

He expects retail sales to decline in 2007, and tourism to remain flat, unless Mother Nature cooperates and gives Maine another spectacular July and August as she did last summer.

The jury is still out as to the effects of the nation’s collective debt. While 10-year private debt hovers around the $1 trillion mark, Colgan noted that the public debt – for the Katrina recovery, the war in Iraq, continuing tax cuts and more – bring the real debt to $6 trillion, a number that caused more than a few gasps from the Chamber audience.

“A trillion here, a trillion there and pretty soon you’re talking real money,” quipped Colgan.

He concluded that his forecast for 2007 was “high-risk,” conceding that the state’s economy could be looking up if the housing issue levels off, the service jobs materialize and tourism gets a boon from weather and strong marketing. But then that’s the danger of gazing into a crystal ball, he said.

“In this business, you eat a lot of glass.”