The planning office has specified five areas that will affect the state’s economy.

AUGUSTA (AP) – Maine was mired in a jobless recovery last year and is awaiting an economic rebound that could set the stage for slow but steady growth in 2004, the State Planning Office reported Monday.

In its year-end report for 2002, the planning office said that as Maine and the nation emerged from recession, most economic indicators showed progress last year.

The exception was payroll employment, which dropped by 2,100, or three-tenths of a percent. As a result, the state’s average jobless rate in 2002 rose a half point, to 4.4 percent.

Unemployment in Androscoggin County rose to 4.3 percent on average in 2002 compared to 4 percent in 2001.

In Franklin County, the rate dropped a full percentage point from the previous year to 5.4 percent.

Oxford county had the fourth-highest unemployment rate in Maine last year at 6.6 percent, a .7-percent uptick from 2001.

The Androscoggin district, which includes much of western Maine, was the only one to experience sales growth below the state average last year and the year before. Consumer retail sales rose 4.4 percent in 2002 and 1.9 percent in 2001.

Retail sales were strong last year, increasing by 4.5 percent. Cumberland County and northern Maine showed the fastest growth while the Androscoggin district lagged for a second consecutive year.

The report said low interest and inflation rates were a major plus in 2002, but they barely outweighed such negative factors as war fears, weak stock markets and rising energy prices.

Looking to the future, the report said Maine’s economy should hold fairly steady this year until the national economy rebounds. Next year, barring a protracted war, the forecast called for slow but steady growth.

The planning office noted that during its recent weak period, Maine’s economic growth generally outpaced that of both the nation and the region.

“The primary reason for Maine’s relative ‘vibrancy’ appears to be that our economy is far less invested in the technology sector which has been ravaged through the stock market adjustment, taking its toll on technology-dependent regions like New England and on the nation as a whole,” the report said.

But as technology gets back on track, Maine is unlikely to make additional progress in achieving income gains that exceed the national average, it cautioned.

Job gains in 2004 will come in the non-manufacturing sector, led by retail trade, health and other services, the report said. Manufacturing jobs will continue to decline, but at a pace that will gradually slow through 2005.

The report spelled out five issues that could play major roles in determining Maine’s economic future:

• The need to curb the costs of sprawl as population shifts outward from cities and inward from more remote rural areas. At a time of rising taxes, communities must explore ways to share programs and services.

•Out-migration of young people and a declining birth rate pose the threat of a labor shortage that could constrain growth.

•To compete in the knowledge-based economy, Maine must embrace strategies that continually invest in the skills of its work force. The state’s natural and lifestyle amenities can prove helpful in drawing businesses seeking high productivity from knowledge-intensive workers.

– State budget shortfalls, seen as the worst in 50 years, have hit many states, including Maine, and the red ink will likely continue in the near future. Contributing factors included the stock market collapse and soaring health-care costs.

– Public clamor for tax reform is apparently being taken seriously and there are indications that Gov. John Baldacci and the Legislature may come up with a plan to ease the property tax burden.