AUBURN – Lewiston-Auburn is facing the same bleak economic forecast as the rest of the state, but it has an ace up its sleeve: affordable office space.

“L-A is one of the cheapest places in New England in terms of available office space,” said Charlie Colgan, economist and professor at the University of Southern Maine. “It’s the energy costs that are killing us relative to (business costs) in the rest of the U.S.”

But that was about the only local good news in Colgan’s annual economic forecast, which he delivered Thursday at a breakfast meeting of the chamber of commerce at the Hilton Garden Inn. For 2008, he predicts a likely recession in the first half, that – if Maine is lucky – will be mild. The most ominous sign: a 5 percent unemployment rate nationally that was released last Friday.

“That’s the most damaging sign we’ve seen in official numbers that the economy is heading to a recession,” he said, defining recession as two consecutive quarters of decreasing gross domestic product.

Colgan said much of 2008 looks like 2007, in terms of the factors that are dragging economic growth. Escalating oil prices (“Expect prices to be in the $80 per barrel range with spikes to $100”) aren’t turning around, given the sustained demand from China and India.

Maine may survive the housing crisis spawned by the subprime debacle better than many states, but it will be felt here in fewer construction jobs, sluggish real estate sales and tighter credit.

“The housing mess is a mess,” he said. “It’s creating the biggest mess in world financial markets in 20 years.”

Overall Maine job growth is expected to range from negligible to minuscule, as business retracts to weather the downturn. Colgan expects jobs to grow by .1 percent from 2007 to 2008.

“And this is my optimistic forecast – the one without a recession,” he quipped. If Maine does enter a recession, there could be a loss of about 6,000 jobs.

He said L-A would be particularly susceptible to job losses in the housing industry, since that is one of the strongest areas of job growth since 2000. Overall, Maine’s housing industry represented 9.7 percent of the jobs in 2006.

But even for those who have jobs, the news isn’t good. While consumers figure out ways to pay for heat, lights, insurance, food and other increasing costs, their paychecks aren’t keeping pace. People with only a high school education haven’t had a measurable increase in their paychecks since 2003, Colgan said.

Folks with a college education haven’t fared much better, with real wages increasing less than 1 percent between 2003 and 2007.

“There is increasing pressure on consumers,” said Colgan. “It’s a much more serious problem than in past recessions.”

To get more money into the average American worker’s paycheck, something on the order of the technology boom of the late 1980s is needed, he said. Tax cuts won’t do it, “even though that’s the major focus of how to get more money to middle-class Americans.”

So where does all that leave Maine?

“It’s a very weak outlook for the first half of of the year,” Colgan said, adding that he expects employment to drop in the first or second quarter of 2008. “The real thing is to see if there’s enough growth in the second half of the year to eke out zero growth for the year.”

Two possible rays of hope: the weak U.S. dollar means a big boost for Maine manufacturers. And the state has seen a substantial increase in population (43,000 people since 2000), unlike most of the rest of New England.

“Maine will get hit in ’08, but not as much as others,” he said. “We didn’t have the boom, so there won’t be as much bust.”