When financial headlines tend to focus on the debt crisis in Europe, a potential hard landing in China, and the sluggish, at best, recovery in the United States, it is sometimes difficult to know if local conditions are any better than the ongoing travails of other regions of the world.  People in Maine, however, know that growth has not been that great over the past few years, and recent economic reports and speeches of well-meaning politicians appear to document this very fact. While the rest of New England posted GDP gains in 2011, Maine was, unfortunately, the only state that recorded a loss in the region.

Known primarily for its rugged interior and coastline, along with the rugged individualists that choose to live and earn a living in this Atlantic coastal community, Maine was impacted by the “Great Recession” more severely and has had more difficulty in recovering than many other states in the union. The economic data is not all bad, by any means, but peripheral states that lie further from the more dense metropolitan areas, typically have a tougher time adapting to both rises and falls in the business cycle.

For 2011, the economy in Maine actually shrunk by four tenths of a percent, technically qualifying as a recession by most economic standards.  The reason quoted most often was the final closing of the Brunswick Naval Air Station.  Along with 2,700 military jobs that were lost, there were also 700 civilian jobs that disappeared.  Real estate prices fell accordingly, as they did across the state, “mirroring” the damage witnessed in most other states, but not nearly as bad as in high-growth areas like Las Vegas, Atlanta, and most major cities in California. 

To add to these woes, energy prices skyrocketed during the year, although the price of oil has plummeted in 2012, which may be a harbinger of better times to come.  Governor Paul LaPage has also brought focus on the point that per capita personal income in Maine is 18 percent below the national average, but, although growing 3.3 percent over the past year, this statistic ranks the state at 49th with only Alaska trailing behind in this category.

A part of the problem is “structural” in nature.  Like it or not, the market in today’s world places less value on agriculture, construction, low-end manufacturing, fishing and forestry ”“ the primary occupations that have traditionally been regarded as Maine’s strong points.  The high value jobs tend to be more related to computers, financial services, and other high-tech professions.

How does a state reverse a “structural” trend?  It takes time and resources.  Investments must be made in education and infrastructure and with projects that mesh more with the general direction of the economy.  Government officials can do just so much when it comes to generating jobs in the private sector, but spending new money is one form of stimulus that seems to cause more political gridlock than progress.  Plans to issue bonds at prevailing low interest rates, which would also receive matching federal funds, for several state initiatives have stalled after three years of active planning.

Within this backdrop, however, there are signs of better times to come.  Energy costs are down, as previously mentioned.  Growth forecasts, although below the national average, do show signs of gradual improvement with positive growth for 2012 and the two years afterwards.  Unemployment is actually at the lower end of 7% while the nation struggles to get below 8%.  Improvements here, however, will be gradual.

Times have been tough in Maine, but economists see future prospects as favorable.     

— Tom Cleveland is a columnist with www.forextraders.com.