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Maine only New England state to lose ground in GDP

Capitol News Service

AUGUSTA — Last year, Maine was the only state in New England to see a reduction in an important measure of the economy, the gross domestic product, which measures the overall economic activity and not just one sector of the economy.
"It is the primary measure of economic growth for each state," said Mike Allen, the Associate Commissioner for the Department of Administrative and Financial Services. Allen is an economist who serves on the state's revenue forecasting committee. "This report does show that the state contracted in 2011."
Maine's economy shrunk by four tenths of a percent while the national economy grew by 1.5 percent and New England grew by 1.8 percent, according to the Bureau of Economic Analysis in the U.S. Department of Commerce. They issue an annual GDP report on the states.
Allen said it appears the reason for the decrease was the final closing of the Brunswick Naval Air Station and the loss of government jobs. A study done by the State Planning Office estimated the closing would result in a loss of 2,700 military jobs and another 700 civilian jobs.
"We saw the last of those jobs go last year," he said. "That had a big impact."
Allen said the downturn will have an impact on projecting state revenues in the fall. He said the forecasting commission will start with a lower base on which to project tax collections.
University of Southern Maine economics professor Charles Colgan believes the slight decrease in the state's GDP is the result of the base closing. He said in 2010 the state saw some growth even as the base was reducing its workforce, but he said in 2011 there was not the private sector growth to offset government jobs at the base.
"We were up in other sectors that the rest of New England was up, "he said, "and we were down in those areas where the rest of New England was down."
Colgan said the factor that put Maine into the negative column was the base closing, and no other state in New England had a base closing last year.
"All of the small New England states had a weak year," he said. "Massachusetts accounted for most of the growth in New England with some improvements in technology and manufacturing."
Colgan said Maine saw an increase in its GDP in 2010, even as some jobs were being last at the Brunswick base. He said the difference was there was some private sector growth in 2010 that offset the loss and actually provided a slight boost.
"We did not see any growth in 2011 to offset that big negative we had of the base closing," he said.
Allen said with the revised numbers released by the BEA, it appears Maine was hit hard by the recession early, and started a slow recovery that was seen in 2010. He said it appears without the impact of the BNAS finally closing that the economy would have continued its slow growth in 2011.
"The energy producing states and states with large agricultural sectors are the ones that are showing the best improvement," he said. For example, Texas grew at a rate of 3.3 percent, more than twice the national average and the far west states, California, Oregon and Washington, with their large agricultural sectors, grew at a rate of 2.1 percent.
Colgan said the GDP measure is considered a "very good indicator" of what is happening with the economy, even though employment numbers are more readily available. He said while employment estimates are released monthly, the GDP is yearly and some times it takes months longer for the various indicators to be finalized.
"When you look at 2009 through 2011, they were pretty dismal years for the economy," he said.
Allen agreed and said some of the revised numbers indicate that Maine went "sooner and deeper" into the recession than first thought and was hit hard during the depth of the recession by high energy prices that had a major impact on the state's economy.
"You don't want to be 46th in the country for ranking, "he said, "and you certainly don't want to be in a position of having negative growth."

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