Long-term Growth vs. Short-term Gimmicks: Maine’s Economy and Gov. Mills’ Second Biennial Budget

Part 1: Understanding the Economic Impacts of the Pandemic

FORECASTING MAINE’S ECONOMIC FUTURE

The truly unprecedented economic shock from broad-ranging government orders to shut down businesses, schools, gatherings, and elective medical care in response to the pandemic, was reflected in immensely volatile monthly unemployment and tax revenue data. Given a long period of relative stability, this makes modeling a recovery course with confidence very difficult.

Another factor that makes long-term economic forecasting challenging at this juncture is the uncertainty about when and how the overall labor force will rebound. If Maine sets a goal to return to “full employment” (somewhere around 2.5% unemployment), but other pandemic-related structural shocks persist through 2021, it is unlikely that employment will rebound in the next five to ten years. The Maine Consensus Economic Forecasting Commission (CEFC) also recognizes this, projecting that total employment will not reach 2019 levels at least until after 2025.