Amanda Rector - Maine State Economist at The Department of Administrative + Financial Services
The U.S. and Maine economies ended 2023 on a solid footing and are starting 2024 with an expectation of declining inflation and interest rates paired with a slower pace of employment growth that avoids recession. However, global geopolitical upheaval remains a risk to the forecast.
For Maine, one of the big questions is whether migration into the state will continue. The pandemic created conditions that resulted in a large influx of people moving to Maine. In 2021, Maine had the fifth highest net migration rate in the country and netted nearly 19,000 new residents through migration. on 2023, migration patterns around the U.S. returned to more normal pre-pandemic patterns, but Maine still had the ninth highest net migration rate and was 21st for population growth in 2023 (0.5%0 and 14th cumulatively since 202 (2.4%).
Maine set a record high for total non farm employment in October 2023, reaching just over 650,000, but growth is expected to slow with the tight labor market as a limiting factor. Maine's labor force has declined in recent years due in large part to retirements among people age 55 and older. Maine has a large share of Baby Boomers 9born 1946-1964) in its population and as this generation ages and retires from the labor force, more and more new workers are needed to maintain the labor force. Migration onto the state is a key factor on labor force growth, but housing availability and affordability is a constraint on migration.
Affordability may be helped by declining inflation and interest rates. Inflation peaked in the summer of 2022, coinciding with a peak in crude oil prices, and has eased since then. Inflation is expected ot continue slowing through 2024; the Federal Open Market Committee projected Personal Consumption Expenditure (PCE) inflation to fall from 2.8% in 2023 to 2.4% in 2024 at their December 2023 meeting. At that same meeting, interest rates were held steady at 5.25-5.5%, with projections showing two to three 25 base point cuts in 2024. This will help ease debt service burdens on consumers and continue steering the economy towards the elusive "soft landing".
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