It’s typical at the start of a new year for business pundits to prognosticate economic ups and downs of the next 12 months. These times, however, are anything but typical. So rather than guesstimating what will occur in 2023, it seems more fitting to forecast what won’t.
Will Hall is business editor of the Portland Press Herald. Gregory Rec/Staff Photographer
I don’t want to be a Debbie Downer. Some of this naysaying means good things for Maine. It’s just that, well, after the unexpected, seismic shifts of 2022, naysaying seems like a safer bet.
A year ago, whose crystal ball would have shown Maine heating oil prices spiking to nearly $6 a gallon – partly due to a superpower’s invasion of a sovereign country? Black swans will continue flocking to Maine in 2023. For now, let’s focus on a few things we can rule out. Probably.
1. The stalemate over lobstering regulations won’t break anytime soon.
Maine lobstermen vs. environmental activists. Protecting a storied Maine industry vs. protecting an endangered species, the North Atlantic right whale. The legal clash around new federal requirements for lobstering gear and a seasonal closure of fishing waters generated lots of headlines in 2022.
The debate over how to balance the often-competing interests has been going on for decades. Fortunately for lobstermen, Congress recently passed a Hail-Mary piece of legislation that means the new rules won’t take effect for six years. That might be long enough for lobstering technology or whale research to begin solving the dilemma.
But a lasting, meaningful solution is unlikely this year and probably for many more ahead. There’s simply too much at stake for both sides, and the issues are too complex for an easy fix. In 2023, we’ll be kicking the crustacean down the road.
2. The sky won’t fall on Maine’s residential real estate market.
Even as home sales have plummeted, Maine is faring better than most states in weathering real estate volatility.
In November, for example, sales nationwide fell more than 35%, while the number of Maine homes changing hands was down 28.7%. And as the median U.S. home price that month inched up 3.2%, the price in Maine increased a healthy 8.3% to $325,000.
The tight inventory and climbing prices will continue to freeze out some buyers (see below). And after two years of double-digit price increases, the home sales market isn’t looking as lucrative for sellers. But compared to the reversals going on elsewhere, maybe Maine’s new normal is a happy medium.
3. The state won’t become a teleworking haven.
In roughly the first year of the pandemic, more than 15,000 outta-staters moved to Maine, helping push the population up to 1.37 million. The 0.7% increase was one of the largest in the country and came as the U.S. population barely increased at all – just 0.1%. Many of the newcomers migrated from more urban, more COVID-stricken areas after realizing a home office can be anyplace with high-speed internet.
The recent arrivals are also discovering their new digs come with a hefty price tag. Those heating oil costs are just the start. Increasingly, shortages of affordable housing, child care and broadband access are limiting the state’s appeal. And Maine’s state and local tax burden ranks as the 10th-highest in the U.S., according to the nonpartisan Tax Foundation.
All of which may help explain why Maine’s population growth has fallen by nearly half over the past year compared to 2020-21, University of New Hampshire researchers estimated last month. Maine, the way life should be? For the teleworking transplants, that possibility might truly be remote.
4. The marijuana buzz won’t last.
After sprouting in October 2020 with $1.4 million in sales, Maine’s legal, recreational market for cannabis has grown like, well, you know the pun. Monthly adult-use sales peaked last August at $17 million, and totaled $158.9 million for all of 2022, nearly double sales in 2021.
The demand may be reaching a plateau, however. Just 62 of Maine’s 483 municipalities have opted to allow the sale of cannabis within their borders, and only about a dozen in the past year. Nationally, there’s now a glut of easily available weed, prices are falling, and more states are climbing onto the legalization bandwagon. At last count, 21 of them were aboard.
There are even signs recreational cannabis may become legal in New Hampshire – the lone New England holdout. The new competition could hurt sales in Kittery and along Eliot’s “green mile” and ultimately dampen Maine’s statewide marijuana market. So think twice before you bogey that blunt.
5. Even if inflation slows, it won’t stop hurting Mainers.
A top economic concern for Americans during 2022 was inflation, but there’s good news for 2023. Economists predict inflation will recede somewhat this year, primarily because of the Federal Reserve’s interest rate hikes last year. In fact, Consumer Price Index growth has been tapering down for six months in a row, after reaching a 40-year peak of 9.1% in June.
In Maine, there may not be as much cause to celebrate. Inflation hits energy costs particularly hard, and Maine is particularly vulnerable to them. The state relies more than any other on heating oil – there’s a theme here – with more than 60% of Maine homes using oil as their primary heat source. And since we’re a big, rural state, Maine is also a big gasoline guzzler. Gas prices heavily affect the costs Mainers pay for goods transported by truck, which is to say almost all of them, and we haven’t finished paying the inflationary toll.
Disagree with these soothsayings? Drop us a line at business@pressherald.com. And watch the Press Herald’s business coverage to see if our predictions hit the mark.
Will Hall is the business editor of the Portland Press Herald.
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