At a glance:
- Despite consensus that the economy is in bad shape, Americans are broadly optimistic about their own financial circumstances
- Economic data mirrors this sentiment: unemployment is low, wages have risen faster than inflation, spending is up, and small business creating is on the rise
- While there are reasons to be optimistic about the economy, there are also things that still need to be fixed — many Mainers continue to struggle to afford necessities and make ends meet
Americans generally feel the economy isn’t working right now.
According to the US Federal Reserve’s Survey of Household Economics and Decision-Making (SHED), almost 80% of adults said the state of the national economy was “only fair” or “poor” in 2023, with 22% saying it was “good” or “excellent.”
Poll after poll show voters are worried about economic conditions. It’s not hard to see why. Prices have risen substantially over the past few years, with levels of inflation not seen in decades. To try to curb inflation, the federal reserve has increased interest rates, resulting in higher costs for mortgages, car loans, and credit cards.
Yet when asked more concrete questions about their own circumstances, Americans are more optimistic. In the SHED survey, 72% of Americans thought their own financial situation was “at least okay” in 2023 — down from 75% in 2019, but nothing like the big collapse in confidence about the national economy.
Economic data is more in line with respondents’ assessments of their personal economic wellbeing and is cause for optimism about the economy more broadly. Unemployment is low, wages have risen faster than inflation, and small business creation is booming. As a result, people are buying more than they used to and the economy is growing. In many ways, it’s one of the best economies in years and the recovery from the pandemic-induced recession has been one of the most well-managed ever.
[1] The unemployment rate is extremely low, and a record number of Mainers are working
Compared to the period immediately before the pandemic, the total number of payroll employees in Maine increased from 639,000 to 658,000. Meanwhile, the unemployment rate remains at historically low levels. The preliminary seasonally-adjusted unemployment rate for Maine in June 2024 was 2.8% — slightly below the rate of 3.2% just before the pandemic in February 2020. Similarly, the 4,500 Mainers collecting unemployment compensation payments at the end of June 2024 is in line with the 4,000 continuing claims as of the end of June 2019.
Maine also has one of the strongest job markets for workers in the last 20 years. The US Bureau of Labor Statistics estimates there are currently two open jobs for every unemployed Mainer looking for work. This means it’s easier than ever for Mainers to find jobs and they’re better positioned to negotiate increased wages. It also advantages Mainers who have historically faced difficulties in the job market — people of color and those with disabilities, with an arrest record, or without a college degree — as employers are more willing to be flexible in hiring requirements.
[2] Wages have risen faster than inflation
The extremely strong labor market, particularly for service occupations that traditionally had poor wages, means wages have increased faster than inflation for most Mainers, and in particular for people in the lowest-paid occupations. Between 2019 and 2023, average prices in New England rose by 16%. But average wages for Mainers rose by 27%, resulting in a real terms increase of 10%.
In some industries the wage gains were even faster. For around 55,000 food service and accommodation workers — some of the lowest-paid workers in the state — average weekly wages increased 18% above inflation over the past four years.
[3] Business creation is booming
According to data from the Maine Secretary of State’s office, filings for new businesses in the bureau of corporations are up significantly from before the pandemic. In 2018, 11,000 applications were filed, rising to 12,000 in 2019. For each of the years 2021-2023, that number had increased dramatically to almost 17,000 per year. Some of the fastest growth has been among Maine-based limited liability companies; 7,700 Maine LLCs were founded in 2018, compared to 13,100 in 2023.
This matches federal data from the quarterly census of employment and wages, which shows the total number of business establishments (physical locations) in Maine growing from just under 50,000 in 2018 to over 60,000 by 2023. The fastest growth was among the smallest businesses with fewer than five employees, the total number of which grew by more than 30% over the time period.
Maine Department of Labor has noted at least some of the growth in business establishments is likely due to the rise in remote work, with each person working at home counting as their own “establishment” in the survey. However, not all the growth can be attributed to remote work, as the data shows growth in establishments with more than five employees, and in sectors such as leisure, hospitality and construction, which don’t lend themselves to remote work. The rise in remote worksites also does not account for filings for LLCs in Maine, which are independent legal entities, rather than simply worksites within a larger company.
[4] People are buying things
Consumer purchases are a key economic measure, both because consumer spending is a large part of the US economy and because consumers are likely to cut back on spending when the economy is bad. Nationally, data shows even after accounting for inflation, Americans are consuming more than they were before the pandemic. In other words, regardless of the increase in prices, Americans are able to purchase more goods and services than they were before. This is consistent with wage growth generally outpacing inflation.
Mainers’ spending patterns have followed a similar trend. According to data from Maine Revenue Services, the value of taxable goods and services purchased by Mainers in the 12 months ending in April 2024 was 9% higher than in the 12 months ending September 2019 — even after accounting for the effects of inflation (and a change to the taxability of online sales).
The sales figures are not uniformly positive — real spending at restaurants and purchases of taxable items at grocery stores (mostly ready-to-eat food or non-food items) are down compared to the pre-pandemic period, which may reflect Mainers cutting back on eating out in favor of cooking at home in the face of higher prices. On the other hand, sales of new and used cars, another potential “luxury purchase,” are up more than 8%. Strong growth among sales of equipment and merchandise to businesses may reflect the growing number of business startups in the state.
[5] The economy is growing
With so many strong economic indicators, it is perhaps not surprising that the broadest measure of economic growth, Gross Domestic Product (GDP), is also rising, even after accounting for inflation. In fact, Maine’s post-pandemic economy has grown slightly faster than pre-pandemic, with real GDP growing by 2.8% per year between 2019 and 2023, compared to 2.4% per year between 2015 and 2019. At the national level, GDP growth since the pandemic has been better than all other major world economies.
A “good” economy can still be painful for many
These relatively rosy economic indicators shouldn’t overshadow the fact that many Mainers are still facing acute material hardships. While the wage gains for the workers with the lowest income have helped to reduce income inequality, the most vulnerable Mainers who use safety net programs like food stamps or Social Security have only been treading water as their benefits receive cost-of-living adjustments which match, but do not exceed, the rate of inflation. There have also been substantial price increases in critical items like groceries, housing, gas, electricity, and heating oil — all which strain household budgets.
Maine Center for Economic Policy urges policymakers to build on the gains brought by a strong labor market and federal investments, while also recognizing the need to bring down costs in crucial areas that impact Mainers every day.
