Speaking before the Joint Standing Committee on Appropriations and Financial Affairs this morning, Maine’s state economist expressed cautious optimism about recovery. 

Michael LeVert told members of the committee that the Consensus Economic Forecasting Commission has reason to believe that economic conditions have stabilized and that the economy is now recovering.  But he also added that the commission, which analyzes and interprets economic trends for state officials, has revised growth predictions downwards to reflect key indicators that are still lagging.

“The economy is growing, but it’s growing very slowly,” LeVert said.  “The good news is that we’ve seen modest private sector growth.  Consumer spending has rebounded, which is a good sign that people are starting to feel a little more optimistic.”

“The bad news,” he continued, “is that businesses and consumers remain anxious.  The European debt crisis took the wind out of the sails of businesses looking to hire or invest.  Homeowners have lost wealth, and consumers have adjusted spending accordingly.” 

LeVert said that Maine is not likely to see pre-recession employment numbers until next summer, but he said the commission does expect wage and salary figures for those already employed to rise.  LeVert said that’s because employers during the recession frequently cut hours or increased furlough days instead of laying off.  As the recovery proceeds, LeVert said he expects employers to add hours or reduce furlough days for existing employees before they hire new ones. 

Consequently, in spite of stagnant job growth, the state may register higher revenues from taxes on wages and salaries, which comprise nearly half of the state’s General Fund budget.   

LeVert explained that the commission forecast the most growth in hospitality and professional services industries.  Job increases are also expected in the manufacturing and health care industry, though at slower rates.  He said that the construction industry will not pick up steam until the housing market rebounds. 

Mike Allen, the Director of Research at the Department of Revenue, concurred with LaVert’s assessment: “The economy is in a recovery, but it is much slower that everyone anticipated.  The latest forecasts show that the labor market isn’t going to pick up until the middle of 2011.  In the meantime, the weak labor market puts us at risk.”

In a monthly report, Allen said revenues came in 4.7 percent, or $26.3 million, over budget.