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Everywhere you look it seems someone is talking about debt today.  The federal government is running its debt levels to heights never seen before in a peacetime economy.  Maine's policymakers are also considering more debt to create jobs and rebuild infrastructure.  The justify this discussion by noting that Maine's debt burden is relatively light compared to other states.

Oh, really?  The New York Times recently ran a story on exposing the real story behind state debt.  It turns out that most state debt is hidden behind a wall of non-transparency known as the state pension system.  It turns out that states have not been honest with taxpayers by using unrealistic assumptions in calculating their pension liabilities "Enron style."  The end result is that reported pension liabilities may be as low as one-third of actual liabilities.

In the accompanying chart to the NYT story, it shows that Maine's general obligation debt plus the unfunded pension liability as a percent of Gross Domestic Product is the 11th highest in the country.  I would not call that a "relatively light" debt burden.

The real story for Maine is why are policymakers focused on taking on new debt when they clearly should be 100 percent laser-focused on controlling run-away pension liabilities.  In fact, as I pointed out in a recent op-ed in the Sun Journal, the state wants to restore recent pay cuts which will not only increase current expenditures but also further add to the pension liability.

In February I showed a presentation at our monthly Bangor and Portland lunches that showed Maine lost population for the first time since the 1960s.  Recently the U.S. Department of Commerce's Census Bureau released more detailed county level population estimates.  The data further supports the "demographic winter" concept that I discussed which means that the birth rate is too low to support the existing level of population. 

First, as shown in the table (click "continue reading" to view table), the population loss is widespread with 11 of Maine's 16 counties shrinking.  More disturbingly, 7 counties showed a negative natural increase meaning there were more deaths than births in those counties.  Overall, there were only 789 more births than deaths in all of Maine!

I can not understate how big of a problem this is for the Maine's future.  Reversing it will take a long time . . . for starters we could begin by reversing the decline in Maine's private sector which would help provide good paying jobs to keep and attract young families.

In my previous blog I hinted that Maine's Personal Current Transfer Receipts (PCTR) were behind the large drop in the private sector share of personal income.  Between 2008 and 2009, PCTR increased by 12.8 percent to $11 billion from $9.8 billion.  In nominal dollars, the $1.2 billion increase is the largest increase, since, well, 2008s $1 billion increase.  In two years, Maine's PCTR grew by $2.2 billion!

As a percent of personal income, PCTR jumped to 22.7 percent in 2009 from 18.9 percent in 2007.  That means that more than 1 in 5 dollars sloshing around in Maine's economy came from these government programs--mostly Medicare, Medicaid and Social Security. 

Given that all of these programs are in various degrees of insolvency at the federal level, this does not bode well for the future of Maine's economy.  In fact, this year was the first year that Social Security revenue was less than expenditures meaning the Social Security Administration had to dip into their IOUs from Uncle Sam.

Unfortunately, BEA will not release the details of PCTR for 2009 until later this year.  However, we can take a look a the data we do have up to 2008 to get a glimpse of what 2009 will like . . . click "continue reading" to view charts.  Enjoy!

Today, the U.S. Department of Commerce's Bureau of Economic Analysis released their 2009 personal income estimates.  Undoubtedly, some folks will be praising Maine's rise in the state per capita income ranking from 29th in 2008 to 28th in 2009.  However, a deeper look at the data shows a much more somber picture.

As shown in the chart (click "continue reading" to view chart), Maine's private sector share of personal income plunged 4.3 percent to 63.6 percent in 2009 from 66.5 percent in 2008. This is the second largest annual drop in the private sector since a 4.5 percent drop back in 1975.

The primary driver behind this is a large jump in personal current transfer receipts . . . stay tuned for my next blog for details.

Today the Maine Department of Labor released December's unemployment rate.  The unemployment rate increased by 0.3 percentage points to 8.3 percent in December from 8 percent in November.  The increase in the rate points to some interesting dynamics.

First, after four straight months of gains, the employment level fell by 1,333 jobs in December which is not a good sign--although some of this may just be post-Christmas losses in retail.  Second, thanks to the previous gains in employment, folks that had dropped out of the labor force were lured back in--711 folks rejoined the labor force in December.

Unfortunately, the new entrants to the labor force simply rejoined the ranks of the unemployed along with the 1,333 who lost their job.  This double-whammy lead to the 0.3 percentage point jump in the unemployment rate.

I bring this up because this will be an important dynamic that plays out in Maine's labor force over the next 6 to 12 months.  Many folks who dropped out of the labor force will be tempted to jump right back in at any hint of economic improvement.  Yet, as December shows, the economy will be up-and-down all year long--with a better than 70 percent chance for a double-dip recession nationally (assuming no new federal stimulus).

As such, predicting Maine's unemployment rate will be very tricky.  Even if job growth picks up, new entrants into the labor force could swamp the gains in employment and lead to higher unemployment rates.  On the other hand, job losses could be more than offset by folks leaving the labor force leading to lower unemployment rates.  So as I've been saying in previous blogs, solely watching the unemployment rate is not enough in understanding the future state of Maine's labor force.

Another issue that folks have been following is the population race between Maine and New Hampshire.  Last year it appeared that New Hampshire's population would exceed Maine's sometime early in 2009.

The revised data shows that New Hampshire's population actually exceeded  Maine's in 2007.  The attached chart shows the growth in population for the two states since 1991 (click "continue reading" to view chart).  In 2007, Maine's population was 1,317,308 and New Hampshire's was 1,317,343.

Accelerated by Maine's recent population decline, the gap has grown to 6,274 people with Maine's population in 2009 at 1,318,301 to New Hampshire's 1,324,575.

Like Maine, New Hampshire also saw net out-migration in 2009 with 2,602 more folks leaving than coming into the state.  However, New Hampshire's net natural increase was significantly higher at 3,587.  Interestingly, this gap is due to a lower death rate with New Hampshire reporting 10,449 deaths to Maine's 12,894.

Also of interest is how quickly New Hampshire's population has grown since 1991 relative to Maine's.  Between 1991 to 2009, Maine's population grew by 85,582 people while New Hampshire grew by 212,191. 

As shown in my previous blog, Maine's population shrank for the first time in decades.  But what is the cause of this decline?

The first chart shows Maine's "net domestic migration" which is the net flow of folks to and from other states (click "continue reading" to view chart).  The chart shows that Maine has entered another period of net out-migration with 2,937 more people leaving than coming into the state.  The previous out-migration episode was in the early 1990s.

However, note that out-migration in the early 1990s was higher than it is today.  Why didn't total population shrink back then as well?

The answer lies in the rapid drop in the "net natural increase" which is the net change in births minus deaths as shown in the next chart.  In 1991, there were 5,873 more births than deaths.  By 2009, the natural increase had plunged to only 789.  The main cause of this decline was in births which fell from from 17,070 in 1991 to 13,683 in 2009.

As a result of lower natural increases, it takes smaller levels of net out-migration to cause drops in total population.  I warned about this problem when I blogged about the 2008 loss in population for 10 of Maine's counties--it is called demographic winter.  Now demographic winter has spread to the entire state.

While this is bad news, hopefully this will propel policy-makers to start taking demographic winter seriously.  There are no easy solutions to this problem--just ask Japan, eastern europe and Russia all of whom face more severe cases of demographic winter and have yet to defeat it.

Today the U.S. Department of Commerce's Census Bureau released new state population data for July 1, 2009 (previous years were also revised).

The data brings more bad news.  Maine's total population shrank by 1,390 people to 1,318,301 in 2009 from 1,319,691 in 2008 (click "continue reading" to view chart).  This is the first decrease in total population since the 1960s.

More blogs to follow in dissecting this disturbing drop in population.

In this study from a few months ago, I found that over the last decade the private sector lost 13,000 jobs while government added 3,400 jobs.  Now that a few more months have passed, I thought it would be a good time to update the data.  Also, the data for November 2009 was just released today by the U.S. Department of Labor's Bureau of Labor Statistics.

As shown in the accompanying chart (click "continue reading" to view chart), Maine's private sector has now lost 20,200 jobs over the last decade (from November 2000 to November 2009).  Maine's government employment, while down, is still 300 jobs higher than a decade ago.

Since the recession begun in January 2008, the private sector has shed 29,700 jobs while government jobs have dropped by 3,500.  What is really interesting about this is that the decline in government jobs has followed the decline in private sector jobs.  This is not "government reform" driving the drop in government jobs--its the lack of revenue caused by a rapidly shrinking private sector.

In my previous blog, I noted the apparent discrepancy between a shrinking labor force but increasing employment.  The answer may lie in the difference between the definition of jobs and employment.  "Employment" is a term used in the unemployment survey while "jobs" is a term used in the wage and salary employment survey both of which are published by the Maine Department of Labor.  The key difference between employment and jobs is that employment includes the self-employed whereas jobs only include those employed by someone else.

The attached chart (click "continue reading" to view chart) shows the growth in employment versus jobs since the recession began in January 2008.  Overall, employment and jobs closely track one another with a few exceptions.  However, one of the exceptions occurred in October 2009 where employment went up while jobs went down.  This suggests that employment went up because of increased numbers of self-employed.

The problem I have with this is that self-employment is not as economically stable as jobs, especially in a recession.  Some would argue it is a form of "under-employment" which is a situation where a worker, while employed, is earning less than before--a prime example is someone going from full-time work to part-time work.

As a result, the unemployment survey is implicitly making a judgment that self-employment is the economic equivalent to a full-time job when it accepts, at face value, someone reporting in as self-employed.  This is an open question and certainly more so during a recession.

Therefore, the data suggests that the decline in unemployment was a result of two factors.  First, more than half of the unemployed gave up and dropped out of the labor force.  Second, many of the remaining joined the ranks of the self-employed which is like leaving one foot in the labor force and one foot out of the labor force. 

However, since there is no official category for them, they are classified as employed.  Only time will tell if they are truly in long-term employment positions, but with jobs declining it appears their grip on employment is tenuous at best.  So it's best to take the apparent dip in unemployment in October (see previous blog) with a big grain of salt.