It is typical at the start of a new year for business experts to predict the economic ups and downs of the next 12 months. These times, however, are anything but typical. So, rather than guessing what will happen in 2023, it seems more appropriate to predict what will not happen.
I don’t want to be a Debbie Downer. Some of these denials mean good things for Maine. It’s just that, well, after the unexpected seismic shifts of 2022, no seems like a safer bet.
A year ago, what crystal ball would have shown that heating oil prices in Maine had soared to nearly $6 a gallon – in part because of a superpower invasion of a sovereign country? Black Swans will continue to flock to Maine in 2023. For now, let’s focus on a few things we can rule out. Probably.
1. The gridlock over lobster regulation won’t be broken anytime soon.
Maine fishermen versus environmental activists. Protecting a legendary Maine industry versus protecting an endangered species, the North Atlantic right whale. The legal dispute over new federal lobster gear requirements and a seasonal closure of fishing waters grabbed headlines in 2022.
The debate over how to balance often competing interests has been going on for decades. Luckily for the lobsters, Congress recently passed a Hail-Mary Act that means the new rules won’t go into effect for another six years. It could be long enough for lobster technology or whale research to start solving the dilemma.
But a lasting and meaningful solution is unlikely this year and likely for many more to come. There are simply too many at stake for both parties, and the problems are too complex for an easy solution. In 2023, we will kick the crustacean on the road.
2. The sky won’t fall for us on the Maine residential real estate market.
Even though home sales have plummeted, Maine is doing better than most states in weathering real estate volatility.
In November, for example, nationwide sales fell more than 35%, while the number of Maine homes changing hands fell 28.7%. And while the median U.S. home price that month rose 3.2%, the price in Maine rose 8.3% to $325,000.
Tight inventory and rising prices will continue to freeze some buyers (see below). And after two years of double-digit price increases, the home sales market doesn’t look as lucrative for sellers. But compared to reversals happening elsewhere, Maine’s new normal may be a happy medium.
3. The state will not become a refuge for teleworking.
In the first year or so of the pandemic, more than 15,000 residents moved to Maine, helping to swell the population to 1.37 million. The 0.7% increase was one of the largest in the country and occurred when the US population barely grew – just 0.1%. Many newcomers have migrated from more urban and more COVID-affected areas after realizing that a home office can be anywhere with high-speed internet.
Newcomers also find that their new digs come at a steep price. These fuel oil costs are just the start. Increasingly, shortages of affordable housing, childcare, and broadband access limit the state’s appeal. And Maine’s state and local tax burden ranks 10th in the United States, according to the nonpartisan Tax Foundation.
All of this may help explain why Maine’s population growth has nearly halved in the past year compared to 2020-21, University of New Hampshire researchers estimated last month. Maine, the way life should be? For telecommuting transplants, that possibility could really be remote.
4. The marijuana buzz won’t last.
After sprouting in October 2020 with $1.4 million in sales, Maine’s legal and recreational cannabis market has grown like, well, you know the pun. Monthly adult sales peaked last August at $17 million and totaled $158.9 million for all of 2022, nearly double sales in 2021.
However, demand could plateau. Only 62 of Maine’s 483 municipalities have chosen to allow the sale of cannabis within their borders, and only about a dozen last year. Nationally, there is now a glut of readily available weed, prices are plummeting, and more states are jumping on the legalization bandwagon. At last count, 21 of them were on board.
There are even signs that recreational cannabis could become legal in New Hampshire – the only holdout in New England. The new competition could hurt sales in Kittery and along Eliot’s “green lane” and ultimately dampen Maine’s statewide marijuana market. So think twice before you bogey this blunt.
5. Even if inflation slows, it won’t stop hurting Mainers.
Inflation was one of the main economic concerns for Americans in 2022, but there is good news for 2023. Economists predict that inflation will ease somewhat this year, mainly due to interest rate hikes of the Federal Reserve last year. In fact, growth in the consumer price index has declined for six consecutive months, after hitting a 40-year high of 9.1% in June.
In Maine, there may not be as much reason to celebrate. Inflation hits energy costs particularly hard, and Maine is particularly vulnerable to it. The state relies on heating oil more than any other – 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 gas guzzler. Gasoline prices are taking a heavy toll on the costs Mainers pay for trucked goods, which is almost all of it, and we haven’t finished paying the inflationary toll .
Disagree with these soothsayers? Write to us at [email protected]. And watch the economic coverage of the Press Herald to see if our predictions are correct.
Will Hall is the economics editor of the Portland Press Herald.
Andrew Lynch promoted to CFO of Legacy Properties