PORTLAND — When it comes to the state economy, 2012 will look a lot like 2011, with little growth and few jobs, according to a leading state economist.

In his annual forecast issued Tuesday, Charles Colgan — a professor at the University of Southern Maine’s Muskie School of Public Policy — said he’s tempered previous forecasts of an impending pick-up in the recovery from the financial crisis and recession of 2008.

Now, he foresees a continuation of the long, slow recovery, and said it’s more likely that a year from now he will be seen as having been overly optimistic instead of too downbeat.

Colgan said his past few forecasts have anticipated that the recovery was always about a year away from kicking into high gear, but now he said it will be much longer before things get significantly better.

For instance, he said it will be 2017 before Maine recoups the 30,000 jobs lost during the recession. A year ago, he predicted that would happen in early 2014.

Preliminary figures show Maine lost about 1,400 jobs in 2011, Colgan said, and he sees moderate job losses continuing this year, with the situation starting to improve next year.

Colgan said things could turn out better than he predicts, noting that the inventory of housing built up by the foreclosure crisis is likely to begin shrinking, allowing real estate prices to stabilize, and profits for many businesses are rising.

But, he said, “the case for pessimism is, I think, a pretty strong one.”

Colgan said a trio of wild cards threaten to nip even a slow recovery in the bud.

The European debt crisis, he said, could plunge that market into a recession, hurting export prospects. Iran could follow through on its threat to close the Strait of Hormuz to oil shipments, causing oil prices to skyrocket, likely sparking a war and pushing the U.S. economy into another recession. And, he said, expect more political fighting in Washington, with lawmakers having to decide whether to extend the payroll tax cut beyond February, wrestling with a bloated budget and deficit and also having to determine what to do about the Bush tax cuts, now set to run out on Dec. 31.

“2012 promises to be a really good year for fiscal policy follies,” he said.

Colgan doesn’t seem to be going on a limb: most economists share his sense that the recovery will be anything but brisk, said Amanda Rector, the state economist.

“It certainly has been much slower than anyone has anticipated,” she said.

Rector noted that the state’s economic forecasting committee has projected that employment will reach pre-recession levels in 2015, a couple of years ahead of Colgan’s prediction, but she noted that the committee will meet this month to issue its first forecast since early November.

Businesses are still wary of hiring back workers, she said, and “there’s so much uncertainty right now that everyone is unwilling to take any big risks.”

The Maine Center for Economic Policy also weighed in, with Executive Director Garrett Martin calling Colgan’s forecast sobering.

Martin said the recovery is fragile and called on the state to encourage growth with a “robust bond package” of spending on education, infrastructure and research and development.

The 250 people who attended Colgan’s presentation to USM’s Corporate Partners, seemed to match his downbeat mood.

“It puts a little bit of a cloud on things,” said Kevin Freeman, director of business development with PC Construction, a contractor headquartered in Vermont with a regional office in Portland.

Freeman said the recession and lingering housing crisis has hit contractors hard, but said smaller firms seem to be taking the brunt. He said some government spending will help, pointing to projects like a $33 million renovation of the Cumberland County Civic Center that’s expected to start this summer, but that beyond that, the market is still soft.

“We’re not getting worse. I think that’s the most important message,” said Randy Blake, who is retired but offers commercial real estate consulting services. “One percent (growth) is better than none.”

Blake said the commercial real estate market is still hampered by a reluctance of banks to lend money for anything but a rock-solid project.


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