Economic Activity Report
December 2009
From my perspective, if you owned or operated a business in 2009 you’ll remember the challenges of adjusting to new business realities and probably be quite happy to have survived the deepest recession since the Great Depression of the 30’s. Many of our local businesses are happy closing their books at a break even point and to forget profits. We end the year with a national unemployment rate around 10% and an estimated underemployment rate double that number. Experts are beginning to speak of an economic recovery in 2010 that may be defined as a “jobless recovery”.
Locally, I have good news and bad news to report. There’s no question that the construction of the Federal Prison softened the impact of the recession and also had a positive impact on our employment numbers. Our larger employers such as Isaacson Steel, Androscoggin Valley Hospital, Car Freshner, Mountain Tire Corporation, held their own and did not have major layoffs. Other and smaller businesses were not as fortunate and had to reduce their workforces or cease operating. When you study the reasons why some make it and others don’t the answers vary with each business. What stands out among the causes are lack of working capital or reserve, decline in specific sector markets such as in housing and foreign imports.
The latter, foreign imports, has been particularly devastating to the manufacturing sector and I’m quite concerned about the long term impact of importing so many of our consumer products from third world countries. We are not just losing the thousands of jobs to foreign countries, but in another ten years the workforce will no longer have the skills that quite often took generation to develop. How many people in Berlin, Gorham or Groveton do you believe will know how to operate paper machines in 20 years? I hope the following article is of interest to you.
Food for thought from: mckenseyquarterly.com
DECEMBER 2008 • Lowell Bryan and Diana Farrell Source: Strategy Practice
The range of possible futures confronting business is great. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even to prosper. The changing role of government
Since September 2008, governments have assumed a dramatically expanded role in financial markets. Policy makers have gone to great lengths to stabilize them, to support individual companies whose failure might pose systemic risks, and to prevent a deep economic downturn. We can expect higher tax rates to pay for these moves, as well as for the reregulation of finance and many other sectors. In short, governments will have their hand in industry to an extent few imagined possible only recently. That’s not all. Protectionism and nationalism will probably feature more prominently in policy debates. We may see not only old-style populist anger against business, high
executive compensation, and layoffs but also the emergence of authoritarian populist movements. Already-dilatory trade discussions will encounter renewed resistance. Although greater global coordination is sorely needed, national political pressures will make it hard to achieve. All this will constrain some business activities but also opens the door to new ventures that depend upon collaboration between the public and private sectors.
Norman Charest
Economic Development Director
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