What’s actually alarming about the Portland study

From the PPH (for the BDN piece):

Portland is losing ground at an “alarming” rate, according to a new study examining nearly 30 indicators of where the city’s economy is headed.

Portland’s Economic Scorecard 2014-2015, to be released Tuesday by the Portland Community Chamber, shows that the city has experienced lackluster improvement – or no improvement – in 14 of the 28 economic indicators, including job growth, average wage, property taxes, population growth and affordability of housing. Despite the nation’s overall economic recovery, several components of Portland’s economy have gotten worse over the past year, it found.

Portland Regional Chamber CEO Chris Hall said regarding the data in study:

I hope people don’t read this scorecard as some sort of indictment of city officials. We all own these numbers.

While we all might own the numbers, we don’t (or at least shouldn’t) share in the interpretation of them.  For starters:

A high property tax decreases the attractiveness of a city to outsiders, which deters in-migration and stifles economic growth, the study said.

“Just to be blunt about it, we need to get more people to move here,” Hall said. “And so we need to set the table for that.”

One indication of the deterrent effect of high property taxes is Portland’s low population growth rate. According to the study, the city’s population grew by 0.1 percent from 2012 to 2013, compared with U.S. population growth of 0.7 percent.

First, the nexus between property taxes and inter-/intra-state migration is tenuous.  Second, even assuming that nexus is more concrete, it’s at best speculative to use changes in population as a proxy for migration flows.  Moreover, if the concern is attracting professionals and educated workers to Portland, as articulated by Hall, the figures do not offer insight

As for job growth:

Some of the data was sobering. Although Portland had job increases in certain sectors, overall job growth was sluggish. Total employment decreased by 0.1 percent in Portland from 2012 to 2013, compared with employment growth of 0.2 percent for Maine and 1.2 percent for the U.S., the study found.

Using 1 year of data to term Portland’s job growth as “sluggish” ignores long-term trends.  From the report (p. 4):

Portland employment

Those longer-trends show job growth in Portland has exceeded growth in the rest of the state.  Moreover, nominal job growth alone can be a poor indicator of economic and labor market health because it does not take into consideration other factors such as population growth.  As the study states:

A steady increase in the number of jobs that keeps pace with population growth ensures that residents will be able to find work, contributing to the overall economic stability.

But comparing population growth to job growth reveals that Portland’s job growth has outpaced population growth over the past 5 years, and has been more in line with population growth than the other areas noted in the study (p. 18):

portland pop

Then there’s the chicken or the egg question about job growth, where at different points the study argues that the chicken came first, and then argues that the egg came first.  As quoted above, the section on employment growth states:

A steady increase in the number of jobs that keeps pace with population growth ensures that residents will be able to find work, contributing to the overall economic stability.

And in the section on population growth:

A healthy level of population growth ensures that there will be a sufficient workforce to fill the jobs needed to support the City’s economy.  Population growth, through both natural increase and in-migration, helps fuel the economy by both supplying jobs and generating demand for goods and services.

Basically, you need jobs to attract and keep workers, but you need workers to stimulate demand to create jobs.  If Portland is near full employment, then there is little need for job/population growth.  If there are job vacancies, then there is a need to increase the size of the workforce.  If unemployment is elevated, then there is a need to increase jobs.  However, the circular logic of ‘we need to create jobs to increase the population, and we need to increase the population to create jobs’ is not viable policy.

Lastly:

Another weak area for the city was the average annual wage, the study found. While the city’s 2014 average of $44,289 was higher than the state average of $37,215, it was nearly 7 percent lower than the national average annual wage of $47,451.

Again, one year of data ignores long-term trends.  In this case, we don’t know how Portland has done relative to the U.S. over the long-term.  Given that Maine has historically lagged behind the U.S. in wages, one could assume that Portland too has lagged the U.S. in wages.  The question then becomes whether the gap between Portland and the U.S. (assuming the wage gap between the two is relevant) is expanding or shrinking.

While the report does offer some valuable data points and insights into the Portland economy, ringing the alarm based on the offered interpretations of that data is itself alarmist.

John Haskell

About John Haskell

John graduated from the University of Southern Maine with a degree in Political Science, and from the University of Maine School of Law. He has worked in both the public and private sectors, and currently, works with a small business services company in the Mid-Coast area.