Maine's greatest economic strengths, as they have been since the beginning of European settlement, are its forests and waters, yielding wood products, water power, fisheries, and ocean commerce. Today, the largest industry by far is paper manufacturing, for which both forests and water power are essential. However, since the 1980s manufacturing employment has dropped; and especially since 1992, services sector and trading sector employment has risen.
Maine's greatest current economic weakness is its limited access to the national transportation network that links major production and manufacturing centers with large metropolitan markets. On the other hand, this relative isolation, combined with the state's traditional natural assets, has contributed to Maine's attractiveness as a place for tourism and recreation. It also meant that the national recession in 2001 largely bypassed Maine's economy because of its limited involvement in the growth fields of information technology and equity venture capitalism. Annual growth in Maine's gross state product, which at 5.9% in both 1998 and 1999, and rising to 6.4% in 2000, did moderate to 3.2% in 2001, but employment had returned to peak levels reached before the recession by mid-2002. Tax revenue shortfalls were also less than other New England states, all more affected by the abrupt decline in capital gains income.
Maine's gross state product in 2001 was 8th smallest among the states at $37.4 billion, to which general services contributed $7.9 billion; financial services, $7.2 billion; trade, $6.7 billion; manufacturing, $5.2 billion; government, $5.4 billion, and transportation and public utilities, $2.5 billion. Output from general services increased 35.2% across the period 1997 to 2001, whereas output from government services, trade and financial services all increased 24% to 25%. Output from manufacturing increased 13.5% from 1997 to 2000, but then fell 8.5% in 2001, reducing the five-year gain to 3.2%. As a percent of total output, manufactures fell from 16.6% in 1997 to 14% in 2001. The public sector constituted a relatively high 14.4% of gross state product in 2001.