Md. economy is battered but staying on its feet Situation is bad, but not as bad as elsewhere in U.S.

September 16, 1990|By David Conn

The word came in June from her employer, Human Development Institute of Baltimore: The company's largest contract, with the city of Baltimore, had been cut sharply. Two months later, on Aug. 10, Valerie Toney got the pink slip: Her $25,000-a-year job was over, and she became part of Maryland's rising unemployment rate.

Ironically, Ms. Toney and a dozen or so of her laid off co-workers were training and finding jobs for city welfare recipients. But don't cry for Ms. Toney. The 24-year-old will start work on her MBA degree this fall at the University of Chicago's business school.

The last time the state announced the unemployment rate, two weeks ago, it showed a sharp increase in July, to 4.5 percent from 3.9 percent the month before. But, as with Ms. Toney's situation, there was good news with the bad: Although the 4.5 percent unemployment rate was a two-year high, it was still well below the national rate of 5.5 percent. And it was no higher -- in fact it was lower -- than it had been through most of the 1980s.

That seems to be the story statewide: There is a slowdown in most sectors of the economy, and it has been going on for at

least six months and probably longer, according to the official statistics and the business people generating the numbers.

But few people are willing to say Maryland is in a recession. And if there is great concern, it is understandable in a state that used to believe it was immune from the downturns that hit states such as Texas and Massachusetts.

"Are things slowing down in Maryland? Yes," says Richard Larkin, a managing director in Standard & Poor's Corp.'s municipal finance department. "Would I characterize it as a recession? No, not yet. ... When things slow down nationwide, things are usually not as bad in Maryland."

That's the conventional wisdom, and it still largely applies, according to Mr. Larkin, who analyzes Maryland for the New York bond-rating agency. In the late 1980s, Maryland was "coming off a period when everyone was just fat and happy," he says.

Now people are reacting to the slowdown as a beauty queen reacts to a pimple: She's still beautiful, but now there's this ugly blemish.

Maryland will retain its coveted S&P Triple-A bond rating, says Mr. Larkin. It's the agency's top rating, awarded to only nine states, and it saves Maryland millions of dollars each year on municipal bond interest.

Further, even though the jobless rate is up, more people are working. The labor force continues to grow, and the length of the manufacturing workweek increased two consecutive months during the summer.

The state's major defense contractors say that fears abouPentagon cutbacks are unwarranted, partly because they've started shifting their business toward non-defense commercial work, and partly because the military is using their products in the Persian Gulf.

Martin Marietta Corp. spokesman Elliott H. Miller acknowledged that the Bethesda-based company's employment in Maryland was down to 5,500 last year from 7,500 in 1988. But he says the company remains strong because its defense programs are high priority, "and that puts us in good stead."

Jack Martin, a spokesman for Westinghouse Electric Corp., which has 16,000 employees in Maryland, said his company is "cautiously optimistic that barring any unforeseen reductions in our business, we will be able to maintain relative employment stability in the Baltimore area."

But the blemishes are beginning to show. Even though First Maryland Bancorp, parent of the First National Bank of Maryland, expects to earn between $60 million and $70 million this year, the company's net income for the first six months was down about 16 percent from the same period last year, said Charles W. Cole Jr., chief executive officer.

Economic uncertainty can be a selling point for some firms. William B. Snyder, chairman and CEO of GEICO Corp., the Chevy Chase insurance company, said sales are 4 percent or 5 percent higher this year than expected. "As people become more concerned about the level of their income, they seek out companies like ours," he said.

Chuck Donofrio, executive vice president of Baltimore advertising agency Richardson, Myers & Donofrio, said 1990 has been "the best year in the last seven." The agency has won six new substantial accounts. The 100-employee company has hired new people, mostly for the public relations side, since last year, he says.

But two of the new accounts switched from another agency, and one came from a firm that went bankrupt this year. And, despite the new revenues, Mr. Donofrio said his agency's experience with existing clients "in the last six to nine months has been bad. ... The existing clients' budgets have been flat to down," he says.

"We hear a lot of caution, basically, a desire not to commit too far in advance," Mr. Donofrio said. "Nobody wants to get too far out ahead of anybody else. It's been a very unsettling time."

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