Officials see no recession here, yet But economy is weakening

September 20, 1990|By Jon Morgan | Jon Morgan,Evening Sun Staff States News Service contributed to this story.

Maryland's once-vaunted rate of economic growth has slowed to a trickle, but state officials stop short of declaring a recession.

"Up until this point we've seen slow growth in [the number of] jobs, but not a loss of jobs," said Michael Lofton, deputy secretary of the state's Department of Economic and Employment Development.

In the second quarter of the year, the rate of job growth was 2.5 percent, the lowest it has been in the same three-month period since the recession of the early 1980s. The second quarter of last year, by comparison, saw job growth of 3.9 percent compared with year-earlier figures.

The Federal Reserve Bank's six-week economic analysis, released yesterday, says weakness is especially apparent in the Northeastern and Mid-Atlantic states.

In the fifth district, which stretches from South Carolina to Maryland, economic activity "slowed somewhat in recent weeks," the report said.

"Retail stores, tourist areas and manufacturing plants reported that business conditions softened," the Fed said in its report based on information obtained before Sept. 11.

Maryland's individual income levels and relatively low rate of unemployment have put it among the nation's healthiest states in the past several years. The state's economy was fueled by strong defense and other federal spending and by growth in health services, tourism and some manufacturing sectors.

Lofton stopped short of saying Maryland now has entered a recession, pointing out that the state's economy still appears to be growing slightly.

Economists define a recession as two consecutive, three-month periods of no growth. Typically, such periods lead to bankruptcies, layoffs or smaller wage increases for workers, and other hardships.

"We're certainly getting a lot of reports that there is a major economic slowdown in the nation and, as always, Maryland is going to participate," Lofton said.

Lofton said he is concerned about a possible, sudden cutback in federal spending to balance the budget or accommodate automatic cuts that would occur Oct. 1 as a result of the Gramm-Rudman-Hollings budget-balancing law.

"If we go into the uncontrolled drop of Gramm-Rudman, all bets are off," Lofton said.

Robert N. Schoeplein, director of research for DEED, said Maryland tends to outperform much of the rest of the nation during downturns because manufacturing represents a relatively small part of the state's employment base. This sector tends to be the hardest hit during recessions.

Maryland's large defense sector is primarily high-tech and is well positioned to convert to civilian needs. Also, much of it is suited to the manufacturing of equipment used in intelligence gathering, which is not expected to suffer as great a decline as other sectors of the defense industry, Lofton said.

The bank board, which based its judgment on mail surveys and other data gathered by economists in its 12 district banks, did say a plus was expected in this district: Ports in the area expect exports to increase faster than imports in coming months.

Other regional highlights in the Fed's report:

* Tourism in the district was lackluster late in the summer season and only one resort manager contacted by the Fed felt declines were the fault of higher gasoline prices. Most blamed the downturn on a generally weaker economy.

* Manufacturing activity slowed in August from July, with all indicators down except prices and export orders. Many companies were hurt by higher crude oil prices and only one-fifth of survey respondents said they felt the economy would improve in the next six months.

* The fall harvest provides a brighter picture, with most crop yields expected to be average or better, although corn probably will suffer because of hot weather in June.

* Business leaders in the Washington and Norfolk areas said cuts in defense spending continued to spread adverse effects.

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