In state, numbers add up to hard times Maryland's worst trouble in eight years

December 28, 1990|By Jon Morgan and Frank D. Roylance | Jon Morgan and Frank D. Roylance,Evening Sun Staff Laura Lippman contributed to this story.

After years of smooth sailing, Maryland's economy has run aground and could lose thousands of jobs in the new year, many of them white-collar positions, economists say.

Experts surveyed by The Evening Sun disagree on whether Maryland actually has entered a recession, but they concede that the state is being battered by its biggest economic storm in at least eight years.

The extent and duration of any slump are difficult to forecast, the economists say, but there is no doubt that the state's long, smooth run of economic growth and prosperity has been interrupted.

The storm also has shattered the rosy view that Maryland's robust, diversified economy can escape a national downturn.

And the turbulence differs from the last recession; some of the companies that were most violently shaken then, such as Bethlehem Steel Corp., have been relatively untouched this time. Meanwhile, stock brokers and accountants are looking for work in what is being called the first "white-collar" recession.

Mahlon R. Straszheim, chairman of the economics department of the University of Maryland at College Park, believes the state, like the nation, probably entered a recession in the final quarter of the year, starting in October.

But, he adds, "It would be a mistake to compare Maryland to Houston five years ago or to Massachusetts or even New York."

"Basically, the state is just being dragged down into the national recession," Straszheim says.

Robert A. Rader, director of the Bureau of Revenue Estimates for the state comptroller, says Maryland's rising unemployment could be interpreted as a sign of recession.

The state's long-humming, job-making machine froze up in June, Rader says. After years of growth, total employment declined from year-earlier figures in June, July and August. It increased a bit in September, but, by October, the most recent figures available, it stood at 2.416 million, down from 2.440 million in October 1989.

Rader is predicting a net loss of 13,000 jobs next year, which would wipe out most of this year's growth. Depending on how you measure a recession, those numbers could mean Maryland is in one, he says.

Nationally, recessions are generally defined as any two consecutive quarters of decline in the gross national product, or GNP. But a comparable assessment for a single state is elusive because of the flow of commerce across state lines.

Experts look at personal income, employment, tax receipts and other data to piece together a composite sketch of a state's economic performance.

Most of the indicators suggest trouble. Maryland's sales tax receipts, for instance, began sending out distress signals in May when their normally robust growth turned anemic. By October they were running below the 1989 level, leaving the state budget in a shambles. Officials say it is the biggest drop in sales taxes since 1947.

Charles McMillion, senior fellow at the Johns Hopkins University Institute for Policy Studies, coordinated an exhaustive, 10-volume study of the state's economy that will soon be published.

He says the state seems headed for a recession, though it is not yet a foregone conclusion. "I don't think Maryland is in a recession yet. . . . If the Middle East crisis goes away and oil comes back down to $20 a barrel, I don't think a recession is inevitable," McMillion says.

But if war breaks out, all bets on a speedy recovery are off, economists say.

Pradeep Ganguly, associate director of research for the Maryland Department of Economic and Employment Development, is reserving judgment on whether Maryland has entered or will enter a recession. But if it does, he says, the downturn is likely to be shallow and short-lived.

"Maryland is not recession-proof . . . [but] the economy is a lot more diversified and resilient than other states," says Ganguly, one of the top economists in state government.

He worries, however, about consumers cutting back on their spending in response to "media hype" about the situation.

Many indicators of economic activity are signaling trouble.

During the Christmas shopping period, retail stores deeply discounted their goods, but sales generally remained slow.

Cracks have appeared in institutions once regarded as economic pillars -- MNC Financial Inc., Alex. Brown Inc., USF&G Corp. and others. Unfamiliar faces are taking over their reins.

State and local government budgets seem suddenly flooded by red ink. Public service jobs once considered at least safe, if less than lucrative, are suddenly neither.

Layoffs are again in the news for the first time since the early 1980s, at places such as AAI, General Motors Corp., USF&G, Alex. Brown and others. More and more Maryland communities are coming abuzz with word of one neighbor and then another who've lost their jobs.

Unemployment in the state hit 4.5 percent in July and has not budged since. That's still better than the national average, but it's a two-year high for Maryland.

The human toll of the economic turbulence can be seen in other figures.

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