Maryland economy better than most

January 03, 1991|By Frank D. Roylance | Frank D. Roylance,Evening Sun Staff

The state's third annual "state of the economy" report has found slowdowns in housing, retail sales and construction, and extremely slow growth in employment and personal income.

But on the whole, says J. Randall Evans, Maryland's secretary of economic and employment development, the state's economy is out-performing the national averages, and Evans paints an optimistic picture for Maryland as the new year opens.

"It's clear the country is in a recession," Evans said yesterday, "and areas of Maryland's economy are in recession."

"However, the diversity and basic strength of the Maryland economy are expected to carry the state through this period of brief but difficult economic adjustment."

Evans attributed the state's relative economic stability to a diverse economy, skilled work force, large consumer market, transportation infrastructure, access to financial markets and the national capital, and a high quality of life.

"If you're going to be in a storm, Maryland is a good ship to be on," he said.

Other economists not associated with the state agency,

however, see a more uncertain future for Maryland's economy. Some fear that the state has ceased out-performing national averages and may face competitive weakness in some of its most important sectors: federal employment and a vibrant service sector.

In a 60-page working paper released in October, Mahlon R. Straszheim, chairman of the economics department of the University of Maryland at College Park, joined several other economists who are expressing concern over the underlying health of Maryland's economy.

"Maryland's competitive advantage is likely declining...A business-service based economy will continue to provide a competitive advantage in the 1990s. However, this competitive advantage will likely be less in the 1990s than in the 1980s," the report said.

Charles McMillion, senior fellow at the Johns Hopkins University Institute for Policy Studies, said in a recent interview that the state is at a crossroads. It needs to do more to keep its service-sector jobs from being lost to federal budget cuts, he said.

Evans acknowledged that the statewide averages mask gaps between rich and poor regions. Areas such as Baltimore and parts of Western Maryland and the Eastern Shore have made gains, but they still need help recovering from numerous plant closings in recent years.

On the lower Eastern Shore in particular, he said, "I don't sense the same confident spirit the way I would in Western Maryland. There needs to be a lot more done there."

The challenge statewide, Evans said, is to "emphasize the creation of jobs through new business formation, and to assist existing businesses to stay competitive in a changing market. Maryland must also provide education and training and upgrade our work force."

The state's own financial troubles, however, have curtailed the Department of Economic and Employment Development's ability to help. For example, Evans said, DEED's support for local efforts to build tourism and international trade has been cut because of Maryland's $423 million deficit.

The statistical indicators spotlighted by yesterday's report reflect only the beginnings of the slowdown, through October at best. As far as they go, the data show the economy generally out-performing the national averages.

State economists predicted that, by the time all the data are in, the state could experience "one or more non-consecutive quarters of decline during 1990." Two consecutive quarters of decline in the gross national product is a commonly accepted definition of a recession.

The new year should bring the start of a recovery. "Major economic forecasting firms estimate that the Maryland economy will have modest economic growth during 1991," the report said.

Nationally, modest inflation, low inventories, a weak dollar and federal orders related to Operation Desert Shield should help keep the recession mild and brief, Evans said.

The weakest sectors of Maryland's economy currently, according to the DEED report, are in real estate, finance and construction.

During the first 10 months of 1990, residential building permits issued in Maryland declined 13.8 percent from the year before, compared with 14.6 percent nationally.

Non-residential permits declined 6.1 percent, compared with 7.1 percent nationally.

However, the report said, "the downward adjustments in these sectors started nearly two years ago and have not, so far, led to significant negative impacts on Maryland's economy."

Evans said construction employment has remained stable, perhaps due to the number of very large, long-term construction projects already under way.

Exports and imports through the Port of Baltimore also declined during the first six months of the year. Import tonnage fell 25.7 percent. Export tonnage fell 1.5 percent.

Evans expressed confidence that new container facilities and renewed cooperation among shippers, labor and other port interests would help slow the port's decline.

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