Md.'s recovery from recession may come slowly



It is a well-kept secret that newspapers love to print good news, news to warm your heart, news to make you happy, news that sends you out of the house in the morning with a whistle and a bounce in your step.

The recession has made it tougher to find such news, although we did do an upbeat feature on the booming business in public auctions.

We hoped, along with Fed chairman Alan Greenspan, that lower interest rates would help revive the economy and bring a quick end to the recession. So far, however, we haven't seen much evidence of any increase in loan demand.

Neither, it appears, have the heads of some of the nation's largest corporations, about 100 of whom belong to a group named the Business Council. Meeting last weekend in Virginia, they spent considerable time disagreeing with the upbeat forecasts of their own staff economists. Although the consensus forecast is for a recovery to begin this summer, many chief executives said they simply don't see a recovery coming that soon, lower rates or not.

If lower interest rates permit banks to reduce their cost of funds and begin rebuilding balance sheets, I suppose the decline in rates will have been helpful even if it didn't do much to directly spur additional lending.

(It's certainly clear that lower rates haven't been passed along to consumers in the form of reduced charges for credit-card debts.)

And there are glimmers of a turnabout. Residential real estate markets show signs of ending their slide. Retail sales may have hit bottom. Auto sales may have hit bottom. The number of people making initial claims for unemployment insurance is getting smaller, not larger.

Still, the number of people on unemployment is not getting smaller. That's especially true when you notice that there have been actual declines in the work force. This occurs when people drop out of the labor force, which happens when they stop looking for work, which happens when they have exhausted their unemployment benefits and see no point in trying to find a nonexistent job.

In Maryland, the labor force is nearly 2 percent less than it was a year ago, and that's not because the population is shrinking. Nationally, the labor force grew by about 1.6 percent a year during the 1980s.

So, you can see that if we were forced to accommodate the normal influx of new workers into the labor force, the stated unemployment rate in Maryland could be more like 9.5 percent than the 6 percent that was reported for March.

Traditionally, Maryland has suffered less and rebounded faster than the nation when it comes to dealing with recessions. This time around, however, the upturn may be slow in coming.

The state's traditional sources of economic advantage stem from government, which is a large direct employer and also provides government contracts to private businesses, particularly in the defense industry. With government tapped out at federal, state and local levels, including declines in defense spending, Maryland's traditional edge has all but disappeared.

Looking to the private sector, at least at larger companies, doesn't provide much more encouragement. Here's a look at the first-quarter profits of 20 large corporate players in the region's economy and how they compared with the same quarter last year, which wasn't exactly a boom period in its own right. The results are in millions of dollars and the change is a percentage:

Company ... Results ... Change

BG&E ... $41.1 ... -45

Bell Atlantic ... 353.6 ... 0

Beth. Steel ... -39.2 ... --

Black & Decker ... 4.1 ... 59

Alex. Brown ... 10.6 ... 323

Crown Central ... -5.9 ... --

CSX ... 57.0 ... -26

Giant Foods ... 39.7 ... 2

Legg Mason ... 3.8 ... 126

Manor Care ... 5.3 ... 8

Marriott ... 10.0 ... -64

Martin Marietta ... 71.0 ... 6

McCormick ... 15.2 ... 53

MNC Financial ... 154.0 ... 2,388

T. Rowe Price ... 5.6 ... -19

Ryland ... -4.4 ... --

Signet ... 6.4 ... -76

US Air ... -166.7 ... --

USF&G ... -55.0 ... --

Westinghouse ... 98.0 ... -53

MNC Financial, owner of Maryland National and American Security banks, reported hefty income because it sold its gilt-edged credit-card operation in Delaware -- a move of weakness, not strength, that was forced on it to raise cash for debt repayments.

Alex. Brown and Legg Mason did well as the regional securities companies continued to ride out the downturn better than their battered brethren based in New York. McCormick seems to thrive in any economic climate these days.

Beyond these few, it's hard to find a source of near-term economic strength on this list.

Nationally, growth prospects for smaller companies may be better, according to a quarterly survey by the National Federation of Independent Business.

Lower interest rates have been passed on to smaller companies, which were paying an average of 11.2 percent for borrowed money last quarter, down from 11.9 percent at the end of last year.

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