Signs of recovery may prove crucial for growth in '90s Economists watch for hints on state's future.

August 01, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff

Economists in Maryland are watching the recovery closely for clues to a major riddle: Will the state's economy resume the double-digit growth rates of the 1980s or will it settle into a period of sluggishness and fall below the national average?

The answer will determine the quality of life in Maryland for years to come. So far, economists are split on whether the good times are over or not. But many of them are cheered by some early signs:

* Federal employment has remained surprisingly stable in Maryland, where Uncle Sam employs more workers than any other single entity.

* Pentagon cutbacks appear to be inflicting the greatest damage in areas where tanks and other hardware are made and places where bases are being consolidated. In Maryland the defense industry's focus is on research and development, computer software, and high-tech wizardry that the military is still buying, although not as eagerly as before.

* New England's much-publicized malaise never did envelop the Mid-Atlantic, as some had feared. Although troubles in several -- industries, especially real estate, developed in the region, they tended to be less severe.

Ken Goldstein, an economist with the Conference Board, a business research group that compares regional economies, said the Mid-Atlantic continues to outperform the nation -- but just barely. The Western and Southern states are leading the way out of the recession, he said.

"I wouldn't say the good times are over, but the 1990s are not going to be as good as the 1980s," Goldstein said of the Mid-Atlantic.

The state's unemployment rate remained below the nation's for most of the recession, poking above it only briefly in December. The most recent statistics show Maryland with a 5.8 percent unemployment rate in May, compared with 6.6 percent for the nation during the same month.

The state's labor force has also resumed growing at a slightly higher rate than the nation's, although neither was back to pre-recession levels as of May, the most recent month for which state statistics are available.

"There is an underlying strength that is beginning to show," said Pradeep Ganguly, a senior economist with the Maryland Department of Economic and Employment Development.

In the vital sector of federal government employment -- Maryland's economic ace up the sleeve -- the state has been spared much of the pain. Federal employment across the country is down about 12 percent, but in Maryland it is down 3.5 percent.

Despite cutbacks in a wide range of government activities, the operations concentrated in Maryland -- such as the Social Security Administration and the National Institutes of Health -- have proven relatively resistant to the recession and budget cuts, Ganguly said.

Closely related to this is defense spending. "There are some concerns there," Ganguly said.

The ultimate impact will depend on the ability of Westinghouse and other big employers in Maryland to find civilian customers for their military expertise.

Ann Franklin, an economist for the Maryland General Assembly, said Maryland "weathered the recession a little bit better" than the nation as a whole.

But the future is difficult to read. The engines of the last decade's growth, services and federal spending, are sputtering. Few expect federal spending in the state to accelerate. The services sector has some slow spots, principally in financial services.

Overall, service employment in the state was up about half a percentage point in May over the same month last year. This compared with 1.6 percent growth nationwide. Health care was one of the strongest areas for the state: up about 3 percent, but still shy of the national average of 5 percent.

The overbuilt commercial real estate industry continues to be a problem, Ganguly said. But even so, employment here is down about 5 percent, compared with 10 percent nationwide in May.

"I think we should still outperform the nation because we still have a lot of white-collar, skilled workers," Franklin said. "We won't get to the super boom that we had in the 1980s."

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