Maryland's Mixed-up Economy

August 04, 1991|By David Conn

Economists, business people and consumers are still having a tough time determining whether Maryland's economy is ready to head skyward again -- and if so, how quickly.

As data from the first half of the year trickle in, some signs point to the beginning of a local recovery. But as last week's state and national unemployment reports illustrate, there are still as many dark clouds as silver linings.

On Friday, the U.S. Labor Department reported, against expectations, that the national unemployment rate fell to 6.8 percent in July from a five-year high of 7.0 percent in June. But an accompanying report showed employers had cut 51,000 jobs during the month.

In Maryland, which reports its data one month later than the U.S. government, unemployment rose in June, but state officials attributed that to the influx of summer workers, some of whom hadn't yet gotten a job.

The bright spot in the June report was that overall employment continued to rise.

For every statistic that sends consumers confidently out the door and toward the mall, another makes them want to shovel cash under the mattress. Welcome to Maryland, where uncertainty is king.

"This is a mess," Joel Lee, executive assistant to Gov. William Donald Schaefer, told a group of local development officials last week. "New and existing sales of homes are up. Normally that's a good sign, but some say it's only because prices are so low because the market's depressed."

Other good signs for Maryland: Industrial output was up 0.7 percent in June, the third straight monthly increase; inventories are down, even more than nationally; and the state's index of leading indicators is up.

"What it shows is a growing, slow, not meteoric, improvement in the state's economy," Mr. Lee said.

But there's bad news, too: Consumer spending remains flat, and most state tax revenues are down sharply.

At a Baltimore car dealership, Schwing Motor Co., sales of new BMWs are down, but the owner, Fred Schwing, says his repair shop is hopping. Profits at the 61-year-old company are respectable because Mr. Schwing has cut his staff about 20 percent in the last year, and remaining employees are working harder.

"As a general rule I would say that people are keeping their cars longer," he said. "Buying a new car does not seem to be the thrill it used to be." So things are getting harder and tougher. That's OK with Mr. Schwing.

"What we've done in the past 10 or 15 years, I don't consider normal," he said, referring to the sustained period of high economic growth. "I consider normal when you work hard and make a good living. . . . My guess is that we have a long, hard pull at this level."

Mahlon Straszheim, chairman of the University of Maryland's XTC economics department, sees "little evidence of any turnaround to date." The biggest problem, he says, is that credit from financial institutions, the hardest-hit sector of the economy, is so much tighter than during the last recession. That constrains consumers and developers alike, he said.

The value of future construction contracts signed in June declined 31 percent, compared with levels in June of last year, according to F. W. Dodge, a division of McGraw-Hill Inc. In the first half of the year, Maryland construction contracts were down percent from the first half of last year, Dodge reported.

But the number of single-family building permits in Maryland climbed each month from March to May, according to Pradeep Ganguly of the state Department of Economic and Employment Development's research office.

Permits in May were down 1.4 percent, compared with May of 1990. But the recent trend is encouraging: In April, single-family permits were down 8.7 percent from the year before, and in March, they were 15.3 percent lower than in March 1990.

Home purchases were slower this spring than last year, but they have been increasing each month, the University of Baltimore's Center for

Business and Economic Studies reported.

The Mid-Atlantic Consumer Confidence Index rose 1.7 percent in June, the Conference Board said. And even though the index in the second quarter was 31 percent below its level of a year ago, June's rise was the third in six months, according to the University of Baltimore.

Bennett Leaderman, for one, is confident. The Laurel resident was at Schwing last week getting a minor problem serviced on his 3-week-old car. In his town house development, three new cars appeared within a week: an Oldsmobile Cutlass convertible, an Alfa Romeo and his own BMW. "Business is tough," says Mr. Leaderman, a salesman for Art Litho Co., a Baltimore commercial printer. "But if you're willing to be aggressive and work hard, you can get the business. We see a lot of our competitors folding."

Indeed, bankruptcy filings in Maryland were twice as high during the first six months of 1991 as they were during the same period last year. At the same time, Dun & Bradstreet reports show that business starts are up in Maryland, Dr. Ganguly pointed out.

Finally, retail activity, while still well below last year's levels, is rebounding, according to June sales figures for the Rouse Co.'s malls across the nation.

Even though the Rouse Retail Barometer for the first half of the year was a mere 0.2 percent ahead of the 1990 first-half barometer, Vice President David L. Tripp was optimistic.

First of all, 1990 was a particularly good year, he said. Considering that sales fell 8.4 percent in January, an overall increase for the first six months of this year is impressive. And in the Southeast region, which includes Rouse's nine malls in Maryland, 1991 first-half sales were up 1.1 percent from last year.

Mr. Tripp said, "In what everyone clearly identifies as a recessionary environment . . . we're running ahead of last year, and that's not so bad."

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