State economy stuck in neutral Economists says recovery is still months away.

October 04, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff

Maryland's once-humming economy has sputtered worse than expected during the recession and a recovery may still be months off despite signs of national improvement, according to a study by the University of Maryland.

In the most comprehensive look at the state's economic picture since the recession began, two University of Maryland experts predict more tough times ahead.

The job outlook will not improve until well into next year and the state's budget woes will worsen despite the spending cuts announced this week by Gov. William Donald Schaefer, according to Mahlon R. Straszheim, chairman of the university's economics department.

Straszheim and report co-author Lorraine Sullivan Monaco were among the first economists to correctly diagnose last year the end of Maryland's long period of economic growth. Their report, issued a year ago this month, drew a strong rebuke from Schaefer at the time.

"It's sobering," Straszheim said of the conclusions of the most recent study, which used a computer model of the state's economy.

"We're pretty close to the bottom now but things will be halting for the next six months to a year," he said.

It now appears that Maryland -- which once fancied itself as "recession-proof" -- actually entered a recession slightly before the nation did in mid-1990. And it is having an even harder time pulling out of it, Straszheim said.

"The state is more dependent than the nation on services and finance and construction," Straszheim said. Those sectors have been more severely battered by the recession than the manufacturing sector, which accounts for a relatively small part of Maryland's job base.

The report predicts unemployment levels above 6 percent until the second quarter of next year. The number of jobs in the state will not reach pre-recession levels until the third quarter of 1992, he said.

"The actions taken to close the 1992 budget are not sufficient to close the 1993 budget," Straszheim said. More cuts or a tax increase will be needed to close the gap for the next fiscal year, which begins in July.

Furthermore, he said, his computer model indicates the current fiscal year's deficit will be about $45 million deeper than the current estimate of $450 million.

Maryland should eventually return to the performance levels it achieved in the 1980s, when it outpaced national averages, he said. But that will not happen before 1993, he said.

Working in the state's long-run favor is a well-educated work LTC force, a good quality of life and proximity to the nation's capital, he said.

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