Right there in the midst of Maryland's searing financial crisis are hugely important structural changes that will dictate the pace and timing of economic recovery.
So says a study released last week by two University of Maryland economists. Though unemployment has been far less debilitating this time around than in previous downturns, the UM researchers predict the state will have a tougher time shrugging off this recession.
The once-welcome shift from a manufacturing to service economy now is perversely retarding recovery. Service industries are shrinking, casting off workers. Manufacturers did the same thing a decade ago, but growth in banking, retailing, construction and insurance helped prop up the rebound. Today finds the situation reversed, with manufacturing providing jobs and economic steam.
UM researchers contend that this "structural adjustment" explains the scope and severity of Maryland's economic troubles and puts the state at a distinct disadvantage in recovering from the current downturn. The collapse in real estate and construction has decimated state and local tax receipts. Banking too, has been hurt, so badly that lenders have applied the rTC brakes to commercial loans. A new study by W.C. Pinkard & Co., says lenders now control nearly 10 percent of the office space in metropolitan Baltimore.
In light of these weaknesses, the UM report forecasts a painfully slow recovery with a 1.7 percent fourth quarter decline in inflation-adjusted personal income. Growth thereafter should tick upward, hitting 3.3 percent in the second quarter of 1992.
The implications of these findings are painfully clear. Responses to Maryland's economic travails -- individual, corporate and governmental -- cannot be based on the lessons of the past. The state's economic troubles are systemic and severe. The jobs -- and income -- that once drove this economy are no longer there. The latest testament to this is the threat of potential layoffs at Westinghouse Electric Corp.'s Maryland industrial plants.
Unavoidable cuts in state services and layoffs of state employees will almost certainly impede recovery, as would a tax increase. Unless Annapolis intervenes, the strains on the state's already overburdened economy will only get worse.