Layoffs, uncertainty strike from Cumberland to Annapolis


October 13, 1991|By David Conn

In Cumberland, 150 Schmidt Baking Co. workers were laid off last week. Allied-Signal Corp. of New Jersey said that it will lay off 5,000 salaried workers; it isn't known how many will be affected at the company's Towson and Columbia operations. And the 14,000 Maryland employees of Westinghouse's Electronics Systems Group found out Friday that up to 1,200 of them will face Christmas without a job.

Last week was possibly the worst week of the year for economic news in Maryland, and it wasn't limited to layoffs.

In Annapolis, the governor and legislators struggled with the choice of firing state troopers and grounding medevac helicopters, or cutting education funding and aid to counties as a way to cut $450 million in state spending. And state officials said that USAir Group Inc. plans to cut back service at Baltimore-Washington International Airport.

Tremors from those announcements will hit thousands of Maryland businesses that provide support services and products. And the stream of bad economic news, coming at the start of the holiday retailing season, is helping to drive consumer confidence into the ground.

For many who believed the recession, both nationally and in Maryland, was beginning to ease, the latest news came as a shock. "Where's the silver lining in this?" said Charles McMillion, an economist who helped produce a study of Maryland's economy for the General Assembly.

"If you quote me, I'd like to be quoted with something hopeful, but I can't think of anything," he said. "I don't think we've hit bottom. . . . The next three or four months are going to be real difficult."

There is a silver lining, if you look hard enough.

For one thing, this recession is not nearly as bad as the last one in 1981-1982, at least in terms of unemployment. In 1982, the state jobless rate topped 8.4 percent. Since February of this year, when unemployment in Maryland reached 6.5 percent, the jobless rate has declined. In August, as manufacturing employment increased by 4,400 workers, the rate was 5.5 percent.

Housing starts were up slightly in late summer. The amount of cargo moving through Baltimore's port has risen during 1991. And the Rouse Co. reported that sales at its Southeastern malls, half of which are in Maryland, rose 1.3 percent in the first eight months of the year.

It's worth noting that of the 10 recessions since 1937, the average length was 11 months. University of Maryland economists reported this month that the state's recession, measured by real income and employment, began in the first quarter of 1991, although in some industries, such as retailing, it began up to a year earlier.

And the recession actually has been beneficial for some. Larry Hoffman, a leasing agent in the Silver Spring office of a commercial real estate company, Hicks & Rotner Associates Inc., said that he's having one of his best years ever. The reason? Many of his clients are national retailers who can take advantage of opportunities as they arise.

Some companies, Mr. Hoffman said, have been "hovering over a weak economy, waiting for the store to go out of business and taking their space at low rent."

So much for the good news. The bad news: Both the 1974 and 1982 recessions lasted for 16 months. And many economists believe that any economic expansion will be mild.

To this point, it's been non-existent. In July and August, for instance, state sales and use taxes came in about $13 million less than Comptroller Louis L. Goldstein expected. Meanwhile, individual income taxes in August were almost $17 million less than a year ago.

Analysts forecast that more than half of Maryland's $450 million deficit will come from lower than expected revenues: shortfalls of $115 million in income tax revenues, $70 million in sales taxes, $40.5 million in lottery revenues and $25 million in interest from investments.

Westinghouse Electric Corp.'s layoffs are disturbing because the company's problems will affect many technical services, such as systems engineering firms and information-related companies.

Those companies, Mr. McMillion noted, are the key to the growth of Maryland's burgeoning life sciences industries.

"The concern is that the ripple effects of these layoffs at Westinghouse and possibly Allied-Signal be contained," he said. With the holiday season coming, he added, "This is a lousy time for this to happen.

Some retailers are upbeat. A. J. Borenstein's Eclectic, an upscale men's furnishings store in the Gallery at Harborplace, is preparing for a green Christmas.

"We've bought more gifts for this holiday season than we've ever bought before," said Arnold Borenstein, the owner.

"Many of our customers were naturally affected in the downturn in the whole mid-Atlantic economy, particularly since they were involved in the real estate and banking businesses. And we haven't seen much of them, so in that respect, it's not very good," he admitted.

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