Maryland income lags Recession hit harder than in most of U.S.

February 19, 1992|By Liz Atwood | Liz Atwood,Staff Writer

Marylanders apparently have suffered more from the recession than the rest of the country has, as personal income in the state has suffered more than in the nation as a whole, according to figures from the Maryland Office of Planning.

Personal income in Maryland has declined in every quarter since the end of 1990 when compared with the same quarter a year earlier, the figures showed. The last time Maryland posted an increase in personal income was in the summer of 1990, and even that increase was smaller than the gain recorded by the nation as a whole.

Personal income in the state declined 1.7 percent in the third quarter of 1991, according to figures released by the Office of Planning using the most recent data available from the U.S. Bureau of Economic Analysis. Nationwide in the same quarter, the decline was 0.8 percent.

Personal income measures wages, salaries, commissions, dividends and interest, rent and other earnings.

The personal income numbers in Maryland also trailed those of neighboring states. Personal income in the third quarter of last year dropped 0.8 percent in Pennsylvania, 1.1 percent in Virginia and 0.2 percent in West Virginia.

Nationwide, eight states reported declines in personal income greater than Maryland's.

The declines in personal income, although they are adjusted for inflation and seasonal factors, do not take into consideration population growth in the state. If population growth is factored in, the drop in personal income would be about half a percentage point more, said Michael Conte, director of the Center for Business and Economic Studies at the University of Baltimore.

Michel Lettre, assistant director of Planning Data Services at the Maryland Office of Planning, said the quarterly statistics show some encouraging signs when viewed on a quarter-to-quarter basis.

From the third quarter of 1990 to the fourth quarter of that year, personal income declined sharply. But beginning in the fourth quarter of 1990, the decline in personal income eased, and income actually increased 0.3 percent in 1991's second quarter.

However, personal income dropped again slightly in the third quarter last year.

Because the dip was slight, Mr. Lettre said, the worst of the state's economic woes might be over. "It's still a very uncertain picture," he said. "Clearly we've been hit hard, but maybe we're seeing the beginning of a turnaround."

The indicators were sufficient to prompt the Office of Planning to publish the statistics, although it doesn't usually publish personal income figures. Mr. Lettre said the personal income report provides a good insight into the seriousness of the recession and is a key indicator used to forecast recovery.

During the robust 1980s, total personal income in Maryland, excluding inflation and seasonal adjustments, grew 9 percent to 10 percent annually and outpaced income growth in the nation as a whole, said Charles McMillion, president of MBG, a Washington business consulting firm.

But growth dropped to less than 9 percent in 1990 and less than 3 percent in 1991, he said. In 1992, personal income in the state is expected to grow at less than 2 percent, below the expected inflation rate.

Even discounting inflation, however, personal income declined or grew only slightly in most industry categories in the third quarter compared with the same period in the previous year. Income from dividends, interest and rent fell 1.9 percent, income from manufacturing fell 2.8 percent, income from the retail trade was virtually unchanged, and income from the wholesale trade grew 0.2 percent.

Economists said the reason Maryland suffered more was because of the concentration of defense-related work and the extraordinary growth in construction. With the military buildup of the 1980s, new businesses came to the area, creating a demand for office space, and contractors hired more workers. Seeing the opportunity, builders flooded the market with new commercial properties, Mr. Conte said.

When the defense dollars began to dry up, the white-collar services that relied on the industry began to lay off workers. Fewer workers meant decreased demand for new offices. The effects ricocheted throughout the economy.

"We didn't understand how far the tentacles of the real estate industry reached into other businesses," said William F. Treacy, chief economist with MNC Financial Inc.

Although Mr. Treacy foresees slow improvement for the nation's economy throughout 1992, he and other economists are less optimistic about Maryland's recovery.

"We'll come out of the recession more slowly than the rest of the country. What we need is for a national recovery to gather some steam," Mr. Treacy said.

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