Recovery won't be cure-all for state

December 03, 1993|By John E. Woodruff | John E. Woodruff,Staff Writer

Thousands of Maryland's unemployed will at last find jobs next year, and the state's new governor will initially enjoy "a kind of fiscal honeymoon" as a slowly recovering economy replenishes state tax receipts, a leading Maryland economist predicts.

But "seismic changes" in the state's economy will limit growth and keep times tough for tens of thousands of Marylanders even after recovery gets under way, said Michael A. Conte, director of Regional Economic Studies at the University of Baltimore.

The changes will turn still more of Maryland's former strengths into weaknesses, as hospitals and other top employers trim staffs. And many of the state's newest strengths are likely to prove short-lived.

Mr. Conte laid out those checkered prospects yesterday at the Greater Baltimore Committee's annual business forecast.

"The national recession technically ended on March 31, 1991, though you may not have deduced that from talking to your neighbors here in Maryland," Mr. Conte said.

The state, which has more than 160,000 residents out of work, lost about 80,000 jobs in the recession and then, rather than recovering when most of the country did, lost an additional 40,000 jobs in the 32 months since the slowdown officially ended, he said.

But Mr. Conte laid out what he called "a classical sequence" of a state economy bottoming out over the past two years and now beginning to gain jobs.

"First, you expect layoffs to peak, and that happened the second half of 1991," he said. "Then, you expect employers to start working their people longer hours, and that began to happen in early 1992. Then, you expect employers to start advertising for help, and help-wanted ads in The Baltimore Sun began to increase later in 1992."

Next year, for the first time since the recession began in 1990, Maryland can expect personal income growth of about 3 percent, Mr. Conte said. That's less than the 4 percent growth U.S. Sen. Paul Sarbanes, D-Md., told the GBC audience to expect for the national economy next year.

And job growth will fall far short of overall economic growth in BTC Maryland, much as it is doing in states where recovery came earlier and stronger, Mr. Conte said. In 1994, it probably will be somewhere between 0.7 percent and 0.75 percent, he said.

To Marylanders looking for work, that would mean, at most, a modest start toward regaining the 120,000 jobs lost since the recession began -- a net 1994 gain of somewhere between 14,000 and 15,500 in the state's current total of 2.06 million private, government, military and other nonfarm jobs.

To the state government, relief from four years of relentless deficits and budget-slashing will come in the form of $200 million or $300 million a year in surpluses, beginning as early as 1995, the first year of the new governor's tenure, Mr. Conte said.

"This is still going to be a tough budget year, and even as we recover, we won't see surpluses like the $400 million or $450 million a year that had people fighting over how to spend the money in the late 1980s," he said.

Under repeated questioning by business executives in the audience, Mr. Conte argued that despite severe fiscal problems this year, even a modest recovery will bring the state substantial surpluses by 1995.

"The state has cut expenses and increased tax rates to deal with the recession, and that means it won't take a dramatic recovery" to bring Maryland's government out of the red, he said.

And Maryland's recovery won't be dramatic, because the state economy is undergoing "changes that can only be described as seismic," he said.

Those changes are releasing crosscurrents of economic good news and bad news.

Some of the good news:

* Research and testing services are zooming ahead and have become the state's eighth-biggest employment category, with more than 28,000 jobs, many of them high-paying. They will continue to grow.

* Jobs are cropping up rapidly in three areas Mr. Conte collectively dubbed "dependent care services" -- child day care and residential care for the elderly and the disabled or handicapped. Though they pay less than hospitals, the state's second-biggest nongovernment employers, the jobs are spread across the economy and include hard-hit areas like Baltimore City and Prince George's County.

* Tourism is beginning to stabilize. Business at eating and drinking establishments, by far the state's largest employment category and the biggest new-job generators of the late 1980s, is leveling off after two years of sharp losses.

* Early reports suggest that jobs are beginning to grow again in white collar and professional categories that were among the hardest hit during the recession.

But the impact of this good news will be held back by powerful countercurrents of bad news:

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