State's economy poised to catch up with U.S. recovery

January 02, 1994|By John E. Woodruff | John E. Woodruff,Staff Writer

After lagging far behind for three years, Maryland is poised to at last join fully in the national economic recovery in 1994.

In the state and the nation, personal incomes will rise more than they did last year, businesses will sell more goods and services, and more unemployed people will find jobs, economists and business leaders say.

"The state economy will regain most of its strength and expand at a moderate pace to catch up to the national growth rate," said Chang Min Kong, an economist at Towson State University.

But it's likely going to be a very gradual climb -- so gradual that many Marylanders, especially among the unemployed, probably won't feel it.

"I just talked with a friend who's been out of work as long as I have, and now my brother's out of work, too, and of the 27 people who started classes with me at the career development center, only two have found jobs so far," said Edward Adams of Essex, who is still looking for work more than six months after being laid off by Miles Chemicals Inc.

"I really can't see any sign of what they're saying about an economic recovery," Mr. Adams said. "For me and the people I know, the recession is still the reality."

Still, what emerges from a series of interviews over the past two weeks is a picture of a solid, if muted, recovery.

The economy this year will be helped by continued low inflation. Unlike in most recoveries, inflation is not expected to accelerate significantly this year, although some increase is projected. That means that interest rates will not advance much, and credit can expand enough to fuel further recovery.

"More importantly, and especially important for Maryland, there will be some credit easing, in the sense that more businesses will be making loan proposals that banks will perceive as viable, and there will be more borrowing and more investing," said Michael A. Conte, director of regional economic studies at the University of Baltimore.

But business leaders and economists expect the state's recovery to be uneven:

* Manufacturing: For much of this century, factory production drove Maryland's recoveries, but no one counts on that any more. Decades of wrenching decline and three years of recession-driven cutbacks have left this sector with barely one-tenth of the state economy. The best hope for this year is that it may hold its own or increase slightly.

With vans still popular, the bright spot should be continued strength at the General Motors Corp. assembly plant in Southeast Baltimore. Some high-tech companies in the Washington area and Howard County also should perform well. Other factory employment "should at least hold steady in 1994 and will probably increase," says J. Alexander Doyle, president of the Maryland Manufacturers Association.

* Retail: Most Maryland retailers expect 1994 to be better than 1993 but not a banner year, with sales increasing between 3 percent and 6 percent. They expect last year's trends to intensify, which will be good news for auto sales and

big-ticket consumer durables, especially for the home, but little help for clothing sales. "Retail trade will be the weakest sector of Maryland's economy for the next two years," said Towson State's Mr. Kong.

* Port of Baltimore: The port is no longer the job creator it once was, but it should extend its recent gains this year. The tonnage upturn of recent years should continue for the first six months of the year at last year's annual rate of 3 percent to 4 percent, then gain speed in the second half. The recent NAFTA and GATT multination trade agreements "benefit all ports in the world, but we should see more than our share of goods flowing through Baltimore to the heartland," said Adrian G. Teel, head of the Maryland Port Administration.

* Housing: Home sales are expected to improve on last year's growth. New-home sales are expected to increase by 5 percent, sales of existing homes by 4 percent. The biggest increases may be in the upper end of the price range, which for several years has been the hardest hit.

* Construction: The recovery in home construction that began in 1993 should continue through this year and well into the next. But commercial construction is likely to remain in the doldrums until late this year or early 1995, except for some highly specialized warehouse projects in Harford, Carroll and Howard counties.

* Defense: Maryland may begin to feel some benefit by year's end from planned expansion of the Patuxent Naval Air Station. Also, some of the state's biggest defense contractors are beginning to make headway in converting to civilian production. But Maryland, the fifth-most defense-dependent state, probably faces further losses. "Our estimate is that between now and 1998, Maryland will lose 17 to 32 percent of its defense-related work force," says Richard A. Bitzinger, a Washington-based defense analyst.

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