Jobs trail sales rise, study finds Maryland survey shows profits outpacing new hires

September 29, 1995|By Jay Hancock | Jay Hancock,SUN STAFF

The jobless recovery rules in Maryland. Sales are rising for the state's businesses. But few companies are hiring.

So says a survey conducted by a research group at the University of Baltimore. The study shows that a national phenomenon -- record corporate profits with anemic job creation -- has rubbed off here.

The state's slow job growth this year has already been demonstrated by monthly payroll tallies from the U.S. Labor Department. What the new study shows is that financial results of Maryland businesses seem to outshine their hiring records -- especially businesses in the Baltimore area.

"Firms' revenues are expanding much more than employment as they continue to seek efficiencies and downsize," said Richard P. Clinch, program manager for the Maryland Business Research Partnership.

"Usually you expect revenues to increase faster than employment, but this spread seems excessive."

Mr. Clinch's group recently surveyed 250 Maryland companies and found that 60 percent recorded sales increases this year but only 42 percent boosted employment.

About 11 percent said revenues have "greatly expanded."

When the companies were asked about the future, the disparity showed up again. Sixty-seven percent expect to book higher sales in the next year, but only 25 percent said they would probably increase employment. Another 30 percent said chances were "50-50" that they would add jobs.

Increased productivity -- making more with fewer people -- can explain why corporate results might outpace hiring, said Roy Webb, an economist with the Federal Reserve Bank of Richmond. The Fed wasn't involved in the Maryland study.

"With productivity growing by about 1 1/2 percent, you would ex-pect inflation-adjusted sales to grow that much faster than employment would grow," Mr. Webb said.

The phenomenon shows up in national statistics. U.S. corporate profits grew by 11 percent last year and at an 11 percent annual rate in the first half of 1995, according to the Commerce Department. But the country is adding jobs by less than 3 percent annually.

In the Baltimore area, 64 percent of the companies said sales were up this year, and a substantial 75 percent said they expect sales to rise in the next year. Forty-five percent have boosted payrolls this year, and 34 percent of Baltimore-area companies said chances are good that they'll add jobs in 1996.

Baltimore's results contrast with those of Maryland's Washington suburbs, where federal budget cuts appear to have cooled both corporate revenue and hiring, Mr. Clinch said.

"The Baltimore metropolitan counties are really the growth pole of the state," he said. "The clear leaders are Anne Arundel and Howard."

By contrast, he added, "more firms reported declining revenues in the Washington area than any other region."

Fifty-two percent of the companies in Maryland's Washington suburbs had rising sales this year. Twenty-two percent had falling sales.

Statewide, 19 percent of businesses surveyed had declining sales; in metropolitan Baltimore the figure was 16 percent.

The University of Baltimore's survey supports other data showing that Maryland companies are hiring halfheartedly. The average monthly number of state jobs in the first half of this year was just 1.3 percent higher than in the first six months of 1994, according to the Labor Department.

The Maryland Business Research Partnership is sponsored by state businesses and run by the University of Baltimore. The group intends to survey companies each quarter on their results and perceptions of the economy.

The research group didn't survey companies evenly across the state. Instead, it concentrated on "mobile" businesses that don't have to be in Maryland: manufacturers, high-wage service businesses, nonprofit organizations.

It avoided those operations that mainly serve the ambient population: stores, restaurants, hospitals.

Also in yesterday's report:

* Thirty-seven percent of the companies surveyed said the state's business climate is good; 31 percent said it was poor. "That is not a good number," Mr. Clinch said. "If the state's a product and 31 percent of the customers are unhappy, that does not bode well for the performance of the state."

* The state's biggest advantages are its central location and strong infrastructure, 59 percent of the companies said.

* State and local taxes were the top business complaint. Of those surveyed, 33 percent said taxes are the biggest disadvantage of doing business in Maryland.

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