Maryland's economy lags nation's Citizens are worried about job picture, not spending freely

Better days ahead?

Some companies plan to hire next year

November 26, 1995|By Jay Hancock | Jay Hancock,SUN STAFF

Maryland's economy crept last summer, failing again to keep up with the nation's and casting uncertainty on the upcoming holiday buying season, newly available statistics show.

The state hasn't been in recession, and some analysts believe that its economy will heat up again next year. Low interest rates are helping many area businesses to continue booking solid sales and earnings, and some say they plan to hire next year, according to surveys and interviews with managers and analysts.

But Marylanders, still worried about federal downsizing and more defense-industry shrinkage, have been cautious about job prospects and conservative about spending, analysts report.

Area companies served by Naden-Lean, a large accounting firm based in Lutherville, "seem to be kind of entrenched," said Allan Cohen, managing partner of the firm. "There's no real growth in their businesses. Business isn't bad. It's just that nobody's willing to take the chance to put money into an expansion."

The torpor "is due largely to the severe decline in government contracts" from Washington, said Charles W. McMillion, president of MBG Information Services, a Washington-based business analysis and forecasting service.

"It's not just the direct loss of government jobs which has had an impact, but the squeezing of companies that rely on government contracts."

It's unclear, however, just how weak Maryland's economy has become.

According to preliminary figures from the U.S. Department of Labor, the state hasn't added any employment in five months -- the poorest performance since the recession ended here three years ago. But one prominent analyst thinks those results sell Maryland short.

The Labor Department said the state had 2.162 million jobs in September, the same as in April after adjusting for seasonal variations.

"We don't believe that," said Michael Conte, director of the Regional Economic Studies Program at the University of Baltimore. "We don't believe the economy's been sterling, either. There are lots of reasons to believe it has slowed down."

But Mr. Conte thinks the government has missed thousands of new jobs that won't show up in indicators until next year, when precise job counts emerge from records on unemployment insurance.

One reason for skepticism is the Labor Department's track record in Maryland.

The agency's initial survey often fails to account for jobs at small, new companies. For example, preliminary figures for 1995's first three months undercounted Maryland's true annual employment growth by nearly a full percentage point.

More evidence, Mr. Conte said, comes from utility records.

New residential phone hookups in Maryland have been relatively flat this year, compared with 1994. But business connections are up. In June, the most recent month for which figures are available, business phone hookups popped by 4,400 over June of last year -- a 26 percent increase.

New electricity accounts set up for businesses by Baltimore Gas and Electric Co. rose by about the same amount in the July-September quarter, compared with the same period last year.

That suggests that startup companies are still adding to Maryland's job inventory.

But even allowing for undercounting, analysts still believe that Maryland's job-growth rate for June through September was less than 1 percent, on an annualized basis. The expectation is that growth for all 1995 will be less than 1 percent, too.

That's slower than the 2.0 percent growth for 1994.

It's also far slower than the reported 4.6 percent increase for the third quarter in the gross domestic product -- the country's total output of goods and services.

Last year "was probably the strongest year of Maryland's recovery," said Ann O'Brien Franklin, chief economist for the state Board of Revenue Estimates. "We had pretty solid job growth. People were feeling more confident about job prospects."

Now, she added, "consumers are pretty much tapped out."

Metropolitan Baltimore has been faring worse than the state as a whole and may actually be losing jobs, according to the Labor Department. Employment in the Baltimore region was 1.122 million in September -- 1,200 jobs fewer than in the same month last year.

But if the government is undercounting jobs statewide, it's also missing jobs in the Baltimore area. So the region may not be getting enough credit. Mr. McMillion of MBG acknowledges that the preliminary regional employment data is "goosy."

Still, he adds, "it certainly seems clear that greater Baltimore month to month has been losing jobs since May and maybe earlier than that."

What's noteworthy is that Baltimore's suburbs, not the city, have been the main source of employment weakness.

In September, 411,500 people were working in the city -- several hundred more than in September of 1994, the Labor Department said. If Baltimore's results hold up, it will have stanched a decline that began six years and about 60,000 lost jobs ago.

Statewide, several other indicators point to economic lassitude.

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