Maryland's economy still climbing the cliff A gathering of experts: The talk was of sluggishness, soft landings and hard realities during the economic forecast conference yesterday in Baltimore.

January 31, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

So how is Maryland's economy?

Two years ago, Dream Homes in the state builders' annual trade show cost from $469,900 to $775,000. Last year you could get a Dream Home for $290,000 to $370,000. This year, the Dream Home show has been canceled.

Any more questions?

As economic indicators go, the Dream Home index isn't threatening to dislodge the gross domestic product. But the home-show anecdote, related by economist Michael Conte at a forecast conference yesterday, reflects nuggets of general truth.

Yes, homebuilding has been sluggish. Yes, consumers are spending less freely. Yes, Maryland's economic expectations aren't what they used to be.

"It is difficult to be an economist in Maryland these days," said Mr. Conte, director of the Regional Economic Studies Program at the University of Baltimore. "We are not regarded as the bearers of good tidings at all times."

Mr. Conte and more than a dozen other economists and business people spoke at the downtown Baltimore conference, thrown by the Regional Economic Studies Program and several other sponsors. Much of the analysis centered on Maryland's difficulties -- including a decline in defense spending, disappearing bank jobs and a shrinking federal government.

But the news wasn't all bad. Few if any economists expect the United States or Maryland to slip into recession this year, despite discouraging national consumer statistics disclosed yesterday. The Federal Reserve is expected to decrease short-term interest rates today by a quarter or half percentage point.

Exports should rise. Consumers have the capacity to spend more. And the "significant turnaround" in Maryland homebuilding and other construction anticipated by Mr. Conte may bode well for Dream Homes '97.

The national economy has executed the often-sought, seldom-attained "soft landing," slowing and then recovering before sliding into recession, said Christine Chmura, chief economist for Crestar Financial Corp. of Richmond, Va.

"We just finished a soft landing," Ms. Chmura said. "If we can get through the next quarter or so, this economy will start to accelerate."

She expects the yield on the government's main, 30-year Treasury Bond, a closely watched indicator of long-term interest rates, to drop to a record low of 5.2 percent before the end of next year. The T-bond yields a little over 6 percent now.

Boosted by a still-growing national economy, employers expect to raise wages this year by 3 percent or 4 percent, Ms. Chmura added. Most economists expect that the country's gross domestic product will increase by 2 percent this year or a little less, up from an estimated annual growth rate of about 1 percent in 1995's fourth quarter.

Whether the economy meets or misses those expectations depends on consumers, Ms. Chmura added. Consumer debt payments aren't as high as they were in the last recession. But further weakness in retail spending could pull the country into recession, she said.

With consumer spending making up 65 percent of the gross national product, "where consumers go, so will the rest of the economy," she said.

An expanding national economy should help Maryland add jobs, too, analysts said. Mr. Conte expects Maryland employment to grow by 1.49 percent this year and to have grown by 1.24 percent in 1995 when the counting is done. In 1994, state employment expanded by 2.1 percent, its fastest since the last recession.

But Maryland will have trouble keeping up with the nation. The jobs it is attracting are generally low-paying; the jobs it is losing are high-paying. In the 1980s, per-capita personal income soared by 28 percent in the state; since 1990, it has fallen by 2.5 percent, Mr. Conte said.

Jobs paying less than $30,000 in 1995 dollars have recovered to their pre-recession levels in Maryland. But the state is still 10,000 jobs short in the $30,000-$50,000 category and more than 10,000 jobs shy in the $50,000-plus column.

The state is expected to continue losing factory jobs, but Mr. Conte advocated the development of business parks in low-cost areas to attract manufacturers.

"The Maryland economy really fell off a cliff in 1991, and it is still struggling to remount the precipice," Mr. Conte said.

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