Some left behind by state's growth Spotty: Maryland achieves a modest 1 percent progress, with some segments prospering as others lag.

November 17, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

A chart in Sunday's Business section gave an incorrect figure for Maryland home sales in the third quarter. In the July-September quarter, 12,571 homes changed hands in the state.

The Sun regrets the errors.

Maryland's economy continued to churn forward in the third quarter, new figures show, pushed by a resurgent federal cash spigot, low interest rates, tourism, a booming securities industry and a topping-off of office space still left from the last recession.

But "churn" is the operative word.

State employment has still been growing at only about 20,000 jobs a year, most economists estimate.

At 1 percent, that's just half the national rate.

And, as ever this decade, Maryland growth is purchased at much cost.

FOR THE RECORD - CORRECTION

For every T. Rowe Price, the Baltimore mutual fund company that is layering on more new workers and revenue than it knows what to do with, there's a Stroh Brewery Co., which intends to close its Halethorpe beer plant five days before Christmas.

For every jump in help-wanted ads, which soared by nearly a fourth in the July-September quarter, there's a flood of bankruptcies.

Maryland bankruptcy filings set another record in the third quarter, ballooning by 46 percent over the same period last year.

For every Vulcan-Hart, there's a Reliable Shoes.

Vulcan-Hart, the Dundalk maker of commercial-grade ovens, ranges and fryers, is expanding its space by a fifth and "definitely going to have to hire," said Richard Galicki, director of cooking manufacturing for Vulcan-Hart's parent company.

"I'm probably planning on, salary and hourly, another 100 people."

At Towson-based Reliable Shoes, on the other hand, "business has fallen off in three years almost 50 percent," said owner Scott Frenkil.

"The key word is oversaturation. There are so many stores out there that we're all beating each other up to break even. I get a lot of lookers. I'm like a museum."

Net result: "We essentially are in a very moderate growth stage," said Mahlin Straszheim, head of the economics department at the University of Maryland in College Park.

And Straszheim forecasts more of the same for the state: "continued growth that lags the national growth."

Even recent political developments contain mixed messages for Maryland.

A Democrat in the White House for four more years should help preserve the federal agencies and spending on which the state rests so heavily.

But continued Republican control of Congress will quash any new spending.

"We're not going to see an outpouring of federal dollars into the Maryland economy or the U.S. economy," said Mark Zandi, chief economist with Regional Financial Associates in West Chester, Pa.

"The election results imply continued restraint and continued downsizing of the federal government."

Slow growth in jobs

Maryland averaged 2.2 million jobs in the July-September period, according to the U.S. Labor Department.

Although its unemployment rate averaged only 4.8 percent, that's only 8,000 more jobs than the year-ago average -- less than a half-percent of growth.

But many analysts, including the Maryland agency that counts the jobs, believe the figures understate Maryland's performance.

Most agree with Zandi, who figures the real growth rate is around 1 percent and will be confirmed when exact payroll counts are delivered next year.

But some economists believe even that's too pessimistic.

Michael Conte, director of the Regional Economic Studies Institute at Towson State University, estimates that Maryland had 1.7 percent more jobs in September than it had a year earlier.

Other broad-based measures support the moderate-growth interpretation.

The state's sales-tax collections, which closely track retail activity, grew by a 5 percent yearly rate in the third quarter, continuing a healthy spring pickup after almost no growth at all for last fall and winter, when storms and a paralyzed U.S. government depressed buying.

Income-tax withholding, which offers a timely window onto business payrolls, has been rising at an annual rate of about 5 percent since July, said Ann O. Franklin, chief economist for the state's Board of Revenue Estimates.

That's more than twice the growth of previous quarters.

Withholding for September managed to rise even though September 1995 had five Fridays and five payrolls for many employers, instead of four.

"We were expecting withholding for September to be just about flat, and in fact it ended up growing by 2.7 percent," Franklin said.

"Things look to be going pretty well in the state's economy."

Bounce-back effect

If Maryland is doing better than it was a year ago, many economists credit a bounce-back effect from the federal shutdowns and budget uncertainties of last fall and winter.

Not only did the turmoil stop U.S. cash expenditures cold, it also delayed agencies' authority to order products and services.

The result: Federal contractors and subcontractors operated at half-speed for several months and truly began to recover only in late spring and summer, analysts said.

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