Generally rosy outlook seen for state, nation

Maryland might be poised to out perform country this year, analysts say

The Year Ahead

January 24, 1999|By Jay Hancock | Jay Hancock,Sun Staff

Maryland's economic fortune is tied to the country's this year, analysts say. That's good for two reasons.

First, it suggests that Maryland's economic hobbles have finally been broken, that it has left its last recession in the dust. The state did much worse than the United States as a whole from 1990 through 1996, as the malaise of defense cutbacks, federal downsizing and manufacturing failures lingered like a cloud.

Second, the United States is expected to have a pretty good year. Maryland could do a lot worse than hitch its caboose to an economy, strongest in the world, that keeps surpassing forecasts and defying history.

"'98 was just a spectacular year for the state, for the country, on every score," said Charles McMillion, chief economist for MBG Information Services, a Washington forecasting and consulting business. "Wages were up. Productivity was pretty good. Balanced budget."

If anything, McMillion said, "I think Maryland has gotten to the point where it will begin to outperform the country as a whole."

Mortgage rates are at their lowest since the 1960s. Maryland booked its best job growth and lowest unemployment in a decade last year. Maryland personal income is finally rising at an acceptable rate. Like the country and many other states, Maryland boasts a budget surplus. Inflation is almost invisible.

Not all analysts agree that Maryland will outperform the nation this year, and they identified plenty of risks. But none expected Maryland to diverge sharply from the national trail, and all predicted the national economy would continue expanding this year, although at a slower pace than last year.

Few foresee a U.S. recession

"Maryland will grow with the national economy," said Mahlon Straszheim, chairman of the economics department at the University of Maryland, College Park. "Although employment growth has been less, Maryland's personal income is high. Its unemployment rate is very low. And the state will probably continue to grow a little bit less than the nation in terms of employment growth."

Several analysts expect Maryland will have added more than 50,000 jobs in 1998 when the final figures arrive. It was the best year for the state since the 1980s, and economists were impressed not just by the number of jobs but by their quality. "You really haven't had the rapid growth in retail trade, tourism, a lot of the lower-paying jobs," said economist Mark Vitner, who follows the state for First Union Corp. of Charlotte, N.C. "We know that income growth has been pretty good in Maryland. The quality of jobs being added in Maryland stacks up with any other part of the country."

More than 700 of those jobs belong to Amerix Corp., a Columbia company that demonstrates the rewards and the risks of Maryland's new prosperity.

Growing from nothing in two years, Amerix pays new workers more than $25,000 annually, plus benefits, to help overextended consumers pay back debts. More than just a credit counseling service, Amerix intervenes directly with creditors all over the country and makes its money from banks and other lenders that are thrilled to recover funds they thought were permanently lost. "This may not sound humble, but we have really revolutionized this industry and how it works," said Bernie Dancel, Amerix's founder and owner. "There are billions of dollars every year that are getting charged off, and it doesn't have to be that way."

Consumer debt undergirds much of the U.S. economy and is one of several caution lights flashing on the forecasting console. Many economists believe that consumers will pull back and that debt delinquencies will rise further, which might be good for Amerix but would be bad for the overall economy.

At the same time, Amerix symbolizes another challenge for Maryland: its ability to attract and retain good employees in an age of the mobile corporation.

Companies continue to demand large subsidies from Maryland taxpayers and [See Overview, 3k] threaten to move their operations if they don't get them. Hotel operator Marriott International and shipping concern Maersk/Sea-Land are two of several companies seeking large, taxpayer-funded incentives.

Amerix, too, is considering its alternatives. "We are in the beginning stages of developing a corporate campus," Dancel said. "We are looking at Maryland, Delaware and Northern Virginia for that corporate campus."

'I like it here'

While Dancel promises to examine several options, "when it comes down to it, we are Maryland's to lose, basically," he said. "These other states can't just be better than Maryland by a little bit. They have to be better by a significant amount because I like it here. My kids go to school here."

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