Jobs, sales growth continuing in state

Low unemployment will add to expansion, economists predict

Workers still in demand

Higher interest rates won't stop expansion, economic experts say

August 29, 1999|By William Patalon III | William Patalon III,SUN STAFF

Strong job growth continued to buoy spending during Maryland's second quarter, making the cash register ring and allowing home and car sales to set records.

Higher interest rates and somewhat satiated consumers could tap the brakes on higher-dollar purchases during the current quarter and the fourth quarter to come. But fear not: Local economists expect the markets of Baltimore and Maryland to keep motoring, partly because a tremendous appetite for new workers is driving up wages and making more money available to spend.

"This is the type of strength one expects to see in the initial phase of an economic recovery," said Anirban Basu, director of applied economics for RESI, the research and consulting arm of Towson University. "A recovery is supposed to lose momentum over time. This recovery is not behaving like that. Indeed, every year is stronger than the last. And 1999 will be another year stronger than the one just completed."

Numbers bear this out. In the second quarter, on average, just over 2.5 million people were working in Maryland, second only to the last year's fourth quarter as the highest total for any quarter in this decade, according to figures from the U.S. Bureau of Labor Statistics. And the fourth quarter typically gets a nice boost because stores hire extra people for the Christmas shopping rush.

The state economy grew at a 2.2 percent annual clip during the second quarter, down from a blistering 6.6 percent in the first quarter, but still better than the 1.8 percent annualized gain in the nation's economy, according to research by First Union Corp. economist Mark Vitner.

Over the past year, Maryland's economy expanded at a 4.2 percent pace, compared with 3.9 percent for the U.S. economy, Vitner said.

While experts say the state and local economies are on cruise control for the near-term, there are roadblocks that could exact a toll. Among them: Higher interest rates that are slowing home sales, as well as the same tight labor market that's stuffing cash in workers' pockets. About 66 percent of companies polled by a University of Baltimore research group said they had trouble finding qualified workers during the second quarter, an increase from 61 percent in the first quarter.

Labor shortages restrict corporate and economic growth.

And rising wages raise a company's costs, which eventually are passed to consumers as higher prices.

Statewide, the unemployment rate touched 3.4 percent in April -- the lowest point this decade -- and was 3.6 percent in June, the final month of the second quarter. That's the inverse of the June a decade ago -- when unemployment was 6.3 percent.

The Baltimore area's unemployment rate dipped to 3.9 percent in April, and closed the quarter at 4 percent. April tied December for the lowest unemployment rate Baltimore has seen this decade.

The employment and unemployment numbers -- the only ones available -- are not seasonally adjusted, meaning they have not been "smoothed out" to reflect seasonal changes in the structure of the economy. Regardless, these figures are fine for use in comparisons, economists say.

Besides, anecdotal evidence demonstrates that this has been the best market for job-seekers this decade, if not in memory.

Just ask Brendan Courtney, area director in the Baltimore office of Interim Services, a placement firm that's a unit of the Fort Lauderdale-based Interim Financial Solutions. As the economy continues to surge, and companies see profits there for the picking if only they can grow, the thirst for workers has transformed the normally civilized job market into the Shootout at the O.K. Corral.

"We see companies getting into bidding wars, and see our client companies do things for employees" that would have been unthinkable just a few years ago, Courtney said. "They're jumping through hoops.

"In one situation, the person was thrown a counter-offer that doubled their salary to get them to stay," Courtney said.

From the first quarter to the second, nearly two-thirds of the 250 Maryland companies surveyed by the Maryland Business Research Partnership said they had increased revenues and two in five said they had added workers.

Hiring will not end soon, according to the survey: During the same period, the number of companies expecting to add workers jumped from 47 percent to 56 percent.

"Businesses are bullish," said Richard Clinch, project manager for the Research Partnership, the research unit of the University of Baltimore. "Not only are they bullish, they're turning in great performances, too."

With job security now, and for the foreseeable future, it's easy to understand how consumers could feel confident. Consumer confidence translates into consumer spending -- which accounts for about 70 percent of the U.S. economy's growth. During the second quarter, consumer spending was brisk in Maryland for houses, cars and other retail goods.

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