Maryland economy struts its stuff with another strong quarter

Jobs and home sales among the standouts

Pulse beat of the state

September 24, 2000|By William Patalon III | William Patalon III,SUN STAFF

Despite a few soft spots, the Maryland economy enjoyed another strong quarter during the second three months of the year. Leading the way were robust job gains, healthy consumer spending, record car sales and a hefty jump in contracts for homes.

"The second quarter was a very solid quarter," said Pradeep Ganguly, chief economist for the Maryland Department of Business and Economic Development. "It was almost as strong as the first quarter."

Among the quarter's highlights:

New contracts for homes rose statewide over the second quarter of 1999, even though settlements on earlier contracts slumped.

Maryland car dealers enjoyed their best quarter ever for vehicle sales.

State sales tax receipts from consumer spending posted a big gain, signifying health in the retail sector.

Manufacturing slowed - more so in the Baltimore area than statewide.

One of the biggest keys to a healthy economy is job growth: When consumers are working, they have money to spend - and the confidence to spend it. During the April-June quarter, Maryland enjoyed strong job growth, with an average of 2.45 million people employed - 3 percent more than the 2.39 million employed in the state during the second quarter of 1999.

Even with this rise in jobs, there was a slight uptick month-to-month in unemployment both in Baltimore and statewide - though unemployment for the quarter was still down from a year earlier. In Baltimore, the unemployment rate rose from 3.3 percent in April to 4.3 percent in June. Statewide, unemployment rose from 3 percent in April to 3.6 percent in June, matching last year's rate for that month.

The small increase in unemployment can be traced to several causes: New entrants to the work force - such as college graduates, or students on summer break - who hadn't been absorbed, and a gentle slowing in the growth rate of the Maryland economy, which is mirroring the slight slowdown in the pace of national growth engineered by the Federal Reserve.

This upshot of the still-strong job market was higher consumer spending: State consumer sales tax receipts jumped 9 percent during the second quarter.

"We are doing fine here," reported Mike Gaeta, store manager for Dick's Sporting Goods in Bel Air, who said his store is having an excellent year.

Consumer spending wasn't limited to smaller-ticket items such as running shoes, soccer balls and archery equipment - it extended to big-ticket items such as new cars and trucks. Sales of new vehicles in Maryland jumped 11 percent to an all-time record of 111,783 cars and trucks during the second quarter, bolstering an already strong year, said Peter Kitzmiller, president of the Maryland New Car and Truck Dealers Association.

Only two other times have Maryland dealers sold more than 100,000 vehicles in a quarter: They sold 100,277 in last year's second quarter and 103,782 in the third quarter of the year. Dealers sold 95,330 vehicles in the first three months of this year.

Sales of cars and trucks increased despite the double whammy of higher interest rates and rising gasoline prices and have continued brisk into the third quarter.

"The strong spring has continued right into summer," Kitzmiller said. "I think people think the economy is still good."

Kitzmiller is expecting the pace to continue. New models - once reserved for the fall months - now are rolled out year-round, and several, including a new Ford SUV, were unveiled over the summer. Car makers have still more new models behind the curtain for a fall debut - which should fan the flames of consumer interest even more, he said.

Higher interest rates have affected the housing sector, with both Baltimore and the state registering declines in the number of sales.

Second-quarter settlements dropped 3 percent in the Baltimore area and 2 percent statewide over the like stretch last year. However, the dollar value of new contracts signed statewide during the second quarter leaped 24 percent - from $714.4 million last year to $883.7 million this year.

"Business is great," said Bob Connelly, vice president for Cockeysville-based FNMC, formerly First National Mortgage Corp.

Marc Witman, a sales associate at the Greenspring office of Long & Foster, said the big jump in new contracts is more important than the slight year-over-year decline in home settlements. His logic: New contracts are a leading indicator, while settlements are a lagging indicator, because they are finished deals. The second-quarter dip in settlements was likely due to the rate increases enacted by the Fed, as well as the early-year sell-off in stocks, which temporarily doused buyers' confidence, Witman said.

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