Md. manufacturing to grow little

Better off: If there is a national slowdown, the state should fare better than others since many of the job losses have already occurred.

January 21, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

The good news on the manufacturing front for the coming year is that most of the bad news has already arrived. On the downside, economists say they don't expect much growth in the sector in 2001.

"From Maryland's perspective, their bad news is over," said Margaret Murphy, vice president of the Baltimore branch of the Federal Reserve Bank of Richmond, Va. "They were an early loser for the old industrial base."

The number of manufacturing jobs in the state declined 14.5 percent, from 207,000 in 1989 to nearly 177,000 a decade later in 1999 as companies closed plants, put in new technologies to raise productivity and reduced their work forces.

Jobs ticked upward slightly to 179,000 in the first quarter of 2000, the latest figures available.

Patrick Arnold, director of labor market analysis and information in the state's Department of Labor, Licensing and Regulation, said that the slow growth could continue, adding another 1.5 percent to 2 percent this year.

"If there is a nationwide slowdown, we're expecting Maryland to fare pretty well in that," he said.

"We're not like some states that have had very precipitous increases, particularly in high tech. Our growth is much more manageable in my view."

A nationwide downturn in manufacturing had gathered enough momentum by year-end to help convince the Federal Reserve to reverse course. After a series of six interest-rate boosts, the Fed cut interest rates a half-point early this month.

The National Association of Purchasing Management's factory index dropped to 43.7 in December from 47.7 in November - the fifth consecutive monthly decline.

The Fed acted the day after the index was released, saying the cut was made "in light of further weakening of sales and production."

Art Stowe, president of the Printing and Imaging Industries of Maryland, said "the industry is running a little scared like everybody else."

"The big concerns are about dot-coms going out of business, and they have done an awful lot of print advertising over the past several years," he said.

Despite those worries, Stowe said industry analysts expect the printing industry to see increased sales of about 4 percent in 2001.

"We hope that that's valid," he said. "Personally, I'm fairly optimistic that we're going to do the 4 percent. I'm just not comfortable that the economy is exceedingly strong and am concerned about the dot-coms."

Mark Vitner, an economist who follows the area for First Union Corp., a banking company based in Charlotte, N.C., doesn't expect major job losses in the manufacturing sector this year, but gains are also unlikely.

`Significant' cutbacks'

"I think the first half of 2001 is going to be very difficult for the manufacturing sector," he said. "I think you're likely to see fairly significant production cutbacks across the country, but it's hard to pinpoint where those are going to be. ... We're seeing that inventories have risen in recent months, orders are falling off and manufacturers will have to cut back production."

One company to watch is Millennium Inorganic Chemicals of Hunt Valley, which employs about 450 at its plant in South Baltimore.

The maker of titanium dioxide plans a multimillion-dollar expansion but warned that if state and local officials don't come up with incentives for the money to be invested in Baltimore, the future of the plant could be in jeopardy.

Bethlehem Steel Corp. recently spent more than $600 million on upgrades to its Sparrows Point facility. About half the money was for a new cold-rolling mill that is expected to save the company more than $100 million a year in operating costs. Without the improvements, the future of the plant, which employs about 4,000, would have been uncertain.

Hurt by strong dollar

Pradeep Ganguly, chief economist for the Maryland Department of Business and Economic Development, said the overall slowdown in manufacturing employment is caused in part by a strong dollar, which makes U.S. products more expensive overseas, and technology advances.

"What used to take two people to do," he said, "is now done by one person and a computer program."

But Peter Bowe, president of Ellicott Machine Corp. International, is still hiring and is having trouble finding workers.

In fact, a weaker dollar and higher unemployment that could accompany a slowdown would actually help his dredge-building company, whose business is primarily driven by exports.

"If there's a slowdown, our view would be that it would most likely be a benefit to us. There would be more labor available," said Bowe, who employs about 100 and could use another five people.

Paul Engle, a manufacturing consultant at Grant Thornton LLP in Baltimore, said labor shortages are a common complaint from manufacturers.

"Their big problem is attracting and retaining people, particularly engineers and technicians, and I expect that will not change in the foreseeable future," he said. "But I also think that manufacturers are being more conservative abut recruiting new workers; they're taking a wait-and-see attitude."

He said the "jury's still out" on the outlook for 2001 for the traditional manufacturing sector but that those in the high tech markets, such as fiber-optic makers, should see a good year.

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