Outlook brighter for Md. business

Most companies see better environment, expect more revenue

April 20, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Despite a weakened national economy and lowered expectations for growth, more than half of 250 state companies rated Maryland as having a business-friendly climate -- a 14 percent increase over the same quarter last year -- marking the highest level of optimism in four years, according to a University of Baltimore economic survey released yesterday.

In contrast to cutbacks and layoffs at companies across the nation, 69 percent of Maryland businesses expect revenue growth in the coming year, and 65 percent reported difficulty in finding skilled workers to fill manufacturing, labor, sales, managerial and engineering positions, according to the report.

But much of the gain in optimism in the first quarter of 2001 was based in Baltimore City, where a re-emergence in the city's harbor, an improving city economy and a positive first year in office for Mayor Martin O'Malley possibly contributed to the pro-business sentiment, according to the study. In the last five years, Baltimore area firms have rarely expressed a positive view of the state's business climate.

"While certainly there are signs of a slowdown in the national economy, all the fundamental economic indicators in Maryland remain sound," said David S. Iannucci, secretary of the state Department of Business and Economic Development. "We are pleased to see that the work put into positioning Maryland as an outstanding place to do business is paying off. It's a combination of our work force, strong institutions of higher education and leading federal laboratories that have all allowed Maryland to become a technological and economic success."

The Maryland Business Climate Survey for the first quarter of 2001 attributed the positive perception to the fact that Maryland firms, "while lowering their own future expectations, feel that to this point they have been mostly sheltered from the effects of the economic slowing. Unless the slowdown worsens or persists it may have little impact on their future performance," the study said.

The percentage of firms reporting revenue growth for the first quarter held near constant from the fourth quarter of last year -- at 56 percent, according to the study.

"In '91 and '92, the core industries that were walloped nationally were defense, real estate and financial services," said Richard Clinch, a University of Baltimore economist who supervised the study. "Those industries were big in Maryland, too, so the state also took a hit.

"Today, manufacturing and high-tech businesses are getting hit hard across the country," Clinch said. "Maryland has a healthier mix now. We're going to do better whatever happens nationally now."

Clinch and Iannucci said the state's information technology businesses are focused more on government contracting and consulting, and not computer manufacturing, which has been hit hard nationwide.

Maryland is also no longer a huge manufacturing state, and the state's biotech industry is poised for substantial growth opportunities, they said.

The state, however, is not immune to the national slowdown. According to the study:

Since the first quarter of 2000, the percentage of businesses reporting employment growth has fallen from 40 percent to 36 percent.

The percentage of firms expecting employment increases fell from 61 percent in the fourth quarter of 2000 to 56 percent.

Thirty-eight percent of firms in the first quarter said that labor market conditions in the state hinder their ability to do business -- a slight decline that might be attributed to the cooling economy.

And while 65 percent of firms reported worker shortages -- down from 73 percent in the fourth quarter of last year -- the decrease might be a result of firms needing to hire fewer employees after the holidays and lowered expectations for future growth.

"You would not expect to have this level of worker shortages in an economic downturn," Clinch said. "The issue for us now is finding workers, not laying off workers. That's a good sign. If Alan Greenspan can engineer a quick turn around in the national economy, Maryland has tremendous potential for growth."

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