U.S. report shows huge job loss in Maryland

But economists dispute 1% drop, nation's largest

August 22, 2002|By William Patalon III | William Patalon III,SUN STAFF

While a new government report shows a stunning rise in the level of job losses in Maryland, economists are sharply divided over just how severe a downturn the state is facing, or whether a rebound may be within sight.

The report, by the federal Bureau of Labor Statistics, said Maryland lost 23,500 jobs from June to July, the nation's second-worst decline after Texas in that period. Maryland's 1 percent employment loss was the largest percentage decline in the country, according to the BLS report.

A number of economists say the state is finally succumbing to the downturn that has gripped the nation for the past year.

However, some experts - including several at the BLS - said the large number was likely due to statistical aberrations and will probably be revised in the next jobs report in September.

"I'm concerned, but I'm not alarmed" about the status of the state economy, said Pradeep Ganguly, chief economist and director of economic research for the Maryland Department of Business and Economic Development.

One of the most glaring problems with the BLS report is that 18,000 of the 23,500 lost jobs - or about three quarters of the total - were from the government sector.

Because the state is seeing strong federal job growth, and because employment at the state level is fairly stable, that would mean there had to be substantial job losses at the local government level - meaning huge layoffs in school districts across Maryland. And that's just not the case, economists say.

But even if the report misstated the level of job losses on a one-month basis, longer-term trends suggest the state has endured a substantial employment downturn, said Charles McMillion, a former Johns Hopkins faculty member who is now chief economist for MBG Information Services in Washington.

According to McMillion, the state has lost about 33,400 jobs over the 12 months that ended in July. With a statewide work force of about 2.5 million, that equates to an employment loss of about 1.35 percent, a steep decline, McMillion said.

"It's significantly worse than the national average," which is 1 percent for the same 12 months, he said. What concerns McMillion is that the job losses are pretty much across the board, touching nearly every industry.

Construction, manufacturing, utilities, transportation and retail/wholesale trades have all experienced slowdowns and employment reductions. Widespread losses signify an economy in decline, he said.

The government sector - with job growth of 1.2 percent over the past 12 months - is one of the few bright spots for the state, McMillion said.

Economist Scott Hoyt, who follows Maryland for Economy.com in West Chester, Pa., had little confidence in the gloomy BLS employment report. Even so, a recent Economy.com assessment concluded that only five states remain in a recession, with Maryland one of those listed.

"We have been saying that all but five states were no longer in recession. Clearly, Maryland is one of the five," said Hoyt, director of consumer economics for the business-research firm. "If anything, it looks like it's getting worse before it gets better. That's definitely a cause for concern."

But others see bright spots. Brendan Courtney, vice president of the Baltimore office of Spherion Professional Recruiting, said the demand for qualified workers in the finance, human resources and technology areas is on the upswing, suggesting that firms are hiring in these areas.

"July and June have been good months for us," Courtney said. "Historically, July is always slow ... from our perspective, the strength of the employment market within the professional sector is better now than it was for most of this year. Even technology, which has been slow, is also better."

Typically, companies hold off on hiring during lean times, preferring to make do with fewer workers instead of making permanent additions to their payrolls. Hiring suggests these companies are confident about the near-term future.

Maryland businesses expecting to make hires increased during the second quarter, according to the most recent state business climate survey conducted by the Maryland Business Research Partnership at the University of Baltimore.

The percentage of companies forecasting revenue growth in the coming year held steady at 69 percent, but the percentage of firms expecting to hire workers climbed from 46 percent in the first quarter to 49 percent in the second quarter, the survey found.

"I think the economic environment in Maryland remains steady," said Richard Clinch, director of economic research at the university's Jacob France Center and an expert on the region who also disputes this week's BLS report.

"The industries Maryland specializes in are not really hard-hit by the national downturn ... and once the nation returns to growth, Maryland will see a return to the kind of strong growth we've had over the past four years."

Paul Engle, a technology and manufacturing expert with the Baltimore office of Grant Thornton LLP, said he's seen strong hiring by federal defense contractors.

The out-of-work people he's dealt with have been able to find new jobs fairly quickly, he says.

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