State's job loss persists in July

Effects of slump across nation hit Maryland economy

August 19, 2006|By JAMIE SMITH HOPKINS | JAMIE SMITH HOPKINS,SUN REPORTER

Maryland employers cut jobs for the second month in a row, according to federal numbers released yesterday, a sobering trend that comes on the heels of slowing growth.

Jobs in Maryland fell by 1,000 last month, after a 1,100-job drop in June, the Labor Department said. Unemployment worsened as a result, rising to 4.3 percent from 4 percent -- still better than the nation overall, but not as much better as it used to be.

Nationally, the jobless rate was 4.8 percent last month.

The numbers, which are preliminary, are adjusted for seasonal variations to allow for monthly comparisons. That means they can end up statistically skewed, economists warn.

But even unadjusted numbers show that growth in the state clearly began decelerating this spring. Employers added about 35,000 jobs in the past 12 months, compared with about 44,000 jobs in the 12 months that ended in March.

Helped along by generous federal spending here, Maryland outperformed the nation during and after the 2001 recession. No more. Local economists believe recent weak economic performance nationally -- from gross domestic product to job creation -- is rippling through the state.

Several economists say a sharp drop in home sales in Maryland after an unprecedented housing boom is also impinging on growth. If fewer people are buying homes, there's less immediate need for a wide range of other products and services, from appliances to carpet installation to painters and architects. And a downturn in new homes means fewer construction jobs.

"A slowing economy is becoming a reality in Maryland," said Anirban Basu, an economist who is chairman and chief executive of Sage Policy Group Inc. in Baltimore. "Maryland's economy is reflecting the national economic slowdown that took place during the second quarter and will likely continue into the third."

Basu -- who added that he still senses optimism from Maryland businesses -- doubts the state has slipped into a recession.

But some economists fear the nation is at risk in coming months. Problems are piling up: high energy prices, consumer debt and moderating housing values. The last is a concern to economists because Americans have been tapping home equity and using that cash for other spending. As that source of funds dries up and consumers continue to be pinched by $3-a-gallon gasoline, they have less money to spend elsewhere.

Charles W. McMillion, president and chief economist of MBG Information Services in Washington, said he's reluctantly predicting a 60 percent chance of a U.S. recession in the next nine months.

"The economy is very definitely slowing down," he said. "There's a lot of bad news."

Economic growth in the U.S. slowed markedly in the three months that ended in June, according to the latest government numbers. The annual rate of expansion was 2.5 percent, compared with an annual rate of 5.6 percent in the first three months of the year. Consumer spending slowed; federal spending dropped.

That's having an effect locally. Trade, transportation and utilities -- the sector that includes retailers -- shed 2,200 jobs in Maryland during the past year, the Labor Department said. Construction -- which includes homebuilding -- showed a tepid gain of 900 jobs.

Job losses were most pronounced among government agencies. The Labor Department counted 4,700 fewer government jobs last month in Maryland than it did in July 2005. But it's unclear how much of the loss is permanent. The employment level always drops in the summer when schools are closed, and efforts to adjust for that seasonal change are hampered by annual differences in when classes let out, said Ken Shipp, an economist at the U.S. Bureau of Labor Statistics.

The traditionally strong sectors of professional and business services -- attorneys, architects and the like -- and education and health services continued to expand, though the results were mixed.

The category of professional and business services, which added 10,000 jobs during the past 12 months, isn't growing as quickly as it had been in 2005. The housing slowdown could be to blame, McMillion said. But education and health services, which added 13,000 jobs over the same period, is showing better growth than it did last year.

John Hopkins, associate director for applied economics at RESI, Towson University's research and consulting arm, believes job prospects in Maryland will improve if the national economy does. He was surprised to see the recent losses because "everything seems to be going well" -- and because the state, the Baltimore region in particular, is poised for big gains from the national military base consolidation. Booz Allen Hamilton Inc. recently opened an office near Aberdeen Proving Ground as the front line of that movement here.

But the expected 45,000 or more jobs -- government, contractor and associated spin-off -- probably won't begin arriving in earnest for at least two years, Basu said.

"If people are right that we're in for a soft landing [nationally], then Maryland's economy should hold up," Basu said. "And then we'll all wait for base realignment and closure to take effect."

jamie.smith.hopkins@baltsun.com

Maryland jobs, by industry

In July, compared with a year earlier

Manufacturing: down

Trade, transportation and utilities: down

Government: down

Construction: up slightly

Professional and business services: up

Education and health services: up

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