Maryland's economy hangs on, which looks just fine

December 03, 2008|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

In case you weren't clued in by 10 consecutive months of job losses or the recent disclosure that economic output declined last summer, the National Bureau of Economic Research announced Monday that the country has been in recession for a year.

Calling a Maryland recession isn't so easy. This state is in relatively good shape and has avoided the economy-wide slumps in other regions. But car dealers, real estate agents and tax collectors can tell you that this feels like a bad recession to them. And they might prove to be prophetic.

Maryland will be a better place to work or run a business than most places next year, but it will have a hard time dodging the employment declines and other broad reversals afflicting the nation as a whole.

"We are a little bit insulated but not 100 percent immune to a national economic downturn," says Daraius Irani, director of applied economics at RESI, Towson University's consulting wing.

"We're probably going to see some negative numbers. It's going to get worse before it gets better. I don't think anybody has seen a bottom yet."

While the nation has shed more than a million jobs this year - a loss of nearly 1 percent - Maryland employment has grown slightly, with 11,000 more jobs in October than at the beginning of the year. (That's an increase of about 0.4 percent.)

Contrast that with Florida, which has lost 160,000 jobs this year, or 2 percent. Even states that haven't been hammered by housing meltdowns, such as Pennsylvania and North Carolina, are losing employment.

As usual, the medical industry and the huge enterprise called the U.S. government are helping to keep Maryland afloat.

Thanks to an aging, sicker population, big construction projects and delivering care to out-of-staters, medical institutions have contributed well over half of Maryland's job growth this year, even though they make up a much smaller portion of the overall economy.

Federal spending probably accounts for the rest. The government isn't increasing Maryland spending by tens of billions of dollars the way it did after the 2001 terrorist attacks and the Iraq invasion.

But homeland security and war dollars, bumped by base realignment that is adding to Maryland's defense jobs, continue to pour in.

Government contracting and health care are bright spots for the Baltimore office of Robert Half International, which helps companies fill positions for accountants and financial managers.

But hiring has been "relatively steady" across the board, says Jim Meade, the branch's director of permanent placement.

"We have definitely seen employers get a little more hesitant to hire, a little more cautious," he says. "But they're definitely hiring."

Business even picked up this year for Maryland Chemical Co., which makes and distributes chemicals to a wide variety of Maryland companies.

"Things became really good for us at the very beginning of the second quarter, and they've been that way ever since," said Fred Glose Jr., the company's vice president. The company expects revenue to shrink next year, but only because prices are falling.

But to be sure, Maryland Chemical is an exception. Many businesses are having a miserable 2008. Few expect a decent 2009.

"We've probably been in a recession since a year ago," Tom Saquella, head of the Maryland Retailers Association, says of his members. "The last strong retail sales we had here in Maryland were November 2007."

After housing, retail is the defining weak point of this downturn. This is the first consumer recession since 1991. Nowhere is the underperforming Maryland consumer better illustrated than in the state's disappointing sales-tax collections. Automobile sales, which depend on credit that has become increasingly scarce, have been especially hard hit.

Towson's Irani foresees an eventual defense slowdown whether or not U.S. forces withdraw from Iraq.

"Obviously there's a trade-off between bailing out financial institutions and building more B2 bombers," he says.

Even so, "I think we will still outperform the nation" next year, he says. "Compared to our historical standard, we've slowed down considerably. Compared to the rest of the nation, we're ahead."

Maryland has probably avoided a 2008 recession, an impressive achievement. That won't be so easy to repeat next year. A year or two ago, we wouldn't have been satisfied to merely stand in place. Now that prospect looks pretty good.

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