As recovery continues, Maryland households fall behind

October 11, 2014|By Natalie Sherman | The Baltimore Sun

More than five years into the economic recovery, many Maryland households still aren't feeling the lift.

Overall personal income — including wages, investment income and payments from programs such as Social Security — grew an estimated 1 percent in the second quarter of 2014 in Maryland, compared to 2.5 percent in the United States as a whole.

That showing — the fifth worst of all the states — followed four years of statewide incomes lagging behind the rest of the country, driven by a lack of growth in job-related income, according to an analysis the state's Department of Planning published last week.

"Everything is going up except for your paycheck," said Edward David Washington, 68, of Owings Mills.

What economists initially dubbed a jobless recovery has evolved into what some call a "wageless recovery" nationwide. Middle-class jobs remain scarce, more people work part time and labor participation is at a historic low.

The Federal Reserve's triennial Survey of Consumer Finances found that median household fell 8 percent between 2007 and 2013, with the highest drops among the youngest and least-educated.

Maryland — despite being a relatively wealthy, well-educated state — is no exception.

Average household income in the state was $96,032 last year, down about 3 percent since 2007 when adjusted for inflation. Median household income, which is less affected by extremely high or low earners, dropped more than 5 percent in real terms during the same period, to $72,483 last year.

While income from dividends, interest and rent increased in 13 of the past 14 quarters in Maryland, net earnings from "place of residence" — essentially job-based compensation — fell in five of those 14 quarters, including all four quarters last year.

They have grown less than one-half of a percent in each of the first two quarters this year.

Washington, who has worked as a floor technician at Johns Hopkins Hospital for 14 years, did see his paycheck rise this year, but it was after a hard-fought union battle that left many dissatisfied with the university's concessions.

"We did get a raise, but to me it wasn't adequate," he said. "Employees don't have negotiating power."

Wages won't rise until job creation improves, and job growth has been particularly sluggish in Maryland, said R. Andrew Bauer, a Baltimore-based economist for the Federal Reserve Bank of Richmond.

The state added a paltry 600 jobs in August, while the unemployment rate inched up to 6.4 percent. That's higher than the 6.1 percent national unemployment rate and well above the state's 4.7 percent average between 1990 and 2006.

"Some of our key sectors, which are normally really strong … are fairly weak right now," Bauer said. "Given that you've got weak job growth, aggregate income growth is going to be weaker as well. There's just no way of getting around it."

Maryland weathered the recession better than many states, in part thanks to public sector jobs that were relatively shielded from significant job losses.

But that reliance has made the state particularly exposed during the recovery, because government cutbacks and budget-conscious policies have kept public hiring and government pay in check, said Andrew Davis, an economist for Moody's Analytics.

"That's the main contributor to the state kind of falling behind the rest of the U.S. and the Mid-Atlantic region," he said.

An analysis by Towson University's Regional Economic Studies Institute found that nearly 85 percent of the jobs Maryland lost in the recession occurred in midwage industries — of which public jobs represent a large share — but just 46 percent of the jobs created since came from midwage sectors. About 33 percent of new jobs came from lower-paying industries.

That means even workers who can find jobs are likely earning less than they did before, contributing to muted growth in overall income, said Daraius Irani, chief economist for the Towson institute.

"We've been concerned because we're now well into the fifth year of our recovery and it still doesn't quite feel like we've recovered," Irani said. "We've narrowed it down to the fact that the quality of jobs being created isn't as good as prerecession and then … even those that get jobs are working part-time. ... Those factors are really kind of making the recovery feel less like a recovery."

Esther Paige, 26, of Baltimore lost her public-sector job to layoffs in 2011 and survived on temporary work until getting a full-time job in the food-retail industry about four months ago. Paige said she was excited, even though she will be earning about $29,000 a year, roughly $9,000 less than she did before.

"It's better than not having anything coming in," she said.

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