Baltimore economy stands out amid lackluster state growth

Baltimore fares better than state with federal contracting

The Baltimore region has been less affected by federal spending cuts than other parts of the state, helping to make it a bright spot in an otherwise lackluster Maryland economy, a federal economist said Thursday.

Employment in the Baltimore region grew about 1.8 percent between September 2013 and September 2014, comparable to the 1.9 percent rate in the U.S. overall. In Maryland overall, jobs have grown at a rate of about 0.6 percent.

R. Andrew Bauer, a Baltimore-based senior economist with the Federal Reserve Bank of Richmond, Va., predicted that Baltimore will continue to outperform Maryland next year while the state experiences a "year of catch-up."

"It's not going to be an exciting time, but a steady time," he said at the Hilton Baltimore, where the Greater Baltimore Committee hosted its economic outlook conference. "My version of optimistic is perhaps a revision of what optimistic is. … Growth is going to be more moderate."

Maryland's job growth started to slow in 2011, when Congress passed the Budget Control Act imposing spending caps and setting the stage for future automatic spending cuts, Bauer said. Those sequester cuts went into effect in 2013, placing another damper on growth.

Federal contract spending — which represented 8 percent of the state's GDP in 2010 — stayed largely flat between 2010 and 2012, before declining 15 percent in the next two years.

"That's sizable amount of loss of revenue for the state economy," Bauer said. "You can trace out the impacts of the cuts through the labor markets."

In the Baltimore region, by contrast, federal contract spending rose nearly 30 percent between 2010 and 2012. Despite declining 12 percent between 2012 and 2014, spending levels remain higher than they were four years earlier, he said.

Baltimore's ties to the federal government come from agencies such as health and human services, which were less affected by the cuts, Bauer said. In Baltimore, employment in categories such as construction, leisure and hospitality, and professional and business — a grab bag category that includes the tech sector — also are showing strength, he said.

In Howard and Anne Arundel counties, development officials said cyber-related industries are driving growth, while Harford County has seen demand for industrial properties used by companies as distribution hubs.

Helga T. Weschke, deputy director of Baltimore County Department of Economic and Workforce Development, said officials there are seeing an uptick in manufacturing activity, as well as renewed interest in development projects.

Weschke said she is confident the county will retain spice maker McCormick & Co., which wants to consolidate headquarters operations that are spread across several buildings in Hunt Valley. The company is expected to solicit proposals for development sites next month, she said.

"They want to be in Hunt Valley. That's where all their manufacturing is," she said.

The city has several sites that could suit McCormick, including a couple near the Inner Harbor, where the firm was once located.

A luxury apartment tower is now planned for part of McCormick's former parcel, but Baltimore Development Corp. President William H. Cole IV said the city would "save space for [McCormick's] headquarters if they need it."

"It's time for them to come home," he said.

Cole pointed to Under Armour's success, a multitude of apartment conversion projects and construction at Harbor Point as among the signs that Baltimore is headed in the right direction.

The plan to build the Red Line also creates "opportunities … beyond description," he said.

"We have the opportunity to really transform the east and west side using rail and using transit-oriented development opportunities," he said. "That's going to be our focus over the next couple years."

nsherman@baltsun.com

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