Maryland gained about 22,000 jobs in 2012, the smallest annual increase since the recession, underscoring the challenges facing the state in a year dominated by the federal budget and the collapse of a major employer.
U.S. Department of Labor estimates released Friday show a volatile year in which the state move back and forth between job expansion and loss, ending with a gain in December. The preliminary figures suggest that the major culprit was government, which shed 8,500 jobs — the first time in nearly a decade that the usually reliable sector turned in an annual loss.
The private sector, in contrast, added nearly 31,000 jobs — the best annual performance since 2004. That came despite the loss of the Sparrows Point steel mill's 2,000 jobs after its owner declared bankruptcy in May.
James Bohnaker, an associate economist with Moody's Analytics, thinks employment in Maryland held up better than it might have, especially considering that the entire year was overshadowed by debate over the "fiscal cliff" of looming spending cuts and tax increases.
"Certainly could have been a lot worse," he said.
He's not just talking about the effect on government jobs. Washington has an outsized ripple effect on Maryland because many employers here do business with federal agencies or benefit indirectly from federal spending.
Congress, struggling to compromise on a method for cutting the budget deficit, agreed a year and a half ago that sharp reductions in defense and domestic spending would begin this month if it could not come up with another plan.
Since then, the lack of clarity about what would happen has bedeviled agencies and businesses alike. Much is still unclear, because the last-minute deal to avoid the cliff merely pushed off decisions about spending cuts for two months.
But Gus Faucher, a PNC Financial Services Group senior economist who follows Maryland, thinks uncertainty over future federal cuts wasn't the main factor holding the state back last year. He noted that Maryland employers added 4,900 jobs in the month of December, when fiscal-cliff mania was at its peak. Most sectors expanded that month, according to the Labor Department's preliminary numbers.
Instead, Faucher thinks actual government budget-tightening was more significant. Employment fell at all levels — federal, state and local — in Maryland last year.
The loss of Sparrows Point also was a blow, given not only its sizable employment but the way it intertwined with other businesses in and beyond Baltimore County, from suppliers to restaurants. The worst point of the year for Maryland was April, May and June — immediately before, during and after owner RG Steel filed for bankruptcy protection.
"Those were the kind of well-paying manufacturing jobs that provide good impacts, so the effect on consumer spending is kind of magnified," Faucher said.
Unemployment in Maryland ended the year at 6.6 percent, the same as it was a year earlier, but still significantly better than the nation's 7.8 percent rate.
That's because the state doesn't have as much ground to make up from the recession — it lost less of its job base than the country as a whole, which economists attribute to federal spending. But the federal government isn't positioned to give Maryland's employment a continuing lift. The state's pace of employment growth lagged behind the nation's in the past two years, and Faucher thinks it probably will this year, too.
"The state's unlikely to return to its previous pre-recession employment peak until 2014," he said.
A single sector produced the lion's share of Maryland's job growth last year, according to the Labor Department's preliminary estimates. Professional and business services, which includes such fields as computer engineering and scientific research, added about 21,000 jobs between December 2011 and December 2012.
The education and health services sector produced a gain of about 9,000 jobs during the same period. And the long-suffering construction industry, pummeled by the housing bust and recession, added 4,400 jobs, the largest gain since 2005.
The sector pulling back the most, besides government, was manufacturing, which lost 3,600 jobs. Sparrows Point accounts for a large portion, but not all, of that.
This Baltimore Sun analysis of the Labor Department's year-over-year data uses figures not adjusted for seasonal variations, since they compare employment at the same point of 2012 and 2011. Month-over-month job figures are adjusted to try to account for normal seasonal patterns in hiring and layoffs.
Some local companies had a banner 2012, never mind the headwinds. 7Delta Inc., a Columbia-based IT services provider, tripled its revenue last year and went from 80 to 175 employees. The federal contractor landed more work and is assiduously trying to continue the trend.
"We have the right team in place to just grow at a rapid pace," said Gianni LaRosa, the company's marketing specialist.
And though the financial activities sector shed 2,400 jobs in Maryland last year, Northwestern Mutual was — and still is — hiring. The Milwaukee-based insurance and financial planning company brought on 30 new full-time financial representatives in Maryland last year and expects to hire 44 more this year.
Some of that is to deal with turnover. Though the jobs come with health and retirement benefits, they're commission-based, so earnings vary. But Northwestern Mutual's hiring also reflects business growth and the expectation of more.
"Maryland is one of the wealthiest per-capita states," said Scott Iodice, managing partner for Northwestern Mutual Maryland. "There's a lot of people within an hour's drive that are in need of financial advice. So there's a huge market opportunity here."
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