Maryland shed 7,500 jobs in May, as the state posted one of the largest losses in the country for the second month in a row, the U.S. Department of Labor said Friday.
Only North Carolina and Pennsylvania saw bigger cuts in May, according to the new estimates. Quirks of weather may have played a role in Maryland's poor showing, but experts warned that the state's economy appears to be weakening just as a potentially large pullback in federal spending threatens to bring more pain to a region flush with government contractors, agencies and research grants.
"This is unnerving, I have to tell you, because we know the decline in federal government outlays has just begun," said Anirban Basu, a Baltimore economist. "The economic outlook, I think, is pretty grim."
Maryland's unemployment rate rose to 6.8 percent, from 6.7 percent in April. The increase came even as the pool of residents working or looking for work shrank, another bad sign.
State officials emphasized the positives: The jobless rate remained below the nationwide rate of 8.2 percent in May, and Maryland had nearly 36,000 more jobs than it did a year earlier.
"One or two months of lower job numbers does not make a trend, but it does remind us that we need to keep working," said Scott Jensen, the state's interim labor secretary.
May was actually the third straight month that the federal estimates suggested declines in Maryland, coming at a time of sharply slowing growth for the country as a whole. Maryland lost 600 jobs in March and 5,400 jobs in April, according to new revisions — the second-largest drop nationwide.
The numbers are adjusted to try to account for seasonal patterns in hiring and layoffs. As a result, they show up as losses if cuts are larger than normal for the time of year — or if growth is less robust than typical. For May, it's the latter.
The raw numbers show Maryland employers adding 10,000 jobs in May, well below normal for what is generally a big hiring month. Those gains are the smallest for any May since 1976.
A complicating factor is that the unusually mild winter seems to have shifted hiring earlier in the year for work in sectors such as construction and hospitality. That likely gave an artificial boost to job numbers in January and February at the expense of spring months, economists say.
James Bohnaker, an associate economist at Moody's Analytics, said the ripple effects probably bled into May. He expects less volatility in the summer. But he sees real weakness in the Maryland economy, not simply statistical noise.
"It's starting to show in the jobs numbers that businesses are really worried about what's going to happen politically at the end of the year and going into 2013," he said.
The big question is whether Congress will avert the automatic spending cuts scheduled to hit in January — $109 billion, with half in defense. Because Maryland gets a disproportionate share of federal contracting dollars and other spending, it's likely to feel a harder hit from any reductions.
Defense giant Northrop Grumman Corp., for instance, is one of Maryland's largest private employers.
"Obviously, we're taking the situation very seriously," said Randy Belote, a spokesman for the company.
He said it's too early to speak to the potential for layoffs. It's not even clear yet which defense programs would be hit, he said. But the company, anticipating tougher budgets, has been pulling back for a while now.
Employment has fallen 11 percent in the past four years companywide, Belote said. Buyouts and layoffs have eliminated jobs, including at its Linthicum-based electronic systems sector.
The certainty of federal cuts to come — if not how much and where — makes it more urgent that Maryland focus on strengthening its private sector, said Basu, head of Sage Policy Group, an economic and policy consulting firm in Baltimore. He said voting to increase taxes, as the General Assembly did this year, doesn't help the state's reputation.
"Federal dollars are not going to drive this economy forward anymore," Basu said. "It's got to be private dollars."
One employer in the midst of widespread layoffs, RG Steel LLC, continues a push to idle its Sparrows Point mill. The company filed for bankruptcy protection in May and has until late July to find purchasers for its properties.
Joe Rosel, president of United Steelworkers Local 9477, which represents most of the Sparrows Point workers, said at least 200 more people will be added to the layoff rolls next week because the hot mill is shutting down.
On the upside: "There's tours of interested buyers coming through," he said.