The economy is on the rebound, if only in comparison with darker times, economist Anirban Basu told a room of local business leaders Thursday at his annual economic forecast lecture at the Columbia Sheraton, sponsored by the Howard County Chamber of Commerce.
“Things are getting better out there,” Basu, chairman and CEO of the Baltimore-based Sage Policy Group, said. “I think what you are seeing now is the emergence of the best economic outlook in several years for the country.”
But, he added, “that doesn’t say that much… it has not been a particularly great moment in U.S. economic history.”
On a global scale, the economy grew 2.9 percent this year and is projected to grow by 3.6 percent in 2014, according to statistics from the International Monetary Fund.
Domestically, economic growth is a bit slower, with 2.2 percent growth this year and 1.6 percent growth predicted for next year, which is consistent with the approximately 2 percent annual growth the U.S. economy has seen since emerging from recession in June 2009.
Pre-recession and post-recession, Basu said, “the driver [of gross domestic product] is still the consumer.”
The lecture was framed by Chamber of Commerce survey results, announced before Basu took the podium, that found that 43 percent of Chamber members thought the economy would get better in 2014, down from 80 percent two years ago.
And the number of Chamber members who said they would consider leaving the state to do business elsewhere rose seven points over last year, from 39 percent to 46 percent.
But although public outlook seemed glum, Basu said consumers were still spending money, particularly on “durable” purchases, like houses and cars.
Basu looked not only to growth projections, but to job statistics, housing rates and migration data to take a reading on the economic temperature of Howard County and surrounding areas.
Compared with most of the rest of the state, Howard County is a good place to be: unemployment remains low, the housing market is up and people from around the state are flocking to join in.
At 5.2 percent, the county’s unemployment rate is the second lowest in the state, trailing only Montgomery County, at 5 percent.
But Basu qualified the number, calling the unemployment rate “high” by Howard County’s standards, compared with a rate that had historically hovered around 3 percent.
“Have we made that much progress? No, we have not. We’re nowhere near getting back to where we had been,” he said.
At a state level, the Baltimore metropolitan region was responsible for adding about 20,000 of the 22,000 jobs created overall in the state in 2013.
But Basu said national trends show that while employment numbers are looking better on paper, the quality of the jobs created is “inadequate.” Between December 2007 and October 2013, the country gained about 2.5 million part-time jobs but lost about 5.3 million full-time ones.
Housing sales in the area, on the other hand, are much better than they were. While metro accessibility has been touted as a big draw for prospective homebuyers, Basu said the data show that more Marylanders have been moving to suburban and rural counties like Howard, Harford and Anne Arundel.
“People aren’t looking for density; they’re actually looking for more sparsely populated suburbs,” he said.
But they might want to buy sooner rather than later: As a result of Howard County’s popularity, median home sales prices are headed higher.
Despite some concern about the government’s national security operations at Fort Meade in Anne Arundel County, Basu said he thought a nation that was looking to downsize its military would do well to strengthen its intelligence and cyber-defense operations.
“My guess is that’s one of the areas they can’t cut,” he said.
But he reiterated the observation, made often during this fall’s government shutdown, that Maryland, and Howard County, are highlight dependent on federal jobs. He said the state should encourage developing private-sector jobs – a “cyber cluster” – around Fort Meade.
And the greatest growth, Basu said, has been driven by harvesting of natural resources. Mineral and oil-rich nations like South Sudan and Libya top the list of fastest-growing economies worldwide, and at home, states like Texas, Utah, Alaska and the Dakotas have experienced the most prosperity.
With a large cache of untapped natural gas in the Marcellus Shale, Basu said Maryland’s natural resources were underutilized.
Due to environmental concerns about the natural-gas extraction process, called fracking, the state has put the practice on hold while researchers compile a study of risks and best practices.
Basu recommended allowing western Marylanders to forge ahead if that’s what they wanted: “Why not let them decide locally what they want to do?”
Basu also weighed in on other hot topics for the upcoming General Assembly session, which begins Jan. 8, 2014.
Discussing the port of Baltimore, he said a state-mandated storm water fee had the potential to disproportionately impact industrial facilities, which have high areas of impervious surface.
And he cautioned that raising the minimum wage, which Howard lawmakers told the Chamber of Commerce in November would likely happen this session, could lead to businesses laying off the low-paid workers the initiative intends to help, if done too quickly, though he noted that anger about the nation’s growing disparities in income was palpable: “You can see this general push across the country [to raise the minimum wage]… This is the ultimate trickle-down economy.”
Though the event was nonpartisan, Basu couldn’t escape a question about who he thought would be elected governor in 2014. He called current Lt. Gov. Anthony Brown, a Democrat who is heading a ticket with Howard County Executive Ken Ulman, the “clear favorite,” but said that a bid by Congressman Dutch Ruppersberger, whose district includes parts of Howard and influential Baltimore County and Baltimore City, could be a game-changer.
With an election year right around the corner, he reminded the audience, “tax policy and budgetary policy have an impact on the economy.”