Gloomy 2015 forecast for Maryland economy, but there is beer

Daraius Irani is chief economist of Towson University's Regional Economic Studies Institute.
Daraius Irani is chief economist of Towson University's Regional Economic Studies Institute. (Baltimore Sun)

The state's economy is poised for a slowdown, a Towson University economist said Monday, pointing to weakness in the labor market that could continue for the next two years.

"The opportunity to cry in one's beer is going to be present," said Daraius Irani, chief economist of Towson University's Regional Economic Studies Institute, which hosted its annual economic outlook conference Monday. "The economy is struggling."


Irani wasn't joking about the beer. One bright spot highlighted at the conference is the state's craft beer brewing industry, which was on hand to offer attendees a taste. For the past few years, new breweries have been opening and old ones expanding across the state.

But beer is but a drop in the state's economy, which did not grow last year.


When the recession started in late 2007, there were 2.61 million jobs in the state – about where the numbers stood in September — according to the Bureau of Labor Statistics.

Most of the positions created since the recession are in low-paying fields, while the share of part-time jobs remains several percentage points higher than historic averages.

Irani said he expects 2014 to close with the number of jobs up by half a percentage point and predicted similarly stagnant activity over the next two years.

"All the pieces are in place for a slowdown in economic growth both at the national level and in Maryland," he said. "I'm sorry I had to deliver such bad news on such a dreary day."

Traditionally the state has relied on the public sector to fuel the economy, but belt-tightening by the federal government makes that a dubious proposition, Irani said.

Instead the state has to find ways to improve the business climate, Irani said, an echo of the message delivered by voters earlier this month, when they elected real estate developer Larry Hogan, a Republican who ran a campaign based on the need to improve the state's economy.

Among the ideas being discussed is a proposal to change the tax code so that earnings from businesses organized as "pass-through entities," such as limited liability companies, are not taxed as personal income.

"It is time to focus in … on helping to grow our business climate," Irani said. "While it's true that we cannot cut our way to growth, it is also true cannot tax our way to growth."

Craft beer makers said their industry is a case study in the way regulation can shape business growth.

Changes to federal law in the late 1970s, which legalized home brewing and offered a relief from federal excise taxes levied on large brewers, helped spur an explosion in small beer makers, said Lester Jones, chief economist of the National Beer Wholesalers Association.

Nationwide, the number of brewers grew from 47 in 1977 to more than 3,000 in 2013, he said.

In Maryland, there were 84 brewers and beer wholesale firms in 2012, providing direct employment to 320 people, according to the Beer Institute. That number is likely closer to 500 today, said J.T. Smith, executive director of the Brewers Association of Maryland.


Even with that growth, the number of craft brewers per capita remains low compared with other states, presenting an opportunity, said Maureen O'Prey, the author of the beer industry history book "Brewing in Baltimore."

The success of craft beer — which is typically more expensive than brands such as Coors or Budweiser — also reflects the lopsided nature of the economic recovery, Jones said.

"The high end is doing extremely well. The low end is not doing as well," he said. "The lesson here is that the beer industry, like any industry, is sensitive to the recession."

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