Maryland's unemployment rate ticked upward in May as employers shed 1,300 jobs, the U.S. Department of Labor said Friday.
Most states added jobs that month. Maryland was one of 14 that lost ground, its job reductions split about equally between the private and public sectors.
The state's unemployment rate, which dropped from 5.6 percent to 5.5 percent in April, rose back to 5.6 percent in May, the Labor Department said.
It's been an up-and-down year for Maryland's job base, starting off with losses in January and accelerating gains through April. That month, according to newly revised estimates, employers added 10,600 jobs — a big number for the state.
Andrew Davis, a Moody's Analytics economist, said the overall trend averages out to modest growth. Federal budget problems are holding back Maryland's economy, he said.
"The state is really underperforming compared to the U.S.," he said. "Once the government issues get out of the way, then Maryland will catch up with the U.S. and perform more or less in lock step."
Last year, with "sequester" budget cuts hitting and the government partially shutting down for part of October, Maryland's job growth lagged behind the nationwide average. Gross domestic product contracted in D.C., stagnated in Maryland and grew only a tiny bit in Virginia as federal spending decisions rippled through the economy.
"It's been a drag," said Scott Anderson, chief economist at Bank of the West, based in San Francisco. "Should be less of a drag this year — we think the worst of the sequester spending cuts have played out and we're seeing stabilization in state and local government budgets, so that should offset some lingering weakness in federal payrolls. But it just adds to the economic malaise."
For Maryland, the hit is less about job cuts in federal agencies than the ripple effect in the state's large base of contractors providing goods and services to Uncle Sam.
In May, federal government employment fell by 800 jobs, while the contractor-heavy professional services sector shed 5,500 jobs, according to the Labor Department estimates.
The agency's figures are adjusted to account for the normal ebb and flow of hiring by season, a way to allow month-by-month comparisons. As a result, the losses last month aren't true job cuts — they're a reflection of less hiring than Maryland normally sees in May.
The number of jobs employers actually added were at the weak levels of May 2008 and 2009, during the recession, the Labor Department estimated.
Kevin McIntyre, an associate professor of economics at McDaniel College in Westminster, said the share of Maryland's economy fueled by federal spending on goods and services is about four times larger than the national average.
But he thinks lack of clarity about the Affordable Care Act's impact, the way the government will deal with deficits and other federal question marks are also weighing on business owners — here and nationally.
"Uncertainty about public policy, particularly federal policy, I view as the biggest drag on the economy right now," he said.
Given time, Moody's Analytics thinks, the state will see growth pick up. Davis said the company forecasts "substantially" stronger job gains in Maryland toward the end of the year.
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Right now, the Baltimore metro area is the state's strongest performer, he said. If not for the 10,000-plus jobs the area gained in the first five months of the year, Maryland would have been in the red on job growth.
The region — the city and nearby counties — is helped by cybersecurity, Davis noted. It's a federal priority that has fueled some of the continuing growth in and around Fort Meade.
"Baltimore is kind of carrying Maryland," Davis said.
Statewide in May, the biggest gains came among education and health services employers, which added 3,000 jobs, and the leisure and hospitality sector, up 2,800 jobs.
The biggest loss, outside of professional services, hit the retail-heavy trade, transportation and utilities sector, according to the Labor Department estimates. Employers there shed 2,400 jobs.