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Maryland added more jobs in 2018 than any year since 2000, but shutdown's uncertain economic impact looms

Maryland’s economy finished 2018 off strong, adding thousands of positions and lowering the unemployment rate, a new federal jobs report shows, but the progress likely will be overshadowed soon by the partial government shutdown.

“We finally got some really great jobs numbers, but what does the federal government do but shut down,” said Anirban Basu, chairman and CEO of the Sage Policy Group. “It’s almost as if the federal government couldn’t stand that Maryland and the Baltimore region were becoming so prosperous.”

Maryland added 4,900 jobs in December and about 50,900 in 2018, according to the latest report released Friday by the U.S. Labor Department’s Bureau of Labor Statistics. Though only a gain of 1.9 percent, that’s the state’s best yearly job growth showing since 2000, said R. Andrew Bauer, a Baltimore-based senior economist with the Federal Reserve Bank of Richmond, Va.

The job gain helped push Maryland’s unemployment rate down to 3.9 percent in December, down from 4 percent in November and 4.1 percent a year ago. The state’s unemployment now matches the U.S. rate, which rose from 3.7 percent from the month before.

Yet Maryland is one of the states most heavily dependent on the federal government, which employs up to 245,000 people directly, according to a state report from the Bureau of Revenue Estimates. About 90,000 of them are furloughed or working without pay since the shutdown began Dec. 22.

An estimated half of the state’s 164,000 federal contractors also are impacted by the shutdown and likely won’t be repaid, unlike direct federal employees.

Each week that the employees are not paid results in $778 million in lost wages and about $57.5 million in lost state and local income taxes and $2.1 million lost in sales tax to the state, according to the report.

Bauer said workers and contractors in the state are accustomed to the uncertainty that comes from doing business with the federal government. It’s baked into their behavior, with people often taking a more cautious approach.

He noted softer housing and auto sales in Maryland in the past year compared with big ticket purchases nationwide.

“But this is uncharted territory, and there is no clear end,” said Bauer about the shutdown that began Dec. 22. “It will impact consumers in terms of spending and businesses.”

He and Basu said that the state certainly will be affected by the shutdown even if it ends shortly, and that’s a shame given the progress in 2018.

Basu said the state’s economic performance was weak coming into last year, with Maryland ranked in the bottom third of states in terms of U.S. jobs growth and unemployment stubbornly above the national level. But then employment picked up and December was especially good.

For December, the biggest job gains were seen in professional and business services and education and health services, with both categories adding 1,900 jobs. Financial activities fell the most, by 1,200 jobs.

The shutdown could erase that growth, and, if it lasts another month, harm the state and nation’s ability to easily bounce back. Further, Basu said, there could be another damaging shutdown this year as Congress and President Trump face new debates over the debt ceiling and other budget matters.

The economists said the damage will begin to show next month. Though, Bauer said it’s not clear how the shutdown ultimately will be reflected in labor statistics.

Several thousand have filed claims already, but many others will not go through the process, he said.

As of Thursday, the state has received 3,630 claims for unemployment insurance from federal workers affected by the shutdown, according to the Department of Labor, Licensing and Regulation.

When furloughed federal workers get repaid, they will have to refund the unemployment benefits. They also might not be counted in the labor force if they report that they are not looking for work because they anticipate returning to their positions, Bauer said.

Businesses and government agencies directly affected will report fewer jobs, though, and eventually so will service and product suppliers and small businesses like restaurants that depend on those workers.

The state does anticipate some workers will have trouble paying bills. Comptroller Peter Franchot announced this week that his office will offer assistance on a case-by-case basis to federal workers with outstanding tax liabilities.

“The longer this government shutdown lasts, the more financial hardship it is causing federal workers, some of whom may never get repaid,” Franchot said in a statement. “My agency recognizes that Marylanders affected by this prolonged impasse face a greater burden to make ends meet and to fulfill their tax obligations. As always, we stand ready to help Marylanders facing these challenging times.”

Other state officials preferred to revel in the good jobs news of 2018.

"Maryland’s economy continues its excellent record of growth," said Acting Labor Secretary James E. Rzepkowski in a statement. "In this steady business environment, employers have the latitude to invest in and grow their workforce.”

meredith.cohn@baltsun.com

twitter.com/mercohn

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