Slow-motion turnaround Maryland will need time to recover from lost defense, manufacturing jobs


When Wall Street economists confidently predict that the nation's economy will grow quickly next year, and when they tout the rise in Americans' income, they inevitably overlook people like John Krieger.

The Annapolis engineer lost his $75,000-a-year job last spring at Digital Equipment Corp., where he had worked for eight years in computer operations and marketing. Just a few years ago, he could afford a $12,000 sailboat; these days, he's collecting $223 weekly unemployment insurance checks.

"The streets are full of people with my experience," said Mr. Krieger, 46. If he hadn't sold his boat shortly before the layoff, he and his family would "be eating it now."

The national economy may indeed grow next year, but Mr. Krieger and thousands of other Marylanders like him are evidence that this state is different. For all its growth in the 1980s and its potential in the future, Maryland's economy has still not righted itself after the 1990 recession. And if current forecasts are any indication, the state may continue its slow-motion turnaround for at least another year.

"It's been a naggingly poor economic performance for Maryland, and all signs [indicate] that it will continue to be so until the end of '94," said Larry Walker, a regional economist at DRI/McGraw-Hill Inc.

In explaining Maryland's malaise, local economists point to a 15-year contraction in manufacturing. Although the state gained manufacturing jobs in the mid-1970s, the 1980 recession marked a turning point. Since 1979, Maryland has lost 64,000 jobs in manufacturing, to end last year with 183,000 jobs.

"Technology means that hiring in manufacturing is down. So states like Maryland that had a lot of heavy industry and manufacturing are suffering the worst," said Paul Bishop, a regional economist at the WEFA Group in Bala Cynwyd, Pa.

Mr. Krieger thought he saw that trend coming in 1985 when he quit his job at Bethlehem Steel Corp.'s main offices in Bethlehem, Pa. A manager in the company's computer department, he left because he was tired of laying people off.

But the move to Digital's Washington office proved to be a mistake. As defense cuts and government reductions caused the federal government to reduce its purchases from Digital, he was let go.

Mr. Krieger's personal misfortune parallels a similar trend in Maryland's economy. As the smokestacks that once typified Baltimore disappeared, the state thought it had found a new future in defense contracting.

But the Reagan-era defense buildup didn't last. Budget deficits forced defense cuts, and the fall of the Berlin Wall in 1989 and the disintegration of the Soviet Union in 1991 ended the rationale for a growing military. Defense budgets are likely to be trimmed for two to three more years, says Mr. Walker of the WEFA Group.

That change has been reinforced in Maryland by a series of recently announced layoffs, including 481 workers who will lose their jobs at Martin Marietta Corp.'s Glen Burnie plant. Other big cuts came at the Linthicum-based Westinghouse Electronic Systems Group complex, which has shed 7,000 jobs over the past two years.

As consolidation of the defense industry continues, more layoffs are expected. Chang Min Kong, an associate professor at Towson State University, says Maryland's manufacturing sector won't pick up before mid-1994. Strong growth probably won't occur until 1995.

Wall Street investors offer further evidence of this trend. Despite the investment community's upbeat assessment of the national economy, a Sun index of nine leading Maryland industrial companies shows that their combined stock value fell 7.8 percent over the past three months. Analysts say investors expect many of the companies to be hit further by the defense industry's restructuring and are waiting for the dust to settle.

Such pessimism was the last thing on Jane Anderson's mind three years ago. As Maryland's economy hit a high-water mark, she was enjoying the ride.

The 40-year-old physicist worked as a technical writer on an aerospace research project at Johns Hopkins Applied Physics Lab in Columbia. And she was confident of her future, able to plunk down $11,000 in cash for a new car.

Today, she's a regular at the jobless club that meets weekly in the basement of St. John's Lutheran Church in Columbia.

"I'm in a state of paralysis. I'm just so scared," she said last week, after listening to the club's guest speaker explain tax laws concerning the unemployed. She added, "My lifestyle has drastically changed . . . and the savings I was putting away for retirement are getting drained fast."

Phil, a 49-year-old Carroll County engineer who attends club meetings, also is finding it hard to adjust. Hired by Westinghouse when he graduated from college 25 years ago, he lost his job security and $60,000 salary last March when the company cut 460 defense-related jobs.

"I've lost track of the number of resumes I've sent out. Mostly I never hear back from any of the firms I've contacted," he says, noting that his resume is being recast by a professional writer to strip out the military flavor and to focus instead on management expertise.

"I've pretty much written off any type of job related to defense or the military in Maryland. It's dead."

Although defense and manufacturing are the two most stubborn long-term problems affecting Maryland, the state also is trying to work off an office-space glut that has killed construction jobs.

According to statistics gathered by F.W. Dodge/McGraw-Hill, up 24 percent of Baltimore's office space is empty, compared with an average of 21 percent in other major U.S. cities. Other surveys put the local vacancy rate lower, but all sides agree that it will take at least a year before developers start signing deals and hiring contractors.

And even in banking and utilities -- industries in favor on Wall Street -- Maryland is being hurt. NationsBank's recent takeover of the parent of Maryland National Bank will eliminate hundreds of banking jobs in Maryland. Meanwhile, a cost-cutting campaign at Baltimore Gas and Electric Co. could trigger the first layoffs in company history.

Despite this gloom, economists say Maryland has many fundamentals -- and time -- on its side.

The state's investment in biotechnology and health care seems to be paying off, despite recent concern that medical-related companies would suffer under a reformed health care system. A Sun index of local biotechnology stocks shows that Wall Street investors have begun reinvesting in these stocks, anticipating that the industry will survive any politically induced shocks.

Economists also note the local economy's relative affluence. Although Marylanders have not seen their income grow as quickly recently as residents of other states, Maryland remains the fifth-wealthiest state in the country. Much of this is due to the trickle-down benefit of living so close to a huge job generator -- the federal government.

With the national economy on the mend and Maryland's problems in sharper focus, the state economy is likely to grow next year, although slowly.

"I believe that the state will gain jobs this year," University of

Maryland professor Mahlon Straszheim said, citing confidential statistics that he has seen as economic adviser to the state government. "Next year growth will be modest but after the past few years, even 1 percent growth will look good."

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