Md. economy ended '94 strongly

THE BALTIMORE SUN

A solid finishing kick in the fourth quarter made 1994 by far the best year since the recession for Maryland's economy, more than offsetting even the agonizingly slow start the state got when last winter's ice storms bogged down both commerce and industry.

Factory workers' paychecks finally got back to normal growth late last year, after struggling for most of the year to recover from the battering they took in last winter's bitter weather.

They helped fuel holiday spending that filled not only retailers' cash registers but also the state treasury, as sales taxes soared by nearly 10 percent to a new one-month record in January, when revenues from December shopping were counted.

"It was quite a good fourth quarter for Maryland. Unemployment was down, retail was strong and transportation was very strong," said Michael A. Conte, director of regional economic studies for the University of Baltimore.

"The final word on 1994 is that, gradual though it was, it was the best year Maryland has had since the defense and commercial construction boom of the late 1980s," said Charles W. McMillion, president of MBG Information Services, a Washington consultancy that tracks the state's economy.

But by year's end, the state was still tens of thousands of jobs short of pre-recession levels.

And key indexes were flashing warnings that Maryland's economic growth may be even slower this year than in 1994 -- a year in which the state already seriously lagged the nation.

"In spite of all the good news in the fourth quarter of 1994, our Maryland index of leading indicators flattened out during that time, so our outlook is for continued but slower growth in the first half of 1995," Mr. Conte said.

"The Federal Reserve's increases in interest rates have dampened some of the components of the index, especially the construction indicators and in some respects the sales and retail indicators," said Bruce Grindy, who compiles the University of Baltimore index.

Even in mid-February, the state's 1995 prospects remain very hard to forecast, because it is still impossible to guess how deeply the new Republican-controlled Congress will cut into budgets of federal agencies that employ tens of thousands of Marylanders here and in the District of Columbia suburbs, Mr. McMillion said.

Federal spending cutbacks could hurt the Baltimore area and Montgomery County, and the fiscal crisis in the District of Columbia government could hurt Prince George's County, he said.

"But the new emphasis on rebuilding the defense budget could offset some of that damage," he added, "if the money goes into Star Wars and NASA, which use equipment made by Maryland factories, rather than to improve military salaries, living conditions and training."

4th quarter figures

Whatever the future may hold, by most measures the fourth quarter of 1994 was quite strong:

* Unemployment stood far below the national average, at 4.7 percent by year's end.

* Help-wanted advertising was up about 20 percent for both the quarter and the year.

* The transportation sector turned in an impressive year. The port of Baltimore reported tonnage up by 20 percent for the year and 15 percent for the fourth quarter, and Baltimore-Washington International Airport's passenger traffic increased 35 percent for the year and 20 percent for the quarter.

* Exceptional fall weather boosted stops at Maryland visitor centers by more than 30 percent for the year and for the quarter.

* Retail business advanced solidly, with consumer sales tax collections up 9 percent for the quarter and 6 percent for the year.

* New-car sales were up by double digits for both the quarter and the year.

The chief exceptions were housing sales and housing construction, both of which suffered from steeply rising interest rates and were down drastically for the quarter and off somewhat for the full year.

"Housing construction and housing sales were key drivers of Maryland's recovery, and interest rates will probably keep those from contributing much for most of 1995," Mr. McMillion said.

But other parts of the construction industry got some help in 1994 as new contracts for commercial construction projects began to recover from a long slump.

After years of suffering from the overbuilding of the late 1980s, commercial construction contracts bottomed out last spring and leapt by 49 percent in the last quarter and 30 percent for the year, compared with the extremely low year-earlier levels of 1993.

The gathering recovery in commercial construction was reflected rising sales tax collections on construction-related goods and equipment.

'Competition for workers'

Paychecks in the state's long-declining manufacturing sector began to stabilize during the summer and were growing again by year's end.

"We gave our workers their first raise in two years this January, about 6 percent," said James Crystal, president and chief executive officer of L-U-I Corp., which makes office and health-care furniture. Workers at his East Lombard Street factory make between $7.50 and $9.50 an hour, he said.

"We had to make a move because of the competition for workers by other comparable employers, who have begun to move their pay levels up some," Mr. Crystal said.

At SCM Chemicals, 458 hourly employees who now average about $15.60 an hour making Titanium-dioxide pigment for white paint and paper will get pay raises averaging nearly $1 an hour under a three-year contract negotiated with the Steelworkers' union last fall.

"Our hourly pay is a function of collective bargaining, but we also have to compete for the quality employees we need, and to do that we have to pay competitive rates," said company spokesman Louis Kistner.

Maryland's average weekly factory paycheck, which had nose-dived by more than 8 percent amid the ice storms of February 1994 and did not regain its December 1993 level of $550 until August, set records in three of the year's last four months and ended the year at $569.50.

That was an increase of 3.59 percent over 12 months. It meant that factory workers fell just short of keeping up with inflation, which was 3.6 percent for the year in the Baltimore metropolitan area.

"After you seasonally adjust and adjust for inflation, weekly manufacturing pay in Maryland actually declined in all but three of the first eleven months of 1994," the University of Baltimore's Mr. Conte said.

Paychecks that barely keep up with inflation, or fail to, have become part of life not only for Marylanders but for millions of workers across the country since the late-1980s boom years faded.

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