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Economic jitters surface

THE BALTIMORE SUN

Howard County has homes with sticker-shock prices, wage earners with big incomes and one of Maryland's highest percentages of residents with advanced degrees. But this high-end crowd also has a case of the jitters.

Although they are far from having to give up their relatively high quality of life in one of the nation's richest counties, Howard residents are evidencing worries about job security. And those worries could dampen one of Maryland's most robust economies.

"There's a general uneasiness out there about the economy," said Richard Story, executive director for the Howard County Economic Development Authority, which works to attract and retain businesses.

The uneasiness is reflected in county buying trends. County residents aren't spending money on big-ticket items like the new dream homes that can be custom-ordered in upscale River Hill, Columbia's newest community. But they are going off to The Mall in Columbia and area "category-killer stores" to snap up new clothes, furniture and trinkets at a healthy clip.

The reason for the unease, said Charles McMillion, a consultant, may be found 20 miles south in the nation's capital.

"If the Republicans have their way with cutting back the federal government, it is Democrats who will lose their jobs. And Democrats live in Columbia," said Mr. McMillion, who tracks the Maryland economy for MBG Information Services, a Washington, economic consultant.

Almost 40,000 Howard County residents commute to Washington each day for work. Most of those jobs are dependent on federal spending, labor experts say.

"What is developing in Washington is definitely cause for concern," Mr. Story said. He and other area economic development experts have been batting around the potential effects of the GOP plan on area economies but have not arrived at a consensus on what to do if the federal budget cuts are severe.

If the Republicans' proposal to eliminate up to three federal agencies and scale back others doesn't pan out, the county's economy could be in for a burst of economic activity by the end of the year or early 1996, Mr. Story and others predict.

Commercial construction would lead the way, since the county's once-glutted office market is experiencing a decline in vacancy rates. Countywide, the vacancy rate is down to about 9 percent, Mr. Story said. In some areas, such as Ellicott City, it is as low as 5 percent.

As vacancy rates drop further, banks will be more willing to finance commercial projects. That would fuel the county's economy as contractors hired more workers, Mr. Story said.

Already, there are signs of rebirth in the commercial sector. Last week, a Baltimore developer proposed construction of a speculative office building in one of Columbia's office parks, and a new office building was just completed off Broken Land Parkway in Columbia.

Guy Caiazzo, an Ellicott City-based real estate investment expert who sits on the Howard County Economic Indicators Committee, a group of business and government executives, is cautiously optimistic.

"I wouldn't characterize what we'll see as a miniboom," he said. "The banks are going to be pretty conservative this time around."

Interest rates important

Mr. McMillion, the consultant, believes the strength of the county's economy in the next six to 12 months will heavily depend on two factors: stable or declining interest rates and the creation of high-paying service jobs in such fields as medicine, law and consulting. Such jobs are needed to replace wages -- and taxes -- lost to the shrinking of payrolls at defense companies, he said.

Overall, the county's economy is growing at a "modest pace," says Mr. Story, and some data suggest it is among the state's soundest.

For example, Howard County's 3.1 percent unemployment rate in March was down from 3.5 percent during the same month in 1994, the lowest in the Baltimore metropolitan area and far lower than Baltimore's 7.7 percent.

"When you are looking at a 3 percent unemployment rate, what you are really seeing is full employment," said Mr. Story. Mr. McMillion agreed, saying, "Howard County's economy is really among those in the best shape in the [Baltimore] area."

Other trends bolster that conclusion:

* First-time claims for state jobless benefits in the county dropped to 1,932 during the first quarter of 1995 from 2,408 during the same period in 1994, a 20 percent decline, which the the state Department of Employment and Economic Development considers significant.

* New residential gas and electric hookups, a measure of activity some economic experts use as a economic health gauge, are up. There were 842 such hookups in the county during the first three months of the year, up from 535 during the same quarter last year, according to Baltimore Gas and Electric Co.

* Job growth continues in the county. Howard gained about 4,500 jobs between the third quarter of 1993 and the third quarter of 1994, according to county economic development statistics. That is about the same job growth as the year before that period.

But within that overall positive outlook, there are notable problems.

For example, there have been dramatic increases in Howard in the number of residents receiving food stamps and Aid to Families with Dependent Children (AFDC) financial assistance.

According to the latest available data, the number receiving food stamps rose to 4,540 in February from 1,700 in March 1994. The number of families with children receiving AFDC shot up to 2,913

in February from 844 in March 1994.

'Hidden unemployment'

State and county social service administrators cannot explain those increases or square it with the decline in claims for jobless benefits, other than to say that there appears to be more "hidden unemployment" in Howard County than job figures suggest.

On the employment front, there is also concern that the strongest job growth in Howard County has been in the retail and warehouse-industrial sectors. Such jobs traditionally pay low wages.

"New jobs at the checkout counter at a new Kmart. . . . Does that really qualify as job growth?" asked the Rev. Robert Wallace, pastor at St. John's Evangelical Lutheran Church in Columbia, ,, which runs a job club for the unemployed.

He said many of the people who have been attending the church's job club during the past year are professionals who have been laid off from well-paying jobs and can't find comparable work. "Some are finding they'll have to take pay cuts of a one-third or more," said Mr. Wallace.

Earnings drop

Joe Brown can vouch for that. The Ellicott City resident lost his $50,000-a-year job as a plant manager in 1992 when the Baltimore steel manufacturer he worked for went broke. After searching in vain for two years for a job in manufacturing, he decided to give up that dream.

Today, the 50-year-old father of two who holds a master of business administration degree, runs his own business, Rapid Sign Center in Ellicott City. His earnings have dropped to one-fifth of what he made at the steel plant, and he doesn't expect them to climb to that of his steel days for at least another three years.

"Most of the people I knew in the job club who have taken new jobs are earning a third what they made before they were laid off. For well-paid professionals, the job market is rough. These companies can hire younger people at far lower wages," said Mr. Brown.

Well-paid Howard County professionals who hold top degrees and who work in defense-related industries could find themselves walking the same path Mr. Brown did, say labor experts. More cutbacks in those industries are forecast.

Two examples of defense-related job losses that will ripple through the county's economy:

* The Johns Hopkins Applied Physics Laboratory near Laurel plans to lay off at least 200 employees and has already cut back on 100 outside contractors. Those cutbacks account for about 10 percent of APL's total labor force.

* Martin Marietta Corp., which has a plant in nearby Baltimore County, is expected to trim staff as a result of its merger with Lockheed Corp. The number of layoffs will be announced June 30.

Fearful for NASA

Given those losses, Mr. Story, the economic development director, shudders at the thought that the GOP budget ax might fall hard on the National Aeronautics and Space Administration.

The space agency's Goddard Space Flight Center in Greenbelt is an important source of work for some Howard County employers. For example, AlliedSignal Technical Services Corp., one of NASA's largest contractors in Maryland, has more than 700 employees at its Columbia headquarters.

Rumblings about such cutbacks are stirring unease in the county's housing market, which is sour.

Between January and April, the most recent month for which figures are available, home sales fell more than 25 percent compared with the same period last year. And the average selling price has flattened out during the past year, hovering around $194,000.

Mr. Caiazzo said, "It may not be that people think they'll get the pink slip, but they hear these things and it creates a psychology. They are worried about the future and making big commitments."

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