Maryland's already-modest economic recovery will be even slower for the rest of this year and early 1996, but it will not stall out completely despite high interest rates and accelerating federal budget cuts, a team of University of Baltimore economists predicts.
Employment growth, which regional economists use as their chief measure of the state's economic health, will fall off to 0.37 percent in the next three months, just over half as fast as that estimated for the quarter that ends today, the forecast says.
It will not get back to 1994's average quarterly level of just over 0.50 percent any time through the first quarter of next year, the UB team predicts in a new issue of the school's Regional Economic Quarterly, due out next week.
"The forecast is based on an assumption that interest rates will be stable -- that the Federal Reserve will not raise rates any further but that it also will not be enlightened enough to reduce rates, which we believe is much needed," said Michael A. Conte, director of the university's Regional Economic Studies Program, which publishes the quarterly.
Over the 12 months ending next March, Maryland's economy will grow 1.65 percent, well below 1994's 2.05 percent -- which itself was far slower than the U.S. economy and well behind the usual pace of a post-recession recovery -- the Quarterly's forecast says.
"The seven interest rate hikes engineered by the Federal Reserve over the past 15 months have hurt Maryland's residential construction and mortgage banking sectors," the report says. "Consolidation within the state's banking sector is also costing the state several hundred jobs, and federal government downsizing is taking its toll."
Helping the state to stay barely on a growth track will be continued strength in commercial construction, business services, health services, retail trade, and trucking and warehousing, the team's forecast says.
In the lead will be the service sector, contributing growth of 3.7 percent over the four quarters ending next March, with most of that growth concentrated in temporary help services, health services and business services.
"Temporary help services have flourished in Maryland in an environment dominated by outsourcing and downsizing," the report says, and health services continue to add workers at nursing homes and health maintenance organizations even as hospitals struggle to pare their staffs.
The construction business will add jobs far more slowly in the next few months than in the past year, but it will continue to show overall growth despite a flat housing construction market, the article predicts. "Commercial construction continues to be boosted by a number of public and institutional projects, including Baltimore's convention center and Columbus Center," the study says, while "increased construction of warehouses and the recovery of the state's larger office markets also bode well," for commercial construction.