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Maryland's economy trailing the nation's

Maryland's economy is muddling along, barely adding jobs and facing dull prospects for at least the rest of the year, the latest economic indicators show.

In many other parts of the nation, lower interest rates, healthy business investment and rising exports are helping to create jobs at a modest pace. The gross domestic product in the United States is expected to grow by roughly 2 percent this year, down from 4.1 percent last year but speeding up from a 0.5 percent annual growth rate in the second quarter.

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Not here. Maryland matched the country's weak pace in the April-June quarter, adding jobs at a 0.6 percent annual rate, according to the U.S. Department of Labor. But its chances of recovering between now and December seem lower than those of the nation, economists said.

"I'm a little dismayed by what's happening," said Michael Conte, director of the Regional Economic Studies Program at the University of Baltimore. "It's a little worse than I thought. At this point, I'd have to say the state of Maryland's economy is doing about as well as the Orioles."

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To be sure, Maryland is not in recession and doesn't show signs of stumbling into it. Many businesses are doing well -- home renovators, computer sellers, car dealers, warehouse builders, freight shippers. Banks in Maryland are floating more loans, although some people worry that defaults may rise, too.

Mr. Conte thinks signs of life in the comatose office-construction trade could help improve the economy next year, a surmise that is reinforced by talks with area business people.

"Some of the industries dealing with the early stages of %o commercial development are doing very well," said William Bavis, a partner with Clifton, Gunderson & Co., a Towson accounting firm with a wide range of business clients.

The percolating deals include apartments, office projects and warehouses, Mr. Bavis said. "What takes place with the real estate market is so important for our clients, so that is encouraging," he added.

Another hook for hope is that the Labor Department's preliminary job-growth numbers, which give the best picture available of Maryland's business climate so far this year, in the past have often suggested that the economy is more sluggish than it really was. The reason: employer surveys that yield the figures often miss new businesses.

When the government later makes rigorous job counts using unemployment-insurance lists, true employment growth sometimes has been a full percentage point above the original estimate, Mr. Conte said.

Even so, current job-growth estimates for Maryland are far less than those of many other states, implying that, whatever the actual figures, Maryland trails the nation. And the fact remains that Maryland's economy is struggling upstream against strong currents: falling federal spending, halfhearted consumers, banking and health-care layoffs, permanent factory shutdowns and fewer orders in the factories that remain.

Maryland had an average of 2.17 million jobs in the April-June quarter. That's still less than the state's prerecession peak of 2.19 million jobs, reached in September 1990.

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Last year, Maryland added 42,100 jobs -- a modest 2.0 percent increase but the fastest expansion since 1989, when the state gained 52,900 jobs. But the evidence assembled so far this year suggests that, in Maryland's current business cycle, 1994's growth may be as good as it gets.

The number of jobs in the state actually declined a bit in the first three months of this year compared with 1994's fourth quarter -- after seasonal oscillations were ironed out of the reports. Employment in the first half of 1995 grew at an annual rate of just 0.3 percent from the end of 1994, with seasonal adjustments.

The WEFA Group, a Pennsylvania analysis firm, casts states' economic fortunes with an index made of manufacturing data, jobless claims, housing permits and retail sales. The index, which predicts trends in coming months, declined sharply in the three months that ended in May and ranked Maryland 48th out of 50 states.

L Delaware was last. Pennsylvania was 43rd. Virginia was 35th.

"For Maryland, we've seen probably close to six months of decline in the leading index," said Paul Bishop, senior economist for WEFA. "That should throw up a red flag that perhaps there is a turning point in the state's economy."

The mixed prospects for Maryland and other mid-Atlantic states can be seen at National Gypsum Co.'s wallboard factory in Baltimore. The plant ships south as far as Virginia, west to Pittsburgh, north to New York.

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In recent years, the factory has run hard, seven days a week, as lower interest rates ignited the housing industry. But the second quarter "was slower than anticipated," said Joseph Ciampaglio, the company's regional manufacturing manager.

Even so, he said, wallboard sales for home renovation have been very strong, and office construction shows signs of reviving. Demand for wallboard seems robust enough that National Gypsum just cranked up the price by 10 percent.

Neil Shpritz, executive director of the BWI Business Partnership, a group of employers near BWI Airport, said forces are gathering that could generate new office buildings. Rents are firming, he said. Vacancies are down.

Still, he added, "It's probably premature to say it's coming yet. People are starting to talk about it."

Office construction would be a welcome novelty to builders. For one thing, it could help make up for a wavering new-home trade.

Construction action, with its intense local employment and local material purchases, is especially potent fuel for overall business activity. But the value of residential construction permits in the state has declined by 8.4 percent this year through June, adjusting for seasonal variations, according to the University of Baltimore. Lower housing demand shows up in sales results for existing homes, too.

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"It appears that the average prices for home sales this year have declined from a year ago," said Robert Sweet, chief economist at First National Bank of Maryland. "There's also a longer time involved in selling them."

Mr. Sweet, who calls Maryland's economy "mixed," believes that lower interest rates eventually will boost homebuilding results. But he's worried that consolidation among hospitals and related facilities is hurting health-care employment, long a wellspring of Maryland jobs.

Mr. Sweet is concerned about prospects for federal employment, too. As Congress discusses big budget cuts, Maryland lies directly under the cleaver. But, he said, "I really don't think anything major is going to come out of Washington between now and next year to affect Maryland."

Worker salaries, however, aren't the only federal beam undergirding Maryland's economy. Even more important is federal procurement -- contracting and purchasing by the government that supports private-sector jobs, said Charles McMillion, president of MBG Information Services, a business analysis and forecasting firm in Washington.

Federal jobs in Maryland have already been dwindling for three years, Mr. McMillion said. Federal procurement has been falling for even longer and continues to be "scaled back very significantly," he said.

Of four economists interviewed by The Sun, Mr. McMillion was the most pessimistic about Maryland's prospects.

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"The state's economy is in real trouble," he said. "The cutbacks that appear to be going forward in the Congress are having really a profound effect on the Maryland economy. Job growth has virtually stopped, and clearly the real impact has not been felt yet."

The prospect of economic cooling appears to have hurt consumer spending. Sellers of luxury goods -- jewelers, high-end car dealers -- report that they are doing well. So are electronics merchants and furniture purveyors. But overall, sales are uninspired.

Total retail sales tax collections in Maryland rose by 4.7 percent in the second quarter compared with the same period last year -- not much over the 3 percent inflation rate.

"The clients that we deal with in the retail sector are either flat or declining, in comparing to last year, which was not a great year," said Mr. Bavis of Clifton, Gunderson.

Factories aren't helping Maryland's economy very much, either. State plants ran at an average of 40.9 hours a week in the second quarter, the slowest pace for that period since 1992.

Perhaps Edwin F. Hale Sr. has as accurate a feel as anybody for Maryland's unclear outlook.

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His trucking company, Hale Intermodal Transport Co., moves everything from computers and VCRs to rags and paper for Baltimore-area companies. It helped boost container shipments through Maryland marine terminals by 6.3 percent in the first half, compared with the same period last year.

"If you look at trucking orders as a barometer of the economy, I would say things are perking up a little bit," he said. "I think we're in a little better shape."

But Mr. Hale also runs a small bank. And at that bank, First Mariner Bancorp, "the demand for commercial loans . . . is off," he said. "Things are definitely slower than they were last year."


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