The Maryland economy purred through the first quarter this year, continuing to be a beneficiary of a booming stock market, low interest rates and nearly nonexistent inflation.
Unemployment remained low as companies continued almost frantic searches for workers. Home sales soared. Hotel room tax revenues boomed as some consumers aimed disposable income at travel.
Bankruptcies continued rising to record levels, exposing a dark side to strong spending.
The state trailed the nation in job growth, placing 46th among the 50 states. The state's employment grew by 1 percent -- compared with the nation's 2.6 percent increase.
In an additional sign of a cool-off, the proportion of Maryland businesses expecting revenue increases this year fell from 74 percent in the fourth quarter to 67 percent in the first quarter, according to a first-quarter survey of 250 companies by the Maryland Business Research Partnership.
"Employers are reporting an end to the good times," said Richard Clinch, director of the partnership. "There are much diminished expectations. Hopefully, they're wrong. But we can certainly expect moderating growth."
For the most part, the first quarter marked the continuation of a long economic expansion. In March, 4.7 percent of Maryland's work force was unemployed, down from the 5.1 percent seasonally adjusted rate a year ago. And the rate dropped to 4.4 percent in April, the lowest in almost eight years. Nationally, the unemployment rate in March was 5 percent.
Nonfarm employment in the first-quarter rose to 2.257 million in March, up about 1 percent from 2.231 million a year earlier.
Among the other economic indicators suggesting a robust economy:
* Home sales statewide jumped 49 percent from the year-ago quarter, from 7,124 to 10,646. In Baltimore the leap was greater, from 2,995 to 5,169, or 73 percent.
* Used-car sales jumped 6 percent, from 121,213 to 128,108. New-car sales jumped 8 percent, from 64,258 to 69,450. The average new-car price in March was 4 percent higher than a year earlier, at $21,509. In the same period, the average used-car price rose about 5 percent, to $6,410.
* Retail sales taxes, a barometer of consumer spending on apparel, furniture and general merchandise, rose about 2 percent from the year-ago quarter, to $216.5 million.
* The number of business failures in the quarter fell 43 percent, from 403 in the first quarter of 1997 to 230 in the first quarter of this year.
But other signs cast a shadow. Baltimore-area manufacturing pay was flat, at a weekly average of about $618 in March. Maryland manufacturing pay rose 3 percent from the year-ago period, to $605. The average number of weekly manufacturing ** hours also remained flat in Baltimore, at 41.7. Statewide, manufacturing hours increased 2 percent to 42.1.
The picture for construction appeared mixed. Nonresidential contracts decreased 15 percent, to $414 million. Baltimore Gas and Electric Co. nonresidential electric meter installations fell 14 percent, to 668. Residential contracts increased 15 percent, to $621 million, with BGE installations increasing 2 percent, to 2,917. Construction sales tax revenue was $60 million, up 13 percent.
Maryland had 8,830 bankruptcies in the first quarter, continuing a rapid climb and setting another quarterly record.
Job growth, largely in business services, a sector that includes accounting, software engineering, temporary workers, security and other services, has driven the economy.
"We couldn't be busier," said Chuck Sudina, president of Sudina Search Inc., a Timonium company that specializes in recruiting workers for information systems, accounting, finance and health care. "There's just such a tremendous demand, and not only for the areas that we handle."
About 56 percent of the 250 companies in the Maryland Business Climate Survey reported worker shortages, slightly fewer than in the previous quarter. Skilled manufacturing trade jobs accounted for 30 percent of the positions companies had difficulty filling, followed by managerial sales positions, 23 percent, and computer programming, 17 percent.
Alex Doyle, president of Micro-Machining Inc., a Woodlawn machine shop, said he continues to struggle to find qualified machinists. He said the 30-worker company recently started a night shift to catch up on a backlog of orders. "We would have started it several months ago if we had found the right people," Doyle said.
Marvin Bond, a spokesman for the state comptroller's office, said some high-technology jobs are coming with bonuses. "You are now not only seeing performance bonuses," said Bond, who added that the bonuses are reflected in state income tax revenues.
Not every sector is prospering, said Charles McMillion, chief economist for MBG Information Services in Washington. Manufacturing is also generally weak, he said. "We're seeing local problems with Asia. Exports are beginning to suffer and imports are starting to heat up," he said.
Last week, Avesta Sheffield AB, a Swedish company that owns the former Eastern Stainless Co. in Essex, said it probably will close the plant, eliminating all but 15 of the 115 jobs. The culprits include high imports and problems in the Far East. "The issue here is simply oversupply and low prices," said Roy Cooke, president of Avesta Sheffield East, the U.S. subsidiary that operates the plant.
Despite an almost insatiable demand for workers, businesses on the whole appear to be holding the line on wages, McMillion said. In a signal of that tension, the Maryland Business Climate Survey found that the percentage of businesses reporting increases in revenue and employment decreased substantially in the first quarter.
Businesses reporting revenue increases fell from a peak of 66 percent in the fourth quarter of last year to 59 percent in the first quarter of this year.
The percentage of businesses that reported employment increases was the lowest in six quarters, falling from 39 percent in the fourth quarter to 32 percent in the first quarter.
Consumers appear to be feeling little insecurity. They kept spending at a healthy rate, driving total state sales tax collections up about 3.3 percent, from $518.9 million in the year-ago quarter to $536.4 million. "People don't have the same job worries they had two years ago when the government was closing down," Bond said.
Computers and travel
Many consumers are buying computer hardware and software, he said. They are also traveling: Hotel and motel room tax collections soared 17 percent, from $3.9 million in the year-ago quarter to about $4.6 million. The Renaissance Hotel capitalized on the slow time of year by cutting rates. "We had the best January and February in the hotel's history," said Michael Reich, the hotel's marketing director.
Consumer spending is being propelled, in part, by a strong stock market. "I based my bearish forecast for this year for Maryland and the country as a whole on the belief that the stock market would would remain at the level where it ended last year or decline," McMillion said.
Stock sales are boosting not only personal income, but also state income tax collections. "Capital gains have been a tremendous deal," Bond said. "But how much of that will flow into the rest of 1998 is anybody's guess."
Consumers continue to extend -- and in some cases overextend -- themselves as never before. "Last year, savings was at a 40-year low, and this year it's dropping below that," McMillion said. "If people have either a health problem or a car accident or they lose their job, they don't have the cushion they used to have."
Pub Date: 6/07/98