Don't expect the Maryland economy to provide a stock market-type roller-coaster ride.
While the Dow Jones industrial average soars and plunges by hundreds of points, the state's economy continues its steady -- though flattening -- climb.
With a solid second quarter behind it, the Maryland economy will cool for the rest of the year but not suffer a severe downturn from foreign currency crises in Asia and Russia, economists said.
"I think we'll probably end up slowing down a little bit just like the national economy," said Patrick Bradley, senior vice president of Mercantile-Safe Deposit & Trust Co.
"But I don't think the state of Maryland has tremendous exposure to those parts of the world that are experiencing
economic difficulty. And Maryland's economy, like the nation's, has a good head of steam."
Home sales in the second quarter rose, with those in the metropolitan area 59 percent higher than last year's second quarter.
The labor shortage appeared to continue, with a slight increase in jobs, record-high help wanted advertising and unemployment below 5 percent.
Consumer spending pulled back a bit, with sales-tax collections for purchases of apparel, furniture and general merchandise falling 8 percent from the comparable period a year earlier.
Economists generally expect slower growth in the second half of the year than in the first, but they do not anticipate the kind of recession that some associate with a bear market.
"The day after the 500-point drop, business was very brisk," said Robert Russel, president of R&H; Motor Cars LLC, whose five dealerships sell Mercedes, BMW, Toyota, Subaru, Mazda and Volkswagen cars.
Sales of cars -- big ticket purchases that reflect confidence in the economy -- were strong in the second quarter, with 94,885 new cars were sold in Maryland, 2.96 percent more than in the comparable period last year.
"Most of the dealers I've spoken to have weathered the GM strike pretty well," said Peter Kitzmiller, the president of the the Maryland New Car and Truck Dealers Association. "And just about everybody I've spoken to says sales are pretty strong."
Among key indicators of Maryland's economy during the second quarter:
Sales of existing homes shot up 26 percent statewide, to 15,883 from 12,565 a year earlier. The increase in the Baltimore area home sales was 59 percent, to 8,264 from 5,206.
Contracts for new home construction fell 7 percent, to $684 million from $737 million. Nonresidential construction contracts rose 34 percent, to $620.6 million from $462.5 million.
L Bankruptcies jumped 15 percent, to 9,197 filings from 8,025.
Employment rose 1 percent, to 2.286 million from 2.257 million a year earlier, according to the Bureau of Labor Statistics. Baltimore employment fell 2.2 percent, to 291,000 in June 1998, from 297,700 a year earlier.
Unemployment stood at 4.8 percent in June, down from 5.6 percent a year earlier. The jobless rate in the Baltimore area was 5.6 percent, down from 5.7 percent. Help-wanted ads surpassed 1.6 million lines in the second quarter, up 10 percent from the year-earlier period.
Sales tax collections rose 4 percent, to $531.4 million from $513.2 million a year earlier. Sales taxes received on construction goods rose about 10 percent, to $67.1 million from $60.9 million, but those received on furniture and general merchandise fell to $169.7 million, an 8 percent drop from $184.8 million in the comparable period last year.
Traffic through Baltimore-Washington International Airport increased 6 percent, to almost 4 million passengers from about 3.8 million in the comparable period a year earlier. Hotel and motel room tax collections rose 19 percent, to almost $7.5 million from $6.3 million a year earlier.
"The first half of 1998 has been good for the state," said Mike Funk, an economist with the Regional Economic Studies Institute at Towson University.
"We've had employment growth in excess of 2 percent on an annualized rate. We saw consumers go on a spending spree. We've had the best two back-to-back headquarters we've seen in the residential real estate market.
"And there are no signs of inflation at all," Funk said, adding that a cut in interest rates is now far more likely than an increase.
"I'm expecting the Federal Reserve Board to hold the line."
Compared with the nation as a whole, Maryland's economy appears to be growing more slowly. Mark Zandi, an economist with Regional Financial Associates outside Philadelphia, puts job growth in Maryland at between 1 percent and 1.5 percent, about a full point below the national rate. He said income growth is about 5.5 percent, compared with 6 percent nationwide.
Consumers have been spending much of their money on homes. "Since January of 1998, the market has been gangbusters," said Gil Marsiglia, president of the Greater Baltimore Board of Realtors.
"Are we going to keep up the momentum? My feeling is we'll start to see it slow up a little bit."
He said the world economic conditions could affect the market.
A stock market dive could hurt the $400,000-plus end of the market. On the other hand, he said, an interest rate cut could boost the market. In any event, he said, the lower end of the market should stay reasonably strong.
Driving the growth of the Maryland economy is business services, a huge category that includes computer programming, temporary services, copying and printing.
Neal Fischer, president of Towson-based PPS Information Systems Staffing, an information technology recruiting firm, said the stock market has not affected the job market.
"We're still looking for workers," Fischer said. "I. T. has been hot and heavy. There's no change. And, from what I understand, it's going to continue at the same rate."
He said companies are looking for Web developers, Year 2000 specialists and network engineers. "They're offering signing bonuses between $1,000 and $5,000."
The state, which contends that job figures from the federal Bureau of Labor Statistics shortchange Maryland, sees a healthy employment picture.
Marvin Bond, a spokesman for the state comptroller's office, said employer withholding -- a barometer of compensation and hours -- is rising by about 8 percent. "That says to us that underlying things are pretty good," Bond said.
Workers and businesses are spending their money largely on computers and the Internet. "Computers are leading the charge," he said. "What we're seeing is a heightened response to the Year 2000 problem."
The state's coffers have also benefited from the strong stock market. Tax revenue from capital gains "has been going through the roof," Bond said.
The volatility of the stock market and a slowing economy have the state revising some of its revenue expectations for the second half of the year. "We see moderation in sales tax growth and a scale back in capital gains revenue," Bond said.
Economists such as Bradley said the state's third quarter may be stronger than its second quarter. But, because of a very strong first quarter, he said, the second half will look worse than the first half of the year. "But it's certainly not a recessionary environment or one that will see unemployment go up," he said.
The economy's health depends on the willingness of banks to lend, builders to build and consumers to spend, he said. "Right now, we have both willingness and ability," he said. "The employment picture is strong I don't envision that we'll continue to decelerate."
Funk, the RESI economist, said the hit to stocks that largely resulted from the Asian currency crises is a classic case of overreaction. "The Asia crisis is going on for two years," he said. "It's not a new phenomenon."
Perhaps the greatest threat of volatile markets to the state's economy is the prospect that investors will feel less wealthy and spend less of their money.
"The prospects for a recession are still low, but at the same time as high as they've been since 1995," Zandi said. "I would put the prospects at one in four for next year."
Pub Date: 9/13/98