Strong job growth continued to buoy spending during Maryland's second quarter, making the cash register ring and allowing home and car sales to set records.

Higher interest rates and somewhat satiated consumers could tap the brakes on higher-dollar purchases during the current quarter and the fourth quarter to come. But fear not: Local economists expect the markets of Baltimore and Maryland to keep motoring, partly because a tremendous appetite for new workers is driving up wages and making more money available to spend.

"This is the type of strength one expects to see in the initial phase of an economic recovery," said Anirban Basu, director of applied economics for RESI, the research and consulting arm of Towson University. "A recovery is supposed to lose momentum over time. This recovery is not behaving like that. Indeed, every year is stronger than the last. And 1999 will be another year stronger than the one just completed."

Numbers bear this out. In the second quarter, on average, just over 2.5 million people were working in Maryland, second only to the last year's fourth quarter as the highest total for any quarter in this decade, according to figures from the U.S. Bureau of Labor Statistics. And the fourth quarter typically gets a nice boost because stores hire extra people for the Christmas shopping rush.

The state economy grew at a 2.2 percent annual clip during the second quarter, down from a blistering 6.6 percent in the first quarter, but still better than the 1.8 percent annualized gain in the nation's economy, according to research by First Union Corp. economist Mark Vitner.

Over the past year, Maryland's economy expanded at a 4.2 percent pace, compared with 3.9 percent for the U.S. economy, Vitner said.

While experts say the state and local economies are on cruise control for the near-term, there are roadblocks that could exact a toll. Among them: Higher interest rates that are slowing home sales, as well as the same tight labor market that's stuffing cash in workers' pockets. About 66 percent of companies polled by a University of Baltimore research group said they had trouble finding qualified workers during the second quarter, an increase from 61 percent in the first quarter.

Labor shortages restrict corporate and economic growth.

And rising wages raise a company's costs, which eventually are passed to consumers as higher prices.

Statewide, the unemployment rate touched 3.4 percent in April -- the lowest point this decade -- and was 3.6 percent in June, the final month of the second quarter. That's the inverse of the June a decade ago -- when unemployment was 6.3 percent.

The Baltimore area's unemployment rate dipped to 3.9 percent in April, and closed the quarter at 4 percent. April tied December for the lowest unemployment rate Baltimore has seen this decade.

The employment and unemployment numbers -- the only ones available -- are not seasonally adjusted, meaning they have not been "smoothed out" to reflect seasonal changes in the structure of the economy. Regardless, these figures are fine for use in comparisons, economists say.

Besides, anecdotal evidence demonstrates that this has been the best market for job-seekers this decade, if not in memory.

Just ask Brendan Courtney, area director in the Baltimore office of Interim Services, a placement firm that's a unit of the Fort Lauderdale-based Interim Financial Solutions. As the economy continues to surge, and companies see profits there for the picking if only they can grow, the thirst for workers has transformed the normally civilized job market into the Shootout at the O.K. Corral.

"We see companies getting into bidding wars, and see our client companies do things for employees" that would have been unthinkable just a few years ago, Courtney said. "They're jumping through hoops.

"In one situation, the person was thrown a counter-offer that doubled their salary to get them to stay," Courtney said.

From the first quarter to the second, nearly two-thirds of the 250 Maryland companies surveyed by the Maryland Business Research Partnership said they had increased revenues and two in five said they had added workers.

Hiring will not end soon, according to the survey: During the same period, the number of companies expecting to add workers jumped from 47 percent to 56 percent.

"Businesses are bullish," said Richard Clinch, project manager for the Research Partnership, the research unit of the University of Baltimore. "Not only are they bullish, they're turning in great performances, too."

With job security now, and for the foreseeable future, it's easy to understand how consumers could feel confident. Consumer confidence translates into consumer spending -- which accounts for about 70 percent of the U.S. economy's growth. During the second quarter, consumer spending was brisk in Maryland for houses, cars and other retail goods.

According to the Maryland Association of Realtors, a total of 20,178 homes changed hands during April, May and June -- tops for any quarter in the past five years. The $714.4 million in contracts signed to build new houses was the most since second-quarter 1997, according to F.W. Dodge, the research subsidiary of the McGraw-Hill Cos.

"It's the best housing market in a dozen years -- and I don't see any end in sight," said Marc Witman, president of the Greater Baltimore Board of Realtors, and a Long & Foster Realtor himself.

Real estate agents on a white-hot selling streak can thank a red-hot bull market for some of their success: With the typical consumer having doubled his or her net worth in the past five years, it's easier to pay up for that "dream house."

"It's a good, strong economy -- an economy not in its first year, but in its third year, fourth year of double-digit market growth," Whitman said. "When people feel good about themselves, feel good about their financial situation, they believe that it's OK to spend today's cash flow, because the market will make up the money next year."

The automobile market, likewise, has been fueled by the rising market: New-car sales statewide rose 5.68 percent from last year's second quarter to top 100,000 for the first time, according to the state Motor Vehicle Administration.

Retailers clearly are seeing green. State consumer-sales-tax revenues, though down from the first quarter, stayed above $200 million for the third straight quarter. That hasn't happened any other time in the past six years.

Spending isn't limited to older adults. Just look at Changes, a Baltimore-based sports-apparel and specialty retailer whose seven area stores target males age 13 to 30. "The economy is strong and everyone is working -- in serious jobs," said Steven F. Silber, an executive with the company. "Even those working in McDonald's are making $7.50, $8.50 or $9 an hour -- they have money in their pocket."

Last week's interest-rate increase by the Federal Reserve will likely cause spending to decelerate: Borrowing -- except for mortgages, whose rates actually dropped -- will cost more, meaning retail and auto sales will slow. The labor shortage will continue, though an increasing number of companies predict that revenues will rise, according to the University of Baltimore survey.

Unless there is some unforeseen shock to the economy -- such as technology glitches from the millennium software bug, there is no sign of recession in Maryland or the nation, economists say.

"We might face some slowing, but it certainly won't be a slow economy," said RESI's Basu. "Productivity continues to grow rapidly, and a greater percent of the work force will be trained in new skills. That will allow companies to increase business. This is the source of America's vitality. Despite higher interest rates and uncertainty about Y2K, this dynamic will prevail."