Economic soothsayer Stephen Fuller recently suggested that recessions are for places such as Florida and Michigan - not Washington-Baltimore.
"The 'R' Word Means RESILIENT for the Washington Economy," says a slide he showed in a March 4 talk.
Now, a week later, he says, "it's getting harder to believe."
Cascading trouble in housing and financial markets make it increasingly likely that the country is headed for a worse-than-mild recession and that Maryland will have a hard time avoiding one, too.
Even so, the state is better off than many, thanks to stable industries such as medicine and defense. This year could well bring recession, but Maryland and Baltimore should fare better than the nation and much better than they did in the last serious downturn, in 1991. "The grass is browner elsewhere" is Maryland's 2008 motto.
The state's outlook has fallen with that of the country. The nationwide real estate blowup is far worse than anybody except New York University's Nouriel Roubini and a few other canny analysts predicted. And it's no longer "contained" to housing, as many predicted last year.
U.S. employers dismissed more people than they hired in January and February, we learned a week ago. That was the first time that happened since 2003. Retail sales plunged in February, the government said yesterday. With foreclosures rising and home values falling, nobody expects the national picture to improve soon.
Maryland is doing better than the nation but not as well as it was. So far it has avoided employment loss, but this week its 2007 growth got sharply downgraded.
Rather than adding 36,000 jobs last year, as Labor Department economists had originally estimated, the state added only 19,000 jobs.
That's not much more than half the original estimate and the worst performance since 2003.
Housing weighs the state down. Andrew Bauer, economist for the Baltimore branch of the Federal Reserve Bank of Richmond, said he was "kind of shocked" by last week's news showing state foreclosures rising 150 percent from late 2006 to late 2007. Metro Baltimore home prices have fallen 4 percent in the past year.
Last week's $330 million downgrade in projected state tax revenue may be the most foreboding economic sign of all.
Even so, Maryland's assets ought to make most states jealous. Led by Johns Hopkins and other big hospitals capitalizing on world reputations and an aging population, medical and social services employers have been hiring 8,000 Marylanders a year.
They're about as unexposed to real estate as you can get, and they show no sign of slowing down. Last year health care accounted for more than half of metro Baltimore's job growth.
Thanks to the homeland security boom and the war in Iraq, defense is back as a Maryland economic anchor. From the National Security Agency at Fort Meade to Northrop Grumman in Linthicum to Aberdeen Proving Ground in Harford County, Baltimore is surrounded by well-paid warriors, spies and weapons mongers.
Defense realignment, which is moving thousands of jobs here from Virginia and New Jersey, has been oversold as an economic stimulus. But it certainly won't hurt.
Sprayed on top is a buttery cloud of other federal spending. As Washington's back office, Maryland is home to hundreds of thousands of contractors and bureaucrats who make the country run. Local federal spending won't grow much in coming years and may even shrink, but it'll be more stable than other sectors.
What a contrast with the early 1990s.
A federal recession plastered the state. The end of the Cold War caused epic consolidation among defense contractors, and House Speaker Newt Gingrich threatened to shut down entire agencies. A simultaneous real estate and financial crash wiped out huge employers such as Maryland National Bank and USF&G.; The state lost 70,000 jobs in 1991.
At the time in metro Baltimore, "you had nothing going for you except the Social Security Administration and state government," says Fuller, director of the Center for Regional Analysis at George Mason University in Northern Virginia.
Today, Fuller says, "the Baltimore area is in much better shape."
To be sure, bum real estate lending has again put local banks under pressure. But this time they're simply not big enough to matter much to the regional economy. And housing shouldn't get as bad here as in other states, says Bauer.
"There's a floor in terms of how far down prices will go. And that floor is higher than it would be otherwise," he said.
In Maryland, R is for rotten and maybe even recession - but less rotten than in Florida or Michigan.
PUSHING DOWN THE ECONOMY
Residential and commercial real estate sales
Foreclosures and declining home values have hurt consumer spending, lowered construction hiring and made banks reluctant to lend money. Higher vacancy rates may signal weakness in commercial real estate, analysts worry.
PROPPING UP THE ECONOMY
World-class research and hospital services have made medicine Maryland's fastes-growing industry.
A gusher of spending on homeland security and weapons production leveled off in 2005, but it shows no sign of declining.
As the back office for a $3 trillion federal government, Maryland is home to thousands of jobs that should be immune to national recession