While Maryland has enjoyed warmer weather of late, its economy refuses to heat up. Last year, Maryland’s economy remained red hot, but the state’s momentum cooled with the 35-day federal shutdown that transpired several months ago, and renewed economic momentum remains elusive. Anecdotal evidence suggests that some federal contractors are having difficulty recruiting talent that remains concerned by the possibility of future operational interruptions.
Meanwhile, the U.S. economy continues to display a nearly idyllic combination of growth, low unemployment, and tepid inflation. That said, there is a growing body of evidence suggesting that the U.S. economy has begun to soften meaningfully.
For instance, according to the latest numbers released by the U.S. Bureau of Labor Statistics, the U.S. added just 75,000 net new jobs in May. Previously released March and April jobs numbers were revised downward by another 75,000 jobs. According to data available as of this writing, the nation has added an average of 127,000 jobs per month over the past four months. During the prior four-month period, the average was 253,000.
While some of this may be attributable to a softening global economy and a number of trade disputes involving the United States, including with both China and India, slower job growth is also likely a result of a paucity of available workers. The nation’s official rate of unemployment stands at 3.6 percent, effectively a 50-year low.
Remarkably, despite a booming stock market and multi-decade lows in unemployment, Federal Reserve policymakers had been actively considering reducing interest rates, a step normally taken during moments of economic weakness. Equity investors have generally cheered the reversal of monetary policymaking, which has been associated with nine rate increases since December 2015. The Federal Reserve has been empowered to reverse course on the direction of interest rates by measures suggesting that inflation in the U.S. is running at or below 2 percent. Policymakers appear concerned that ongoing trade wars will help push the economy toward recession absent some stimulative intervention.
While one could question whether the U.S. economy needs further stimulus, Maryland’s economy probably does. On a year-over-year basis, the Free State added 19,300 net new jobs in April, representing an increase of 0.7 percent in total payrolls. That percentage growth ranks Maryland 42nd in the nation in terms of the pace of growth among the 50 U.S. states and the District of Columbia. The bulk of jobs added in Maryland were in the Baltimore metropolitan area, home to approximately half of Maryland’s economic output. Job growth in Maryland’s D.C. Suburbs, which are collectively responsible for about 40 percent of Maryland’s economy, has ground to a virtual halt.
One of the sources of Maryland’s economic softness is its owner-occupied housing market. In May, home sales were down nearly 2 percent on a year-over-year basis despite a recent and sharp decline in mortgage rates. Several of the county’s recording the most significant declines in home sales are on Maryland’s Eastern Shore, including Kent County (-25.0 percent), Wicomico County (-16.5 percent), and Cecil County (-8.5 percent).
While sales volumes remain soft, in part due to a dearth of inventory of homes available for sale, prices have been rising, in part for the same reason. In May, the average home sales-price was up more than 4 percent on a year-ago basis, with Talbot County registering an eye-opening 31 percent increase. Statewide, months of inventory has declined from 3.5 months of supply to 3.1 months over the past year suggesting that sales may remain soft and that prices will likely continue to drift higher.
