Bordering Washington, D.C. and being home to many federal agencies, starting the year off with a more than month-long federal government shutdown predictably proved problematic for Maryland’s economy. After a strong 2018, Maryland’s economy stumbled into 2019.
That’s not surprising given the turmoil that characterized federal government activities to begin the year. According to the U.S. Bureau of Labor Statistics, more than 144,000 federal government employees reside in the state. The shutdown, at one point, furloughed almost 400,000 federal government employees, which undoubtedly had a difficult-to-measure impact on the local economy. Anecdotal evidence suggests that since the shutdown, federal contractors have suffered greater difficulty recruiting new talent given that that talent is not actively seeking out dysfunction.
For these reasons and others, after ending last year on a strong note, the Free State has languished. In March, the last month for which state-level data exists, Maryland ranked a lackluster 35th in terms of year-over-year percentage job growth, adding just 15,600 net new jobs on a seasonally adjusted basis. The recently announced closure of a paper mill in Western Maryland, which will eliminate 675 jobs according to available reports, further dampened the reality and perception of Maryland’s economic performance.
The Baltimore Metropolitan Statistical Area (MSA), which comprises nearly half the state’s population and includes all of Anne Arundel and Queen Anne’s counties, among others, added 18,200 jobs on an annual basis, an increase of 1.3 percent. Job numbers from the Baltimore MSA are not seasonally adjusted, so it would be improper to conclude that the region added all of Maryland’s jobs and then some. That would be apples and oranges. But it is clear that the balance of Maryland is not adding jobs rapidly, with emerging evidence indicating that suburban Maryland, which includes economic titans Montgomery and Prince George’s counties, is losing jobs in the context of shrinking federal employment and a federal government contracting apparatus in flux.
What’s more, it’s not as if the Baltimore region is booming. By national standards, Baltimore can be characterized as an ordinary performer, though it is a reasonably impressive performer by East Coast standards. Baltimore’s year-over-year percentage job growth ranked the MSA 16th among the 25 largest metro areas in the U.S. The MSA’s unemployment rate of 3.9 percent also placed it 16th among the same group.
Thankfully, there are indications that the economic malaise prevailing during the year’s onset was merely temporary. Not only has the U.S. economy gained momentum in recent weeks, with unemployment down to 3.6 percent and wages up by more than three percent on a year-over-year basis for nine consecutive months, but federal spending is on the ascent, including defense spending, a mainstay of Maryland’s economy.
According to a recently-released Pentagon report, Maryland ranks fifth nationally in terms of defense contract spending, after only California, Virginia, Texas, and Connecticut. Defense spending comprises 5.3 percent of Maryland’s total gross state product, which also ranks it fifth in the nation after only Virginia, Hawaii, Connecticut, and Alaska.
The combination of growing defense outlays and stronger national activity should help offset the cuts in spending incurred by a number of civilian agencies. While Maryland’s economy is not positioned to boom in 2019, economic performance should be solid. Demand for homes has been lackluster through the spring, but may be unusually strong during the summer months as the economy continues to stride ahead and mortgage rates remain impossibly low.
