Federal spending helping state’s economy

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CAMBRIDGE — Maryland’s recovery gained momentum during the last year largely on the strength of increased federal spending and BRAC-related development, a leading economist told state and local economic development officials gathered here Monday.

While much of the news was positive, Anirban Basu warned members of the Maryland Economic Development Association that uncertainties associated with the federal budget, including the possibility that deep cuts will take effect in January, make economic forecasting for 2013 extremely difficult.

“I still believe in our economy, but my goodness, you have to be on a path of fiscal stability and I would suggest we are not,” said Basu, chairman and CEO of Sage Policy Group Inc., a Baltimore economic and policy consulting firm, as he recounted last year’s partisan battles over the federal debt and other issues.

He reminded his audience that unless Congress agrees to an alternate approach, annual budget cuts of $109 billion a year, half in defense spending, will take effect between 2013 and 2021.

On the positive side, Maryland added 49,600 jobs between March 2011 and March 2012, Basu said at the annual MEDA conference at the Hyatt Regency Chesapeake Bay resort.

Major gains came in the professional and business sector (16,500 jobs) and the education and technical services sector (16,200), Basu said.

Overall, Maryland added jobs at the rate of 2 percent, eighth best in the nation, during that period.

Much of that growth came between May 2011 and March 2012, Basu said, and was driven by the influx of BRAC-related jobs and a surge of federal spending that came after the debt ceiling crisis was resolved in August.

“Does that tell you we are very diversified?” Basu asked the room full of economic development professionals. “I would suggest not so much.”

Despite the impressive job gains from March to March, Basu also noted that during the same period, Maryland shed 3,300 jobs in the manufacturing sector, which he flagged as a warning sign, and 800 high-paying jobs in the financial activities sector.

At this same conference last year, Basu was sharply critical of the state’s business climate and of its record in creating jobs.

This year, while acknowledging much progress in job creation, he said the state’s unemployment rate of 6.6 percent is still somewhat worrisome. Although Maryland’s rate compares favorably to the national rate of 8.2 percent, Basu noted that it is a full percentage point higher than that of neighboring Virginia, which is viewed as a tough competitor for new jobs and new businesses.

“I still attribute that to business climate, or at least to business reputation.” Basu said.