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Riots, crime present challenges to Baltimore’s economy

Baltimore’s economy could be headed for a rough patch as a result of the Freddie Gray riots and the spike in crime that followed.

The possible damage to the economy comes just as the area was showing signs of a more robust recovery taking hold. According to the U.S. Bureau of Labor Statistics’ economic survey, the city’s unemployment rate fell nearly a full percentage point in April from the same time last year, even though its 7.4 percent unemployment rate is the highest in the area and well above the national rate of 5.5 percent.

But the riots didn’t begin until April 25, and a violent May followed, amplifying tensions surrounding Baltimore. Job figures for May, which are scheduled to be released later this month, should provide the first glimpse of the impact the unrest had on the city’s’s economy.

Alejandro Cañadas, associate professor of economics at Mount St. Mary’s University, said crime does have a strong impact on the economy. He argues the unrest and the crime spike that followed — homicides are up 42 percent, robbery is up 12 percent and burglary is up 13 percent from the same time last year, according to the Baltimore Police Department — will have an immediate impact on the city’s economy. He said the unrest and crime could scare businesses from making investments in the city and even could convince existing businesses to set up shop outside of Baltimore because they fear the riots could happen again.

But his predictions for the city’s economy were not all doom and gloom. He said the unrest brought to light some of the inequalities that drag down the area’s economy and that it could force political leaders to address those issues.

“Measures have [to be taken] to address the institutions as well as the community. If that doesn’t happen not only [will there be] the short term negative impact in business and economics, it’s going to be bigger in the long run for that city and the area around,” Cañadas said.

Not everyone is as certain that there’s a direct correlation between crime and an adverse impact on the economy.

Stephen J.K. Walters, a professor of economics at Loyola University, Maryland, and author of the book “Boom Town: Restoring the Urban American Dream,” argues that there’s no clear relationship between economic development and crime. Recent trends such as crime actually decreasing while the national economy tanked following the 2008 financial crisis give credence to that point.

Walters was critical of some academic research being done on the issue, referring to it as “advocacy research.” Walters acknowledged there was probably some negative relationship between crime in the economy but argued there’s not a definitive answer as to how strong the relationship is.

“The literature on this is all over the map. You’ll find some studies that find a correlation between crime and the economy, and you’ll find some papers that don’t find any correlation between crime and the economy. So that’s kind of a mess,” Walters said.

About Adam Bednar

Adam Bednar covers real estate and development for The Daily Record.