After a decade of economic growth and falling unemployment, local economists remain largely bullish on the state’s economic outlook for next year.
But some also are less optimistic about future years, warning of a number of worrisome factors that include a likely rise in interest rates, a continued over-reliance on government spending, potential trade wars and more.
“We’re looking at positive growth in 2019,” said Daraius Irani, chief economist for Towson University’s Regional Economic Studies Institute, citing the 58,000-job gain expected next year in the institute’s annual economic forecast.
“But we see a lot of uncertainties in the future,” he added, explaining how his forecast calls for no growth in 2020 and a half-percent decline in growth for 2021.
Some sectors of the economy are strong, Irani said, mentioning health care, financial, tech services and construction.
However, he said, manufacturing is expected to continue to decline, as is wholesale trade and the information sector, which includes newspapers.
Irani said he is also concerned that the state has job openings it cannot fill, including technology and nursing jobs. He blamed the problem in part on continued disparities in education throughout the state, especially for minority students.
“The future viability of Maryland to attract businesses is in question if we don’t have a highly educated and well-trained workforce,” he said.
Benjamin Wu, deputy secretary for the Maryland Department of Commerce, agreed that having an educated workforce able to fill new jobs in such fields as life sciences and cybersecurity is one of the state’s biggest challenges.
However, he said, the state is working closely with higher education institutions to fix the problem, and characterized the challenge as “one of the most pleasant we can have.”
“We continue to be bullish about Maryland’s economy,” Wu said, noting that the state “continues to lead the mid-Atlantic region in job growth.”
The U.S. Department of Labor’s Bureau of Labor Statistics announced that Maryland added 10,700 jobs in October, the second-highest gain in three years.
Since the start of 2015, Maryland has added more than 117,000 private-sector jobs, and the state’s unemployment rate had dipped to 4.1 percent.
The success of the state’s economy relies on several key private industries, Wu said, including life sciences, cybersecurity and advanced manufacturing.
He singled out the growing cybersecurity sector, noting as an example that the giant Port Covington development, in Baltimore, recently announced its first three commercial tenants, and all three were cyber-related companies.
“We’re becoming an epicenter for cybersecurity,” Wu said. “Cyber is taking hold in all parts of the state, from Montgomery County to the I-95 corridor, and now also in Baltimore.”
Anirban Basu, CEO of the Sage Policy Group, an economic consulting business in Baltimore, echoed Wu’s rosy forecast for 2019.
“It’s shaping up to be a fine year for the Maryland economy,” Basu said.
He pointed to the number of large commercial sites being developed, including: Port Covington; Tradepoint Atlantic on Sparrows Point in southeastern Baltimore County; Downtown Columbia; and National Harbor on the Potomac River in Prince George’s County.
“Economic actors are looking for space, and Maryland has a rare amount of developable land that is commercially and in some cases industrially zoned, and that allows us to accommodate expanding enterprises,” Basu said.
He also cited the state’s sizable budget surpluses and growing appetite to invest in infrastructure, which already has provided a boost in planning and design jobs and eventually would lead to construction jobs. And, he noted, the federal government appears likely to continue to spend aggressively, despite mounting deficits.
“Generally speaking, when federal spending is robust, that’s good for Maryland’s economy,” Basu said. “And the federal government right now is spending freely.”
Economists interviewed pointed to other bright spots in the state’s economy, including:
Amazon’s decision to locate its new headquarters in Arlington, Virginia: While Maryland’s bid to woo Amazon failed, economists insist the northern Virginia headquarters is a win for the state. Many of the company’s high-paying new jobs are likely to be filled by Maryland residents, they said, and the new headquarter is likely to create distribution jobs and even additional high-tech jobs.
“We’ve got a catalyst of a company coming in that’s going to hire bright, smart people,” Irani said. “It could spur more of these types of companies in our neighborhood and spur entrepreneurship here.”
Booming business at the Port of Baltimore: The Maryland Port Administration announced last month that the Port of Baltimore handled a record number of cars and light trucks in August, underscoring the port’s position as “a leading economic engine for our state,” port officials said.
The port also recorded its best fiscal year in 2018 for general cargo tons (nearly 11 million), and its strong showing this year follows an equally strong improvement last year.
“One of the ways we can continue to grow the Maryland economy is to try to attract investments from international partners and push Maryland exports … around the world,” Wu said.
Robert Carpenter, an economics professor at the University of Maryland, Baltimore County, was less optimistic than Wu about the state’s economic future.
He noted that Maryland, with its huge number of federal workers, is vulnerable to any slowdown in the national economy. And after an almost unprecedented nine years of expansion, he said, a national slowdown is almost inevitable.
Couple that with the expected rise in interest rates and future rise in spending to bolster entitlement programs — mainly Social Security and Medicare — and it is likely that government wages will increase at ever-smaller rates, Carpenter said.
“As federal and state government spending goes, so goes the Maryland economy,” Carpenter said. “And when you have slower wage growth, it’s going to inhibit the growth of Maryland’s economy.”
Some local observers take an even longer-term (and bleaker) view of Maryland’s economy, among them Lindsay Thompson, a business professor at the Johns Hopkins Carey Business School.
Thompson had nothing but good things to say about the current state of Maryland’s economy.
“The economy is great, and the economic outlook is wonderful,” she said, noting surveys and statistics that show Maryland among the top states in measures such as education, income, gender equity, minority entrepreneurship and more.
But Thompson’s focus is more global and long term. And from that perspective, she said, it is essential that Maryland and the entire country invest much more heavily in “human capital” or risk falling behind much of the rest of the world, most notably countries in Asia.
Specifically, she said, more money must be spent on three things: mass transit, to get people to and from jobs more quickly; education, to make sure more men and women get an education that prepares them for good jobs; and Baltimore, which she termed something of a “black hole” in terms of a range of quality-of-life factors.
“There’s no excuse in a state and a country as wealthy as ours for anyone to fall behind the way some people have fallen behind,” Thompson said. “We need to reduce the economic inequality of life disparity for people in our state, in Baltimore and elsewhere.”