Maryland Posts a Decent 2018

Federal Shutdown Isn’t Enough to Reverse Momentum

Directly bordering the nation’s capital, Maryland is in a unique position.  Its proximity offers a steady flow of government contracts, thousands of handsomely compensated and abundantly educated federal workers, and a number of agencies like the National Institutes of Health, Food & Drug Administration, and the National Security Agency that supply the Free State with advantages in the race to innovate.  Being so close to the center of U.S. politics, however, does have its drawbacks.  This became painfully apparent at the start of 2019 when a dispute regarding security along the country’s southern border helped produce the lengthiest government shutdown in modern history.

Maryland was hit especially hard during the period of the partial shutdown.  Nearly 145,000 federal government workers reside within the state’s borders, and while it is too soon to completely understand the extent to which this rattled the Free State’s economy, there is little question that the shutdown produced a combination of both negative financial and psychological effects.

But as of the time of this writing, that was more than a month ago.  Since then, Maryland’s economy has continued to manifest signs of strength.  For many years, job growth in Maryland was dominated by services.  Today, the Free State is experiencing a combination of job growth in professional services, health services, construction, manufacturing, and logistics.  Despite maintaining the highest minimum wage among Mid-Atlantic states, Maryland’s unemployment recently dipped back below the national average and presently stands at 3.7 percent.

While the impacts of the shutdown are yet to fully reveal themselves, there is little question that 2018 was a fine year for Maryland’s economy.  Between December 2017 and December 2018, Maryland managed to add 29,700 net new jobs.  That translates into 1.1 percent employment growth, faster than just over half of all states.

As is often the case, an elevated degree of shared prosperity was even more apparent in Howard County.  The most recent data indicate that Howard County’s unemployment rate is just 3.2 percent.  This is hardly surprising given strong regional economies in both the Washington and Baltimore areas as well as the ongoing strong growth in a redeveloping downtown Columbia.

Despite this, home sales in Howard County were down 8.2 percent on a year-ago basis in February 2019 according to housing data released by the Maryland REALTORS.  What’s more, despite a paucity of homes available for sale and tighter development restrictions, average and median home sales prices have been sagging in Howard County of late.

The expectation is that the spring selling seasons should be solid, however, since mortgage rates have been trending lower recently and the financial market volatility that characterized last year’s fourth quarter is increasingly in the rearview mirror along with the federal shutdown.  More households believe that it is a good time to sell a home, which might help bolster the active inventory and create fuel for more rapid sales volumes.  Realtors, title companies, and County tax collectors would be among the principal beneficiaries.

State-by-state Nonfarm Employment Growth, December 2017 v. December 2018 Percent Change

Rank	State	%	Rank	State	%	Rank	State	%
1	NEVADA	3.7	17	MONTANA	1.5	32	NORTH DAKOTA	0.9
2	UTAH	3.3	19	OREGON	1.4	36	KENTUCKY	0.8
3	ARIZONA	2.9	20	NORTH CAROLINA	1.3	36	OHIO	0.8
4	FLORIDA	2.6	20	OKLAHOMA	1.3	36	VIRGINIA	0.8
4	SOUTH CAROLINA	2.6	22	NEW MEXICO	1.2	36	WISCONSIN	0.8
4	WASHINGTON	2.6	23	INDIANA	1.1	40	ALASKA	0.6
7	IDAHO	2.4	23	KANSAS	1.1	40	CONNECTICUT	0.6
8	TEXAS	2.3	23	MARYLAND	1.1	40	DISTRICT OF COLUMBIA	0.6
9	SOUTH DAKOTA	2.2	23	MICHIGAN	1.1	40	HAWAII	0.6
9	WEST VIRGINIA	2.2	27	ARKANSAS	1.0	40	MASSACHUSETTS	0.6
11	COLORADO	2.1	27	ILLINOIS	1.0	40	MINNESOTA	0.6
11	GEORGIA	2.1	27	NEW JERSEY	1.0	40	RHODE ISLAND	0.6
13	TENNESSEE	1.9	27	NEW YORK	1.0	47	LOUISIANA	0.5
14	ALABAMA	1.7	27	PENNSYLVANIA	1.0	48	MISSOURI	0.4
14	WYOMING	1.7	32	IOWA	0.9	49	VERMONT	0.3
16	CALIFORNIA	1.6	32	MISSISSIPPI	0.9	50	NEBRASKA	0.2
17	DELAWARE	1.5	32	NEW HAMPSHIRE	0.9	51	MAINE	0.0

Source: U.S. Bureau of Labor Statistics

Exhibit 2. Maryland Unemployment Rates by County (NSA), January 2019

Rank	County	UR (%)	Rank	County	UR (%)
1	Howard County	3.2	13	Cecil County	4.5
2	Carroll County	3.5	13	Charles County	4.5
2	Montgomery County	3.5	13	Washington County	4.5
4	Anne Arundel County	3.6	16	Prince George’s County	4.7
5	Harford County	3.7	17	Garrett County	5.6
5	Queen Anne’s County	3.7	18	Kent County	5.7
7	Calvert County	3.8	18	Baltimore City	5.7
8	Frederick County	3.9	20	Wicomico County	5.8
9	St. Mary’s County	4.0	21	Dorchester County	5.9
10	Baltimore County	4.2	22	Allegany County	6.0
11	Caroline County	4.4	23	Somerset County	7.5
11	Talbot County	4.4	24	Worcester County	11.5

Source: U.S. Bureau of Labor Statistics. Note: NSA-Not Seasonally Adjusted.

Looking Ahead

Maryland’s economic performance should be decent in 2019.  During the first nine weeks of 2019 financial markets recovered much of what they had lost during last year’s final quarter.  Moreover, despite still maintaining an aggressive income and corporate tax posture, there is evidence to suggest that outmigration from the state has begun to slow.  Indeed, there is even evidence that more people are moving to Maryland.  U-Haul maintains data regarding migration trends.  In 2018, Maryland ranked 6^th nationally in terms of net in-migration, behind only Texas, Florida, South Carolina, Utah, and Idaho.  This is likely a reflection of accelerating in-migration from the District of Columbia as more young people form families and others are driven out by sky-high real estate costs in the nation’s capital.

 

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