Md. forecast for 2012: ‘sluggish’ growth, but not a recession

Wilmington Trust’s top investment management executive looked out from the Hyatt Regency podium at more than 400 executives who attended the Greater Baltimore Committee’s Oct. 10 sold-out Economic Outlook Conference and summed up his 2012 forecast in five words: “It’s going to be OK.”

Maryland and the nation will not slide back into recession, said Sam Fraundorf, president of Wilmington Trust Investment Management. “That doesn’t mean it’s going to be perfect. As a matter of fact, it’s going to be sluggish. It’s going to not be terrific. But we’re not entering a second recession.”

Indicators that bode well for Maryland, according to Fraundorf, include:

Maryland’s employment picture. A higher percentage of Maryland’s labor force is employed. Economic health in the U.S. today is “labor based.” Labor earnings, personal income and consumer spending are major drivers of today’s service-based economy.

Personal income. Marylanders’ personal income has grown at a much better rate than the national average since 2007.

Worker productivity. The work output in terms of goods and services produced per Maryland resident is significantly greater than the national average.

However, the nation’s recent job growth rate since 2010 is “starting to slow” and Maryland’s job growth is slower than the nation as a whole, according to Fraundorf. Maryland’s employment growth rate so far in 2011 is a meager 0.2 percent, compared to 1.6 percent for the nation as a whole.

With employment, “businesses are starting to take a pause. They’re not laying off workers necessarily, but they’re taking a pause,” Fraundorf said. “They want to see consumption increase. They want to see top-line revenue and sales. Then, we’ll talk about adding some more employees to the workforce.”

Overall, Maryland has lost about 110,000 jobs overall since the state’s employment peak in 2007. Statewide, about 4,100 or so have been added back from the end of 2010 into 2011. Among the state’s labor centers, Fraundorf sees the Baltimore region as a key to Maryland’s jobs recovery. “Baltimore looks to lead Maryland through the next year or two years as part of the economic recovery,” he said.

Fraundorf warned that “we’ve got a contraction going on in terms of federal spending.” He noted that the Congressional “super committee” poses downside risk for Maryland.

Overall, Maryland’s economic outlook for 2012 is “getting flat,” said Fraundorf. “But flat doesn’t mean a recession.”

Sam Fraundorf’s PowerPoint presentation.

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