The Truth about Jobs Growth in Maryland
Now that presumptive Republican nominee for president Mitt Romney has chosen his running mate, the real debates can begin in what is shaping up to be a very close race. Surely the malingering “Great Recession” is on deck to be the most hotly-debated issue of the campaign.
The U.S. is nearly five 5 years into this recession, yet we are still not on track to reach pre-recession employment until possibly late 2014 (and that projection assumes Europe’s economy remains somewhat stable in the meantime).
Of course, Democrats and Republicans paint a vastly different picture of employment in this country. The Obama Administration would have us believe that its stimulus package – and the jobs it did create – pulled the U.S. back from the precipice of a depression.
But the bulk of the jobs created as a result of the stimulus aren’t necessarily the type of jobs that foster a robust economic recovery. CoStar Group, the commercial real estate analytics powerhouse, shared this startling graph during each one of the company’s 2nd quarter 2012 market segment updates.
Most of the jobs created since the Obama stimulus package was passed fall into the categories of education and health services, professional and business services, and leisure and hospitality. It’s important to note that the first two categories rely heavily on government spending and contracts.
Sadly, the categories of manufacturing, trade/transportation/utilities, information, and construction, all remain millions of jobs below pre-recession employment levels. It is these categories that drive the production of goods for purchase and export in the U.S., create new technologies, and develop and improve our infrastructure – and they are all a critical source of jobs in our country.
The construction industry is traditionally a massive driver of economic recovery during recessions. In fact, residential construction outpaced every other area of the economy after each recession in the U.S. between the end of World War II and the turn of this century.
American government at all levels, and a vast majority of the population as well, are carrying balance sheets that are bloated with debt. Corporations are too stunned by the lingering recession and paralyzed government to invest much of anything.
In this situation, no amount of purse string loosening by the Federal Reserve is going to enable the kind of spending that will jump start the housing market or sales of consumable goods. The collective value of commercial and residential real estate assets – long a mainstay of American net worth – will continue to lag well below pre-recession levels.
And so, we remain caught in a viscous cycle.
Lacking a much-needed boost from real estate and construction, America must create an entirely new kind of economic recovery in order to end this recession. We need jobs – particularly technology and manufacturing jobs – that will increase Gross Domestic Product and drive exports. (And by exports I mean something more tangible than Facebook accounts.)
The focus on Capitol Hill needs to shift from taxing and spending to removing the barriers to entry that prevent newly-incubated companies from gaining a foothold in free markets without drowning in taxes and unreasonable regulations.
Maryland is a perfect case study in how not to do that.
Maryland, and Frederick by extension, is in a particularly precarious situation right now because so many of the jobs here depend upon federal government spending – and the federal budget is way overdue for massive spending cuts.
Taking the concept of CoStar’s jobs graph and applying it to Maryland jobs, it’s clear that Maryland has also suffered staggering job losses in critical industries during this recession. Over 60,000 jobs in manufacturing and construction alone have been lost since 2006. And, of the jobs gained, the vast majority is in the industries of government and education and health services – jobs that are very vulnerable to spending cuts.
Maryland is uniquely poised to be the envy of the United States. We have one of the most highly-educated workforces in the country, arguably one of the best school systems anywhere, and many of the most brilliant minds in medicine, science, and technology executing government-sponsored research programs right in our own backyard.
In fact, Maryland has everything it needs to become a fertile incubator of lucrative manufacturing, science, and technology businesses – except a supportive government. Over and over again we see newly emerging or relocating businesses choose to locate in Virginia, where taxes and regulations make it possible to operate profitably.
The fact that the old Eastalco Aluminum property here in Frederick County is a candidate for a manufacturing operation is cause for cautious optimism, as the 400 manufacturing jobs it represents would be precious to our community. My fingers are crossed for Helen Riddle and her team at the Office of Economic Development as they pursue this lucrative opportunity for Frederick County, but they have significant barriers to overcome.
Failure to remedy Maryland’s non-business friendly attitude – before budget cuts set in – could result in a mass exodus of intellectual capital from our state. That would be catastrophic for both our business culture and for our school test scores, as the best and brightest take their children with them.
Unfortunately, the powers that be would rather tax and spend us into oblivion than work to develop and nurture the unique and exciting potential of Maryland’s economy.
It remains to be seen if the millions of woefully under-employed U.S. citizens will rally to fire the Obama Administration come November. If it does, perhaps there is hope for a change at the top in Annapolis as well.
Rocky Mackintosh is the owner of a land and commercial real estate firm based in Frederick. He is also the editor of the MacRo Report Blog.