Thursday, August 25, 2011

Recession Smackdown - MD Beats VA in Job Growth - Part 2

Comptroller Peter Franchot's ears must have been burning during last July's Board of Public Works meeting. Find out why below!

In Part 1 of our post, Maryland Beats Virginia in Job Growth, we bragged about how Maryland has now surged ahead of Virginia's flacid job growth. In doing so, we discussed aspects of our regional rivalry, ultimately noting the ungentlemanly behavior by Virginia Governor Bob O'Donnell, who recently took the helms of the Republican Governors Association:
Even Virginia Governor O'Donnell got into the regional spittin' match, comparing his recently projected budget surpluses to Maryland's continuing budget woes.
The Maryland Democrats responded with this rebuttal delivered by press release:
McDonnell’s illusionary “surplus” is the result of deferred bills, dismantled programs important to the middle class, budgetary obfuscation and federal stimulus spending.... No wonder Virginia has one of the worst track records on funding education and ranks 44th in job creation in 2011. 
But as the Washington Post reported today, the Dems didn't get the last word:
On Wednesday, McDonnell spokesman Tucker Martin responded in kind to the Maryland Democrats’ attack on his boss. “Governor O’Malley can keep raising taxes and increasing government spending, and we will keep welcoming his employers, families and capital to the Commonwealth,” Martin said. “The arrangement is just fine by us.”
The Virginia GOP clearly drank the freakonomics Kool Aid and missed Part 1 of this article, where we pointed out that the fear of millionaires fleeing Maryland is an urban legend. But that's not the topic of Part 2. Today, we will dig a bit deeper into the roots of Maryland's new job growth.

First, it is worth noting that in a prior column about the irony of GOP socialism fears, we alluded to the danger of Maryland's over-reliance on federal jobs and spending. In particular, Maryland Juice pointed to an article about Comptroller Peter Franchot in the Washington Examiner:

The Examiner coverage focuses on comments Mr. Franchot made last July at a Maryland Board of Public Works meeting:
Maryland Comptroller Peter Franchot says Maryland has become too dependent on the federal government and must focus more on strengthening its private sector as the state faces a possible credit downgrade over the national budget dispute....

He said the budget negotiations should serve as a "wake-up call" for Maryland lawmakers "to rededicate ourselves to a business climate that inspires, promotes and rewards private-sector investment in Maryland"....

Maryland's proximity to Washington has provided the state with a "safety net" through the recession, he noted. The state ranks second in the nation for per capita federal spending on procurement and fourth for per capita federal spending on salaries and wages, according to the Labor Department.
Mr. Franchot's ears must have been burning, because as the Gazette noted in its coverage this week of Maryland's jobs turnaround, "all of last month’s net growth was in Maryland’s private sector, as government slashed jobs."

The Maryland Department of Business and Economic Development (DBED) further elaborated today, announcing key signs of a private sector comeback in Maryland:
Maryland added 10,440 private sector jobs (seasonally adjusted) in July for a 0.5% monthly growth rate, tied for fifth fastest growth in the country. Overall, the state added 8,100 jobs, with 10 out of 13 major private sectors adding jobs. Maryland has now regained 33.8% or 49,200 of the jobs it lost since the 2007-2009 recession. This share ranks the state 19th in the country in job recovery and is about 50% better than the national job recovery rate of 22.2%.
Curious where this job growth is coming from? According to DBED:
Sectors leading the state’s growth included leisure and hospitality, which added 2,700 jobs, for 1.2% monthly growth—tied for seventh fastest in the country. Wholesale trade added 1.400 jobs, for a 1.6% growth rate—fifth best. Retail trade jobs rose by 1,300 for 0.5% growth. Construction added 1,000 jobs for 0.7% growth. The information services sector added 800 jobs for 1.8% monthly growth—third fastest among states. The professional and business services also added 2,800 jobs for 0.7% growth.

Sectors losing jobs included state and local government, which lost 2,200 jobs for a 0.6% rate of loss and health care services, which lost 1,400 jobs for a 0.4% loss
It is unfortunate to see that the strong growth in the private sector comes at the same time as job losses in state and local government. It did not escape my eye that in this period of public austerity one of the leading growth areas in Maryland is in "leisure and hospitality." This shouldn't be a surprise, given America's increasing wealth gap (have we all given up on doing anything about this?). Nevertheless, this job growth should be welcome news to all Marylanders.

In spite of the emphasis on private sector jobs here, it is also worth noting that Maryland's federal ties remain strong. DBED further noted that Maryland now ranks second in the nation for research and development funds -- a key to the state maintaining competitiveness with Virginia and the research triangle in North Carolina.
National Science Foundation data show that Maryland continues to rank second in federal obligations for research and development. Federal funds obligated for R&D totaled $13.3 billion in FY2008, a 15% increase over FY2007. On a per capita basis, Maryland ranks first among the states in federal R&D obligations. Dept. of Health and Human Services funding accounts for more than half of total federal research support with $7.4 billion in total FY 2008 research obligations. Other agency leaders include DOD ($4.2B), NASA ($808M), and the Dept. of Commerce ($466M).
Is it still too soon to say we've got brighter days ahead? I hope not -- but I'd like to know what's driving all of this job growth in Maryland! If you believed all of the freakonomics out there about our tax rates and spending, you'd think none of this should be possible. And yet...........

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