Frederick County may be the buoy that is keeping Maryland employment from sinking lower
It’s that time of year again in which this Frederick MD commercial real estate broker somehow finds his way into the annual First Friday Economic Outlook Forum held by the Maryland Bankers Association at the Renaissance Harborplace Hotel in Baltimore on January 9th of this year.
Before I share my takeaways from this gatherings, I must thank my good friend Rob Tuggle, Senior Vice President and Area Executive for BB&T Bank here in Frederick, for his graciousness in allowing me to once again be his guest at the event.
This year, as in the past, the opening speaker was the always insightful and surprisingly witty Anirban Basu, Chairman and CEO of Sage Policy Group, Inc. He has served as the economic advisor and strategist for any number of land developers, bankers, law firms, government agencies, non-profits and business associations throughout the state and nation. Currently Basu is part of the transition team appointed by Maryland’s new Governor Larry Hogan.
There were a number of other prominent speakers who also spoke at the event, but the major takeaways came from Basu’s presentation, as my focus this year is mostly on how employment in Frederick County compares to that of the state and the nation.
Let’s look at the job picture.
The nation added 2.95 million jobs in 2014 in all major employment sectors. While Maryland did experience positive job growth, it only added a net of 12,100 between December 2013 and November 2014. This is significantly lower than average of 30,000 that most economists believe is considered healthy for the Old Line State.
Using percentages, overall the US experienced a 2.0% increase in jobs, but Maryland’s gains only reflected a 0.5% increase over the previous year, says Basu.
One of the primary sectors that suffered in Maryland came through federal sequestration which impacted government jobs, but the information and manufacturing arenas also lost out.
On a national level, “the incremental jobs added [in 2014] does not pay a wage equal to the preexisting economy wide average,” said Basu, because “most employment gains came in the lower paying sectors like restaurants, hospitality, security and education.”
Overall this also seemed to be case for Maryland, as when one looks at the state by state employment ranking, it earned the unfortunate 46th out of 50. This is not to say that Maryland was the single suffering jurisdiction from sequestration, because Virginia, New Jersey, Pennsylvania and West Virginia also felt the impact and found themselves at the bottom of the list.
It is reasonable to expect that state government job growth will likely suffer in 2015, as Governor Hogan attempts to tackle the serious budget shortfall that Maryland faces ahead.
According to Basu, Maryland is also suffering from a case of negative net domestic population migration, mostly due to the non-competitive tax policies within the state.
On a positive note however, he shared that international migration into the state has been positive, but facetiously clarified the statement by guessing they probably “don’t know any better!”
Basu expects that interest rates and gasoline prices will remain low through much of the year, and the stock market will likely continue its positive climb. So all in all he expects that nationwide 2015 may very well be the peak of the current business cycle for the country by stating that this year “may be as good as it gets!”
The bottom line from the Sage Policy CEO: Maryland data will improve for the next couple of months; however after that state budget cutbacks will start to negatively impact the economy and will begin to lag back to that of significant under performance.
But what about Frederick County?
Just a few days ago Michael Pugh, a commercial real estate appraiser and owner of the Pugh Real Estate Group, LLC, based in Frederick, shared some of his research on employment growth within our county.
The good news is that while Maryland is suffering from dismal employment rankings, Frederick County has to be one of the very bright spots of the region.
Consider the following information derived from Pugh’s report:
- The Maryland Department of Labor recently reported that Frederick County’s average unemployment rate was 5.0% in 2014, down from an average of 5.7% in 2013.
- While government sector employment has fallen on a federal level and remained flat locally, Frederick County’s private sector employment has bolstered the average year over year job increase to over 2.04% between January 2011 and June 2014 – compared to an average increase of 1.17% Maryland over the same period. Simply put Frederick is tracking at a rate or 74% better than the state as a whole!
Key drivers of private sector employment growth since 2011 has been increases in the number of people working in the construction, education and health services, trade/transportation/utilities, and leisure and hospitality. In addition, natural resources/mining and manufacturing have contributed to this increase, although not at the same rate.
Clearly, the data that Michael Pugh provides, combined with the hope of sustained low fuel prices and low interest rates, this positive trend in local job growth bodes well for the future of Frederick commercial real estate.
Strong growth in the job market translates into expanding businesses. With business growth there should be an increase in office space leases, flex and warehouse absorption, as well as sales in these and other sectors of the Frederick commercial real estate market.
More jobs also mean more land development of new commercial buildings as well new home construction in Frederick County.
Cross your fingers and let’s hope that Anirban Basu is on target when he says this year may be as good as it gets!
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The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He has been an active member of the Frederick, Maryland community for over four decades. He has served as chairman of the board of Frederick Memorial Hospital and as a member of the Frederick County Charter Board from 2010 to 2012, to name a few.“