Commentary: Economy shows signs of life

The RESI Maryland Leading Index finally showed signs of life after the state's economy began to thaw from the harsh winter Marylanders experienced this year.

The Index rebounded to 151.65 in March 2003 from 149.71 in February 2003, a 1.3 percent increase made even more dramatic following three months of decline.

Likewise, consumer spending recovered from February's snow-in and residential home sales maintained its forward momentum.

On the other hand, Maryland's labor market seems bent on maintaining its downward course.

Following a winter full of retailer disappointments, including the industry's unimpressive holiday performance and dismal sales during President's Day weekend, March's consumer spending data are refreshingly lofty.

Total department store tax receipts jumped over 10 percent on a monthly basis, and durable goods receipts rebounded a remarkable 12.8 percent, also on a monthly basis.

Furthermore, with interest rates continuing to dwell in historically low bounds, big-ticket items also enjoyed high popularity in March.

Following several volatile months, new and used vehicle sales rebounded over 3 percent and 5 percent, respectively, from February's disappointing figures.

Maryland's residential real estate market also saw an uptick in activity as inventory, home sales, pending units and building permits surged upwards.

Active inventory increased by nearly 2 percent in March to 14,656 on a seasonally adjusted basis, the largest month-over-month increase in 6 months.

Similarly, home sales jumped to just over 7,000 units in March, up 2.5 percent from February 2003 and up 5 percent annually from March 2002.

Of greater impact is the number of pending units in the state, which rose nearly 16 percent on a monthly basis, and 6.5 percent on an annual basis in March. This uptick will drive home sales and prices in following months.

Lastly, the state is poised to see an increase in residential construction in ensuing months due to a 25 percent spike in the number of residential building permits, the largest monthly increase since February 1999.

With the rest of the economy enjoying the spring thaw, Maryland's continuing labor market troubles stand in stark contrast.

This month's unemployment rate shot up to 4.5 percent from 4.2 percent in February on a seasonally adjusted basis -- the highest unemployment the state has witnessed in nearly a year (4.6 percent in April 2002).

Moreover, manufacturing hours maintained it's downward trajectory, posting a 0.8 percent monthly decrease and a 3.8 percent annual decrease in March, and non-farm employment lost nearly 1,000 jobs from one month before.

The labor market notwithstanding, March's statistical releases shed some hope on an otherwise disappointing first quarter.

Renewed strength in consumer confidence, the successful completion of the Iraqi Freedom campaign, stabilizing stock markets and the state's strong real estate market all continue to drive Maryland's economy.

With expectations of employment growth in the second half of 2003, Maryland's economic recovery will be even more evident.

Anirban Basu is special consultant to the Regional Economic Studies Institute (RESI).

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