The beatings will continue until the economy improves.

From left, Cheryl Brown (Davis, Agnor, Rapaport & Skalny), Anirban Basu (Sage Policy Group) and Rochelle Hazzard (Tower Federal Credit Union) spoke at the Howard County Chamber’s annual Economic Forecast event. (TBM/George Berkheimer)

That’s the prediction of economist Anirban Basu, CEO of the Sage Policy Group, and the reluctant conclusion of regional economic development officials.

Speaking at the Howard County Chamber’s annual economic forecast event, held in December at the Turf Valley Resort, Basu addressed a catalog of conflicting economic indicators that prevailed throughout 2023 and the counterintuitive results they produced.

“Why aren’t we in recession now?” Basu asked. “My feeling is that the reason the economy has been performing [positively] over the past 22 months is because supply chains have improved … in the context of unmet demands.”

In other words, transactional volume translated to economic growth, he suggested.

“My feeling is there’s still another wave of impact from high interest rates to be felt by the economy, and that’s what I think jeopardizes the ongoing economic expansion or recovery,” Basu said. 

Workforce woes

From left, Jennifer Jones (HCEDA), Amy Gowan (AAEDC), Kristi Simon (Central Maryland Chamber), David Iannucci (PGCEDC) and Jonathan Williams (Central Maryland Chamber Board) presented the Central Maryland Chamber’s 2023 Economic Forecast. (TBM / George Berkheimer)

At the Central Maryland Chamber’s own forecast event at the Maryland Jockey Club in November, business leaders heard how volatile economic conditions are affecting policies, revenues and outlooks in local counties.

Jennifer Jones, CEO of the Howard County Economic Development Authority, said retirements and child care costs have contributed to the workforce shortage.

“We have to partner with stakeholders on this,” she said, citing efforts by Howard Community College President Daria Wilis to emphasize certifications, associates’ degrees and upskilling as alternate pathways to employment.

“It’s an opportunity for HCEDA to go out and make more of a connection,” she said. “There are plenty of programs that can help, and that’s a role we can do more with.”

David Iannucci, president and CEO of the Prince George’s County Economic Development Corp., estimated that the number of high school graduates will drop from a peak of 3.5 million in 2016 to the 1992 level of roughly 2.5 million within 10 years, prolonging the situation.

“We have a problem with legal immigration, and that’s a huge part of the workforce shortages for construction, the labor industry and leisure,” he said. 

Amy Gowan, president and CEO of the Anne Arundel Economic Development Corp., said her county hopes to encourage more business growth by paying more attention to its Latino population.

Starting in June 2024, she said, Anne Arundel County’s Inclusive Ventures Program that helps give minority startup businesses a leg up will be offered in Spanish.

The county expects to begin offering additional business programming in languages other than English as well, she said, and plans to increase outreach with the Hispanic Chamber of Commerce to make county resources and contracts more accessible to minority businesses.

Warning signs

Although the U.S. is not in recession, Basu said there are some warning signs.

“Consumer indebtedness has passed the trillion dollar mark and we’re seeing more delinquency in credit card accounts, mortgages and auto loans,” he said, adding that mortgage applications are down about 80% from their 2021 peak.

“There is a lack of inventory, very high prices, and high borrowing costs in the housing market,” he said.

Even though Americans continue to spend on other things, Basu noted that only 6% of respondents in the most recent National Federation of Independent Business’s Index of Small Business Optimism survey agreed that it would be a good time to expand their business within the next three months.

Mixed signals

Despite the doom and gloom, there are still some good prospects for growth.

“I think there are a lot of opportunities around artificial intelligence,” Jones said, particularly in light of the Baltimore region being designated a federal Tech Hub eligible for up to $70 million in federal funding.

“Cyber is another major economic driver,” Gowan said, observing that it’s no longer the domain of government and big corporations.

“It’s more mainstream in the community now and creating another whole market with [smaller] businesses that realize they have to secure their data and intellectual property,” she said.

If there’s an imperative for weathering current volatile conditions, Jones believes it lies in collaboration and connection.

“I feel like we have a lot of great things in place, but we haven’t brought everybody together to put regulations and other things in place that elevate us and make us better,” she said, stressing that local jurisdictions need to do a better job of promoting themselves to attract businesses and the workforce. “Other states are ahead of us right now, we need to work at this.”

Basu predicted that the economy will get worse before it gets better, with persistent excess inflation.

“Some segments will hold up better than others, including construction, grocery stores and multifamily housing,” he said. “At some point the Federal Reserve will stop raising rates, but I think recessionary conditions will prevail at some point over the next 12 months.”