MFP COMMITTEE #1April 2, 2009

MEMORANDUM

March 31, 2009

TO: Management and Fiscal Policy Committee

FROM: Stephen B. Farber, Council StaffDirector~

SUBJECT: Briefing on Economic Indicators

Finance Director Jennifer Barrett, Treasury Division Chief Rob Hagedoom, and ChiefEconomist David Platt will brief the Committee on recent national, regional, and Countyeconomic data. They will discuss the graphs and charts on ©1-23 prepared by Mr. Platt.

The national indicators continue to reflect the sharp downturn in the real economy andthe disorder in financial markets. Real gross domestic product fell 6.3 percent in the fourthquarter of 2008. Average estimates for the first and second quarters of 2009 are for furtherdecreases of 5.0 and 1.3 percent compared to the 3.1 percent average increase in 2004-2006.The Dow Jones Industrial Average, which peaked in October 2007, has continued to fall thisyear and, until a recent bounce, was at less than half its peak level. Unemployment in Februarywas at 8.1 percent and rising, with layoffs in the housing, financial services, and retail sectorsspreading to other sectors as well. Consumer spending and business investment remain weak.Consumer price increases and housing starts have fallen to near record-low levels.

The leading indicator for the regional economy continues to suggest slower growth overthe next 6 to 8 months; despite an uptick in January, it is down 4.0 percent since April 2007. Thecoincident indicator, which measures current performance, is down 12.4 percent since March2007. Consumer confidence and the regional stock market continue to lag. The region continuesto generate new jobs, although at a much slower rate than in recent years, but payrollemployment in the Bethesda-Gaithersburg-Frederick was actually down by 1,300 last year. Thesoftness in home prices for the region persists and is likely to continue into 2010. The one-yearcore CPI increase in 2008 was just 2.9 percent.

County economic indicators are similar. Resident employment has stalled and is nowdeclining, down 13,000 in January 2009 compared to January 2008. The unemployment rate inJanuary was 4.6 percent, its highest level since 1990. It was well below the State's rate, whichrose to 6.7 percent in January (not seasonally adjusted), but well above the County's 2.5 percentrate in November 2007. The State's rate rose to 7.2 percent in February. The County's rate,which the State will release shortly, may also have risen, to 5 percent range.

Finance projects that home sales, which were down 21.4 percent in FY07 and another31.3 percent in FY08, may fall another 2.8 percent in FY09. Finance also projects that theaverage sales price for existing homes, which rose 2.0 percent in FY07 and 0.4 percent in FY08,may fall 12.8 percent in FY09. SDAT's most recent residential property assessments, for Group3, were down 16.3 percent. The value of new residential construction in FY09 is the lowest in13 years. Non-residential construction has also fallen in FY09, while the vacancy rate in Class Aproperty, 9.7 percent, is at the highest level in four years. Taken together, these indicatorssuggest continued weakness, or at best sluggish growth, in County income, property, andtransfer and recordation tax revenue.

The March 2009 report on Howard County economic indicators on ©24-25 includesmuch comparable information. The March 2009 forecast of the State Board of RevenueEstimates, as summarized on ©23, projects that in 2009 employment will decline by 2.6 percent,personal income will rise by 1.1 percent, and wage and salary income will rise by 0.5 percent.The forecast also estimates that capital gains fell 45.0 percent in 2008 and will fall another 30.0percent in 2009.

f:\farber\09mfp\economic indicators 4-2-09.doc

2

e

Presentation of Economic Indicators

To theManagement and Fiscal Policy Committee

By theDepartment of Finance

April 2, 2009

BEA reported that real GDP decreased 6.3 percent during fourth quarter of 2008.On average over 50 economists surveyed by The Wall Street Journal expect

GDP to decline 5.0 percent and 1.3 percent during the first andsecond quarters of this year, respectively, followed by a slight

recovery during the second half of this year.

!percent Change in Real GDP!

~

10.0%

8.0%

6.0%.. 4.0%lll)

= 2.0%e'l.:::U 0.0%-= -2.0%..(j100.. -4.0%~

-6.0%

-8.0%

-10.0%

-6.3%

>-< - .....~

..... .....~ ~

>-< - ~,-., ,-., ,-., ,-.,

or> - ..... .....00 - ti tior>

..... '-0'-0

..... t- r-- - 00 Vl Vl0

'" or> 0 '-0 '-0 0 t- t- o 00 00 ~ ~ '" ~0 00 0 0 0

0 0 0 0 0 0 0 0 0 0 -....-N 0

0 0 N 00 0 N 0 0 0 N 0

0 0 ..... >N N N NN N N N N N N N 0-, 0-, .....

0 0 0-, 0-,0 0 0 0N N 0 0

N N

Year:Quarter

SOURC E: Bureau 0 fEcono mic Analys is. U.S. Department 0 fCo mmerce. Hatched bars fro 111 WallS treet Jo urnal surveyco nducted March 6-10.

NOTE: Percentchanges areatannualrates.

3

Since March '08, the monthly supply of new homes for salehas averaged over 11 months at the current sales rate.

M 0 nth Iy Sup PIy 0 f New Hom e sat the Current Sales Rate

N M M ~ ~ II") II") \D \D t- t- oo 00

9 9 9 0 0 0 0 0 0 0 0 0 9I I I I~

I~ U

IU C u c u C u u C uOJ ::l OJ :::s OJ :::s OJ :::s OJ ;:; u :::s OJCl -. Cl -. Cl -. Cl -. Cl -. Cl -. Cl

Month.Year

~

LSOURCE: Joint Press Release U.S. Census Bureau and U.S. Department ofHUD

4

01

The monthly supply of existing homes for sale has averaged 10 monthssince March '08 - at current sales pace. However, for the past three

months that level has fallen below 10 months.

I 1M onths Supply of Existing Homes for Sale I Iate u rre n t S a Ie sPa c e

12.0

10.0

..0c. 8.0c.=00tI:l 6.0

.c.....=0 4.0~

2.0

0.0N N M M M -:t -:t

~If) on on \0 \0 \0 r- r- r- oo 00 00 0\

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0b I I I I I I ..!. I I

BI I

B ~ b .!. I I .!. I..... .D s:: ..... .D s:: .D I:: .D § .D I:: .D;:l U <Ll :::l u <Ll ;:l u <Ll :::l Il) ;:l u Il) ;:l U <Ll...., 0

'""'...., 0

'""'...., 0 '""'

...., 0'""'

-, 0'""'

-, 0'""'

...., 0 '""'Month.Year

SOURCE: National Association of Realtors®

5

ca

On March 18th, the Federal Open Market Committee of the FederalReserve decided to keep its target range for the federal funds rate at 0

to 0.25 percent. The futures market anticipates no changes to thetarget range until the end of this year or the beginning of next year.

'Effective Federal Funds Rate (solid bars) and' IFederal Funds Futures (hatched bars)

6.00% 1 I5.50%5.00%

.., 4.50%....~ 4.00%'" 3.50%-g 3.00%=r;o. 2.50%"E 2.00%r;o. 1.50%

1.00%0.50%0.00%

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 00 00 00 00 00 00 00 00 00 00 00 00 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 0

9 ~ 9 9 9 9 ~ 9 9 9 9 9 9 ~ 9 9 9 9 ~ ~ 9 9 9 ~ 9 9 ~ 9 999 999 ~ ~ ~ ~-=.z ~ 0.:>.-=-:; ~frt) > g -=.z ~ 0.:>.;= ~frt) > g -=15 ~ s. :>.§= gffrt) > g §15~ ~ ~ ~ ~ ~ ~ ~ ~ 0 t 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 t 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 t 0 ~ ~

Expiration Date

SOURCES: Federal Reserve Bank of St. Louis (solid bars) and theChicago Board of Trade (hatched bars) as of March 24, 2009

6

Although the leading index increased in January, overall the index hasdeclined 4.0 percent since April '07. The Center for Regional

Analysis estimates that the index will not achieve a positivetrend until the second quarter.

Three-M onth Moving Average of theWashington M SA Leading Economic Indicator

110.0 I _

I 12.0 I I

--­=g 108.0 1-1--------------------<iiI"-~ 106.0.­'-'

102.0

100.0..... ..... N N N N ("') ("') ("') ("') '<t '<t '<t '<t on on on on 'C 'C 'C 'C r- r- r- r- oo 00 00 00 0\0 '7 ~ 0 '7 '7 '7 0 '7 '7 '7 0 0 '7 ~ 0 0 0 ~ 0 0 '7 '7 0 0 '7 '7 0 0 '7 '7 '7 0.: 0- <5 I:: 0- :5 <5 I:: .... :5 "'"

.: .... "'" .= ~ "'" .: .... :; "'" .: .... :; <5 .= .... :; t> .:'"

::l

'" '" 0.. u'" 0.. ::s u

'" 0.. ::l U

'" 0.. u '" 0.. '" 0.. '"....., <t:-. 0 ....., <t: -. 0 -. <t:

.....,0 ....., <t:

.....,0 -. <t:

.....,0 -. <t:

-. 0 ....., <t:-. 0 ....., <t:

.....,0 -.

Month

~ 104.0~

=-

SOURCE: Center for Regional Analysis, George Mason UniversityNOTE: Leading indicator is designed to forecast economic performance six to eigrlt months in advance

and includes residential building permits, consumer expectations, help wanted index, initial claims for

unemployment insurance, and purchases of durable goods.

8

~

@

Led by the dramatic decline in consumer confidence since March 2007,the coincident economic indicator, which measures the current

performance of the region's economy, has declined steadilysince then (~12.4%).

Three-Month Moving Average of theWashington MSA Coincident Economic Indicator

125.0

120.0,-.,~

C 115.0~-IIr-oo 110.0~---~ 105.0~

"0=....100.0

95.0

;; ;; N N N N M M M M "'!' "'!' "'!' "'!' V) on on on \() \() \() \() t"- t"- t"- t"- oo 00 00 00 0-0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0

I I I t; ~I I t; I I ...!. t; I .!. I t; ~

I I J,

~,

t; I J ...!. t; ~I I t; ~!ii ... - ... "'3 1a ... 1a "'3 ... "'3 t) 1a "'3 1a ... ... -

0.. ;:l 0.. 0.. ;:l 0.. 0.. 0.. 0.. ;:l 0.. ;:l...., -< ...., 0 ...., -<...., 0 ...., -<

...., 0 ...., -<....,

0 ...., -<...., 0 ...., -<

...., 0 ...., -<....,

0 ...., -< ...., 0 ....,

MonthSOURCE: Center for Regional Analysis, George Mason University

NOTE: Coincident indicator respresents the current state of the economy and includes total wage and salaryemployment, consumer confidence, domestic airport passengers, and purchases of nondurable goods.

9

While the slowdown in the region's economy is reflected in consumerconfidence and the decline in the stock market, the Washington area

still added nearly 16,700 jobs in 2008 (jO.6%), albeit at a much

slower pace than in previous years.

Year-over-Year Change in Payroll EmploymentWas hington DC Metropolitan Are a

~

100.0

80.0

~ 60.0OJ)

=~

.=U 40.0;;....

I0 20.0I

;;....

0.0

-20.0MMMMMM~~~~~~~~~~~~~~~~~~~~~~~~OOOOOOOOOOOO~0000000000000000000000000000000000 0 00

I I I I I I , I I I I r r f fir I I I I I , r I I I I I I I I I I Iff

I: ~ >-.3 ~ > l:: @ >-.::; ~> I: ~ >-.3 8' > l:: @ >-.'; 0-.> l:: ~ >-.'; 8' > l:: ~ >-.'; &> l::ro '":::' ro -, ",oro '":::' ro....., r" 0 ro '":::' ro ~ ",oro '":::' ro -, r~ 0 ro '":::' ro ~ r" 0 ro '":::' ro ~ r" 0 ro~~:2 ~"Z-'~:2 V"Z-'~:2 V"Z-'~:2 V"Z-'~:2 V"Z-'~:2 V"Z~

Month.Year

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

10

While the region's economy continued to add jobs, Montgomery andFrederick Counties lost jobs during 2008 (~1,300). Total payroll

employment in 2008 stood at 575,200 compared to 576,500 in 2007.

Year-over-Year Change in Total Payroll EmploymentBethes da-Fre de rick-Rockville Metropolitan Division

l€j

20.0

15.0

~ 10.0OIl=~

.:::U 5.0~

I0I 0.0~

-5.0

-10.0MMMMMM~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0000000000000000000000000000000000000

I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I

C 8 >-.3 vo.> c@>-';:i0.>c@>-.3 0. > c@>-.;:ifr>c@>-.3 vo.>c@>-.;:ivo.>co:l "'" (Ij >-, '''' 0 o:l "'" o:l >-',~ 0 CIl "'" o:l .-.,~ 0 o:l "'" o:l -, ,'" 0 (Ij "'" o:l >-, '''' 0 (Ij "'" (Ij >-, ,'" 0 o:l'-'~:E ~'Z>-'~:E v'Z>-'~:E v'Z>-'~:E v'Z>-'~:E v'Z-'~:::E v'Z-'

Month.Year

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

11

Based on the Case-Shiller® index, home prices in the Washingtonregion decreased 19.2 percent in December '08 compared to

December '07. The futures market suggests the regioncould expect further declines through the remainder of

this year albeit at a slower pace.

Year-over-Year Percent Change inS&P/Case-Shiller® Home Price Index

Washington M SA

0.0%

-20.0% +1--------------------------------'

30.0% ] INMd..........

eiJ 20.0% ::mI!I't~L:.::U 10.0%"ti0..

~ -10.0% Io

>--30.0%! ••• •

N N N N M M M M .",. .",. .",. .",. If) If) If) If) 'D 'D 'D 'D r- r- r- r- oo 00 00 00 0- 0- 0- 0-0 o 0 'i' 0 0 'i' 0 0 0 'i' 0 0 o 0 0 0 o 0

~0 0 :I 'i' 0 0 :I 0 0 o 0 0, , , , ,

~I ,

~, I I .!.

, , , , ,C: I , C: ' , I

§ 0.:; u c: a. "3 § 0. "3 c:: ... - a ... - c:: ... U ... U ... - U0. ::l U 0. ::l u 0. ::l 0. ::l 0. ::lro ..., ..., ro ro ..., ro ..., ro..., <C ..., 0 ..., <C 0 ..., <C 0 ..., <C ..., 0 ..., <C ..., 0 ..., « 0 ..., « 0 ..., « ..., 0

Month.Year

NOTE: S&P/Case-Shiller price index is a registered trademark ofStandard and Poor's. Data from January 2009 to Decem ber 2009extrapolated from Chicago Mercantile Exchange futures data.

12

€J

On an annual basis, consumer prices for all items increased 4.5% in 2008 wnile"core" inflation (all items excluding food and energy) increased 2.9°~. Most ofthe price increases for all items occurred during the summer months (5.4%

).

Annual Percentage Change in Cons umer Price IndexWashington-Baltimore CMSA

lo. 5.00%t':l~ 4.50%~

~ 4.00% ....."Q 3.50%~'-I~ 3.00%lo.

Po.e 2.50%e 2.00%....~ 1.50%=t':l 1.00%-=U 0.50%....=~ 0.00%~~ 1998Po. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

I III All Items ~ "Core" I

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

13

Comparing the averages of each monthly resident employment numberfor 2006 (498,078), 2007 (499,017), and 2008 (497,249); resident

employment in Montgomery County fell by nearly 1,800. ComparingJanuary '08 to January '09, employment declined by over 13,000.

Year over Year Change in Employment(Labor Force Series)Montgomery County

®

15,000

10,000

eiI 5,000.cU;;.- 0

IQI

;;.- -5,000

-10,000

-15,000___ --_NNNNNN~~MMMM~V~~VV~~~~~~~~~~~~~~~~~~OOOO~OOOOoo~0000000000000000000000000000000000000000000000000

I I I I , • I I I I I I I I I 4 I I I I I I I I I I I I I I 1 I I I I I I I I I I I 1 I I 1 I I I

<: ~ >.::i fr> <: ~ >."; fr> <: ~ >."; fr> <: ~ >."; 0..> <: ~ >.:i 0..> <: ~ >."; 0..> <: ~ >.:i fr> <: ~ >."; fr> <:~~~~,~o~~~~,~o~~~~,~o~~~~~o~~~~~o~~~~~o~~~~,~o~~~~,~o~~~~ V'Z~~~ V'Z~~~ V'Z~~~ [/JZ~~~ v'Z~~~ v'Z~~~ v'Z~~~ v'Z~

MonthSOURCES: Bureau of Labor Statistics, U.S. Department of Labor

Montgomery County Department of Finance

15

Because of the decline in employment in January the County'sunemployment rate increased to 4.6 percent - up from the revised 3.8

percent in December and up from 2.8 percent January '08. The State'sunemployment rate was 6.7 percent (not seasonally adjusted).

Unemployment RatesMontgomery County

5.0%

4.5%

4.0%

3.5%

3.0%<I)

~ 2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan.'09

Calendar Year

@

SOURCES: Bureau of Labor Statistics, U.S. Department of LaborMontgomery County Department of Finance

16

Finance estimates that home sales could decline anadditional 2.8 percent in FY09 compared to l21.4

percent in FY07 and l31.3 percent in FY08.

Total Sales of Existing HomesMontgomery County

20,000

C"I) 15,000.S:l~

rLl~ 10,0000

05,000Z

0

FY98 FY99 FYOO FYO1 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09est.

Fiscal Year

6)

SOURCES: Metropolitan Regional Information System, Inc.

Montgomery County Department of Finance

17

Finance also estimates that the average sales price for an existing homecould decline 12.8 percent in FY09 compared to increases of 2.0

percent in FY07 and 0.4 percent in FY08.

Average Sales Price for Existing HomesMontgomery County

€J

$600,000

$500,000

~$400,000

~

°C~ $300,000cil

< $200,000

$100,000

$0

FY98 FY99 FYOO FYOI FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09e~.

Fiscal Year

SOURCES: Metropolitan Regional Information System, Inc.

Montgomery County Department of Finance

18

Inventory to Sales Ratio for Existing HomesM ontgome ry County

Housing sales inventory in February declined from its recent peak inJanuary from an eleven month supply to a nine-and-a-half month

supply. However, there still remains a high inventorylevel of homes for sale.

I I I I

I

12.00

10.00

8.00.S.... 6.00~

~

4.00

2.00

0.00

- M If) t"- 0\ - - M If) t"- 0\ - - M If) t"- 0\ - - M If) t"- 0\ - -~ ~ ~ ~ ~ - 0 ~ 0 ~ ~ - 0 0 0 ~ ~ ~ ~ ~ ~ ~ - 0If) If) If) If) If) If) \Ci \0 \Ci \0 \0 \Ci r--: r--: r--: t"- t"- t"- oo 00 00 00 00 00 0\0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 -0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0N N N N N N N N N N N N N N N N N N N N N N N N N

Year.Month

SOURCES: Metropolitan Regional Information System Inc.Greater Capital Area Association of Realtors

Montgomery County Department of Finance

@19

Residential construction continued to decline so far this fiscal year. Thenumber of projects declined from a high of nearly 3,100 during the sameeight-month period in FY02 to approximately 350 projects this year. Thevalue of new construction to date is the lowest over the past thirteen years.

IN R "d "I C "P" d V I Iew eSI entia onstructlOn: rOJects an a ueMontgomery County

3,500

3,000

2,500

.:J 2,000~q,j....,0100 1,500I:l..

1,000

500

0

I ." $600,000

$500,000

$400,000 --­QQQ

$300,000 ~..:C':

$200,000 :;...

$\ 00,000

$0

\997 \998 \999 2000 200 \ 2002 2003 2004 2005 2006 2007 2008 2009

Fiscal Year to Date

@

L- Projects ~Value ($000) I

I _ SODRCES, M,G"~mil Co"""'lio0 on" M0 o'gom"y Co "'>lyno.,,'mon' 0 rF;"o"

20

The number of non-residential projects under construction (76) so far thisfiscal year is the lowest compared to the same eight-month period in FY06

(78). The value of new construction (excluding 2 medical facilities) of$373.3 million to date is the lowest since the same period in FY05.

New Non-Residential Construction: Projects and ValueMontgomery County

350

300

250

.l!l 200...~....Q

150"'"Q.,

100

50

01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fiscal Year to Date

__ Projects --+-Value ($000) ISOURCES: McGraw-Hill Construction and M ontgom ery County Departm ent of Finance

$700,000

$600,000

$500,000S

$400,000QQ~'-'~

$300,000 =-;>

$200,000

$100,000

$0

cw21

The slowdown in non-residential construction can be attributed to anincrease in the vacancy rate for Class A property in the County to

its highest rate since the first quarter of 2005.

Office Vacancy Rates Class A PropertyMontgomery County

12.0%

10.0%

<=~ 8.0%....cl':l 6.0%I.ll':lI.l

4.0%~

2.0%

0.0% - - >- -..,. - <r>

0 ~ ..,. 0

0 0 0 0

N 0 0 NN N

- ~- - - ~<r> - \0 - - - - -0 <r> <r> 0 ~ - r-- - ~0 0 0 0 0 \0 \0 0 r-- -N 0 0 N 0 0 0 0 0 r-- r--

N N N 0 0 N 0 0 0

N N N 0 0N N

00ooN

--00ooN

---00ooN

~00ooN

@

QuarterSOURCES: Planning Division, MNCPPC-MC

Montgomery County Department of Finance

22

C®

SUMMARY

• Employment:The County's unemployment rate (4.6%) has risen nearly two percentage points (i 1.8 percentagepoints) over the past year and is at its highest level in over nineteen years.The County's employment, as measured by the labor force series (household survey), decreased 0.4%in 2008.

• Real Estate Market:Both the number of existing home sales 02.8%) and the average sales price of an existing home012.8%) are expected to decline this fiscal year.

• Construction:In terms of the number of projects and added value, new construction and non-residential havedeclined so far this fiscal year 2009.

• State Board of Revenue Estimates Forecast (December):The State's BRE has downwardly adjusted its forecast of the State's economy in March compared toits previous forecast in December. Employment is projected to decline 2.6 % in 2009 02.0% inDecember), total personal income is expected to increase a modest 1.1% (i 1.70/0 in December), andwage and salary income is projected to increase a very meager 0.5% (i 1.5% in December). Finally,capital gains are expected to decline 45.0% in tax year 2008 (same as in December) but another30.0% in tax year 2009015.0% in December).

23

I~I>ICA-TC>RS

Retail•..representatives reported this sectorlocally remains a mixed bag. The same can­not be said for the surrounding jurisdictions.Sales in food, groceries and perishablesremain strongest. There is a definite weak­ness in the sales of home furnishings, majorand small appliances and similar products.Surprisingly gasoline sales volumes haveincreased, but income from gas sales aredown. Coupon usage has doubled as consum­ers try to stretch every dollar. Luxury goodsales are up in volume, but due to pricesdecreases revenues have remained relativelyflat. Inventories are typically about ten per­cent less than last year. Food costs have notgone down for small retailers. Value items areselling best, as consumers seek out bargains.Rents for retailers are often too high and land­lords are putting off rate increases. The newauto market in Howard County remains veryslow. Consumer fears about layoffs, creditmarkets and a general lack of confidence arenot helping. Purchase incentives from manu­facturers are good and dealers are optimisticthere will be some slow but steady growth inthe second half of calendar 2009.

seem like a small change, it could be the thingthat accelerates the economy. Businesseswith government contracts remain busy, par­ticularly those dealing with federal govern­ment contractors.

are busy, agents are busy, and calls are comingin for rentals and sales inquiries alike. Trafficfrom first time buyers is definitely up. Theinventory of homes on the market continuesto be large. Homes are on the market for avariety of reasons, including short sales. Buy­ers are making decisions but often after threeor four visits to properties. During the homeinspection phase buyers are being very partic­ular, asking for the world, but sellers are will­ing to meet those demands ifit seals the deal.Selling prices are usually less than the origi­nal asking price. Sellers seem to haveaccepted that it is a buyer's market and askingprices will not be met. No one is sure if thebottom of the market has been reached, butmany feel the market is on the way back up.All indicators are showing green for buyers inthe resale market. Interest rates are low,inventory is varied, prices are affordable andcredit is available for those with good credit(750 credit score and up). High end homesare still sitting for a year or more. Homesaround the $250k range are selling best.There are properties available in this rangedue to price drops and short sales.

Service Industries•••representativesreported this sector is seeing a somewhat sur­prising uptick. Weather actually tnunped theeconomic downturn as some consumersopened pocketbooks to break out discretion­ary dollars. Transportation services have seenan increase in business traffic, attributable toconvention scheduling. Leisure travelremains slow, but overall business has shownsome improvement. Lower fuel prices havehelped, not just the bottom line, but also byputting discretionary dollars in the hands ofleisure and business travelers. While this may

Banking•.•representatives reported adichotomy exists between mortgage rates forloans under $500k and those above $500k ofover 200 basis points. The lack of liquiditycontinues to impact higher priced homes andhas that market locked up. The residentialmortgage market is expected to be tough for a

A JoiniPublication of HowarcfCounty Government&the-Howard County Chamber of Commerce

Residential Real Estate•.•representa­ti ves reported the local real estate marketappears to be picking up. Conference rooms

Residential Construction...represen­tatives reported the new home market contin­ues to be pretty bad. Builders are continuingto struggle to compete with the resale marketas well as foreclosures. High land prices paidin recent years prevents many builders fromselling new home inventories near the pricinglevels of existing homes. Obtaining or rene­gotiating existing lines ofcredit is difficult forbuilders as their net worth has declined as themarket has declined. Current land prices arelower, but not all builders can afford to pur­chase land. There appeared to be an uptick inbuyer traffic in January, but news of a federalstimulus package seems to have created a cli­mate where buyers arewaiting to see what itwill provide. There is a lot of uncertainty inthe market. The commercial real estate marketin Howard County is experiencing a rise invacancy rates. Cap rates are also having animpact on property values. This makes nego­tiations with creditors more uncertain. Manyloans made earlier in the decade under theCMBS (Commercial Mortgage Backed Secu­rities) were bundled and are held by lendersoutside the area. These loans are now due andthe impersonal nature associated with the bun­dling makes getting reasonable terms uncer­tain. On a brighter note vacancy rates are notas high as in the 1990's as there was less over­building. Rents are going down and negotia­tions with owners are possible, particularly inthe retail sector.

Insight & Outlook

HoW"ard County, Maryland.

March2009

Our Mission...Review the mostcurrently availableeconomic indicatorsfor Howard Countyand surroundingareas to assist inproviding advancewarning of possibleshifts in the localeconomy that maybe helpful in theevaluation ofcurrent and futuregovernment policiesand private sectorbusiness decisions.

Current

Reporting Period Reporting Period

EM PLOY ME NT (Source' Maryland Department of Labor, LIcensing and RegUlation)

Re~ldenl

Resident Employment..., December 2008 ,151,758 .

Unemployment Rate... . December 2008 3 8%

Last Year's

Reporting Period

. ..... 155,455

2.4%

Current Fiscal Year

Average·to·Date

154,530

3.5%

Last Fiscal Year

Average.to-Date

................... 155,145

, 2.7%

Percent

Change

-0.4%

At PlaceAt Place Employment.... . June 2008

Total Wages.. . June 2008

Average Weekly Wage... .. June 2008

151,357

.. 51.893,677.055

5973

..... 149.606

$1,827,674.000

................... $950

148,071

........ $1,912,339.128

...................... _. $994

...... 145,400

$1.822,500,288

.. , ... $964

1.8%

49%3,1%

COUNTY REVENUES (Source: Howard County BUdget Office)

Personal Income January 2009 $3,329,766

Planning and Zoning Fees... . December 2008 $60,065 .

Transfer Tax. .. January 2009 $1,296.560

..... $4.284,402

........... $68.867

.... $2.060.345

.......... $112,359,176

.. ..$375.591

.. $10,890.088

.$107,980,466

$565,524

...513,356.491

406%

-33.6%

-185%

-77%

-254%

$492.180

263

.... $454,441

.. 197

$434,742 $459,568

.115 ,179

November 2008

November 2008

REAL ESTATE (Source: Maryland Property View; and Cushman & Wakefield, Inc.)

Single-family D~lIings

Average Seiling Price

Num ber of Units Sold ..

Condominiums

Average Selling Price.Num ber 01 Units Sold

November 2008

, November 2008

.. ...$230,000 .

...................... 1 ... $287.387

. ... 2....$348, 111

9$340,952

4

2.1%113.6%

Office MarketTotal SQuare Footage. .. December 2008 11.510,641 .

Absorption December 2008 161,226.

Vacancy Rate Class A & B.. . ,December 2008 16.40% .

10,813.341

. 398.278

.13.60o~

11.143,630

19.603

.... 14.78%

................ 10,739,835

.102.567

...... 11.93%

....... 3.76%

.-80.9%

........23.8%

SALES TAX (Source: Office of Comptroller of the Treasury. Revenue Administrabon DllJislon)

Apparel... . December 2008 $901.018 .

Furniture and Appliance.. ...December 2008 $1,136,762

General Merchandise..... ... December 2008 $2.895,006

$812,269

$1.171,103

$2,669,457

$5,116,504

$7,088.1 01

.... $15,443,758

................. $4.458.878

......... $7,582,961

................ $13,358,381

....... 14.7%

... .-6.5%

.. 15 6%

CONSTRU CTION (Source: Howard County Department of Inspections, Licenses, and Permits)

All Building Permits Issued... January 2009 . 160 217 ... 1,814 ................ 2.429 -253%

ReSidential Issuances

Single-family Detached ...

Single·fa mlly Attached ..

MUlti-family Living Units....

January 2009

January 2009

.. January 2009

.27

.......... 22 .

.16

"'.. 21

..23

.0

140. 221.101

258

....219

.. 100

-45.7%

09%00%

NonreSIdential

New & AAllssuances.. January 2009 .... 37 .55

Reported Square Footage.. December 2008 17,542 . .. 67.485

E~lmated Construction Co~t.... ...January 2009 .... $1,560.000 $7,330,000

415..289.152

$57.631.600

503

868.4194

$69.101,255

-17.5%

-667%.... -16.6%

-141.6%. 117.110001028...99.0.............. November 2008

ECONOM IC INDICES (Source' The Conference Board. George Mason University Center for Regional Analysis)

National

Leading E conom ic Index

Washington MSA

Leading EconomIC Index

COincident Economic Index ..

.... October 2008

. October 2008

105.3

106.2 .

.108.3

118.9

106.1

109.7

.1088

.... 120.2

-2.5%

..... -8.8%

The fiscal )ear for Howard County runs from July 11I:l JlXle 30

.......Recordation Transfer

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Howard County Recordation & Transfer TaxFY2000- FY2009 (FY09 thru Feb. 2009)

~HOWARD

!!C..Oiiiir.to:iiij2,U.N.TY..

Janice Bauman. J.M. Bauman AssociatesCathy 1. Bell, Brdancat EnlerpriscJeffrey Bronow, Ho. Co Dept of Planning & ZoningGuy Caiazzo (Moderator), InCI Trading & Invest-

ment, Inc.William N. Chalfant, Jr., PNC BankNancy Cummins, Long & Foster Real EstateDonald W. Eames, The Airport Shuttle, Inc.Charles Feaga" Howard County Farm BureauJaeL: Gunther, Economic Development AuthoritySharon Greisz, Howard County Dept. of FinancePamela Klahr, Chamber of CommerceDavid Liby, CosteoChip Lundy, Williamsburg BuildersMarsha McLaughl in, Howard County Dept. of

Planning & ZoningJohn Miller, Miller Brothers ChevroletJames Peacock, UHY AdvisoI'$ Mid~Atlanlic MD,

Inc.Kirit Parmar, Dunkin DonutsA. Noyab Siddiqui, Scientific Systems Software Int"!Cole Sehnorf, Manekin CorporationRonald S. Shimel, Miles & StockbridgeWill Spcacc, Columbia Junction Car Wash, Inc.Raymond S. Wacks, Ho,Co. BudgelOfficeDonald Stitely (Editor), Ho.Co. Budget Office

Questions or suggestions? Contact:Donald Stitely, Howard County Budgel Office3430 Courthouse Dr., Ellicott City, MD 21043Telephone. 410-313-20n I ITY 410-313-4665FAX> 410-313-3390Email dstitcly@howardcountymd.govThc Indicators is online at http://W\\w.co.ho.md.uslDOAJOOApdfslPrintReadyEcoIndMar09 pdf

Economic Indicators CommitteeMEMBERS

thru the same period. A total of 115 single­family homes were sold during October 2008,a decrease of 36% or 64 fewer units than the179 units sold in November 2007. Averageunits sold fiscal year to date were 197 com­pared to 263 units thru November 2007, adecrease of 25%. Condominium prices inFY09 thru November averaged $348, III up2, I% from the average price of $340,952 thruNovember 2007. Sales of condo units inNovember 2008 declined by I unit comparedto the numbers reported for November 2007when 2 units were sold. The commercialoffice vacancy rate for December 2008 was16.4%, up from 13.6% in December 2007.The vacancy rate does not reflect pre-leasednew construction. Square footage availablehas increased by 697,300 s.f. when comparingDecember 2008 to December 2007. Netabsorption for the fourth quarter of calendar2008 was 161,226 s.f. compared to netabsorption of 398,278 s.f. through the fourthquarter of calendar 2007.

Sales Tax••.December 2008 collections forApparels increased by II % compared to thelevel collected in the same month last year.The FY09 average receipts to date increasedby 14.7% when compared to the prior year,Collections reported for December 2008 Fur­niture and Appliance sales declined by 3%compared to December 2007. Fiscal year-to­date, average revenues thru December 2008declined by 6.5% from the previous fiscalyear. General Merchandise collectionsincreased by 8.4% in December 2008 com­pared to December 2007. Fiscal year-to-dateaverage levels increased by 15,6% comparedto the prior year. It should be noted sales taxrevenues are not returned to the county asdirect revenue. They are an indicator of dis­cretionary spending in the county as reportedby local businesses to the State of Maryland.

Real Estate...The average sale price for asingle-family home (includes single familydetached and town homes) in November 2008decreased by 5.4% from the November2007average of$459,568 to $434,742. Fiscalyear-Io-date average prices declined by 7.7%

-ttO:~??~~

At Place Employment is reported for June2008 and was 151,357 an increase of 1.2%compared to the June 2007 level. Total wagesreported for June 2008 grew 3.6% over theJune 2007 level, rising from $1,827,674,000to $1,893,677,055. The average weekly wagereported for June 2008 was $973 up $23 or2.4% from the $950 reported for June 2007.

County RevenueS...Personal incometax receipts as reported for January 2009 were22.3% lower than income tax revenues col­lected for January 2008. Fiscal year to dateFY09 income tax revenues are 4.1 % aboveFY08 levels. Planning & Zoning fees arereported for December 2008 and are 16.3%higher than the December 2007 level. Fiscalyear-to-date collections for these fees are 34%lower than the FY08 levels. Transfer tax isreported for January 2009. Compared to Jan­uary 200 current collections are down 37% inJanuary 2009. Average fiscal year-to-datecollections for FY09 are down 18.5% whencompared to FY08.

ConstructiOn...Building permits issuedin January 2009 decreased by 26% comparedto the January 2008 level. Fiscal year '09 todate permit activity reflects a decline of 25%,or 615 fewer permits than the FY091evel of2,429 permits, Single-family detached issu­ances for January 2009 reached 27 units com­pared to the January 2008 level of 21 units,FY09 to date SFD permits are down 46%when compared to FY08 year to date levels.Attached single-family issuances decreasedby I unit in January 2009 compared to theprior year. Fiscal year to date the number ofsingle family attached units is down I% fromFY08 to FY09. Multi-family permits posted16 units in January 2009, 16 more than thelevel as reported for January 2008. Non-resi­dential new and additions, alterations, interiorcompletions (AAI) permits were down by 18units in January 2009 compared to January2008. Non-residential reported square foot­age fiscal year to date is reported thru Decem­ber 2008. FY09 s.f. to date totals 289,152compared to 868,494 reported for FY08 thruthe same period, The estimated non-residen­tial construction cost reported for January2009 was $1.56 million compared to $7.33million in January 2008.

Economic Indices...National LeadingEconomic Index (LEI) as reported forNovember 2008 was 99.0, down 3,7% fromthe November 2007 level of 102.8. The LEIfor the Washington MSA was 105.3 in Octo­ber 2008, down from the 108.3 reported inOctober 2007. The Coincident Index for theWashington MSA was 106.2 in October 2008,down from the October 2007 level of 118.9.Fiscal year to date averages for the Washing­ton indices were both down. The leadingindex was down 2.5% at 106.1 for FY09 com­pared to 108.8 for FY08. The coincident wasdown 8.8% at 109.7 for FY09 compared to120,2 for FY08.

SummaryEmployment...Resident employment inDecember 2008 reached 151,758 persons. TheDecember 2008 unemployment rate on.8%was the lowest in the State of Maryland andsignificantly below the State rate of5.8%, Theunemployment rate for December 2007 was2.4%. The FY09 average unemployment rateis now 3.5% compared to the FY08 average of2.7 % thru December.

and low interest rates are helping move buy­ers off the fence. There is some evidence thatconsumers and businesses alike are doingsome discretionary spending, but overall thereis little optimism that things will get betterany time soon. Most business owners agreethat calendar 2009 is going to be a very chal­lenging year,

$1,000$950$9lO

$850

$800

$750$700

$850$600$550

$500

while, Commercial real estate office/ware­house space is appraising at I0-15% belowlevels of a year ago, Increased vacancy ratesmay drive these types of property valuationseven lower in the future. On the commercialretail side vacancy rates are rising as well asmany small retailers in strip center spacestruggle to survive.

Agricultural...representatives reportedadequate rain during the growing season andgood weather during harvesting resulted in anaverage production year for farmers. Calen­dar year 2009 finds the Ag community in aneconomic slump and already showing changesfrom the bounty of 2008. Milk prices havedropped dramatically from a high of $23 perhundred pounds in 2008 to $9.30 in February2009. Corn prices are down to $3.50Ibushel;wheat is $5lbushel and soybeans are now at$9lbusbel. Producers ofbeef and pork areseeing price drops as well with beefat $.95/1b.and pork at $.50/lb. Food prices for consum­ers should be lower in 2009 overall. Farmersare nervous about fertilizer and fuel prices,which remain relatively high. News of etha­nol plants going bankrupt has increased fearsthat grain prices may tumble even more. Pro­duction increases are not likely due to thehigh cost of doing business and the size ofinvestment required.

Professional ServiCe...indusny repre­sentatives reported most local business own­ers are experiencing flat or no growth. Somebusinesses are considering price increases tooffset unpredictable escalations in operatingcosts. Most discretionary spending has beeneliminated. Price shopping for services andmaterials has become routine. Legal officesspecializing in bankruptcy and turnaround sit­uations are busy, while those specializing intransactional activities are less busy. Fewbusinesses are adding new employees. Manyare not replacing employees that leave, eventhough there appears to be an abundance ofjob seekers. Owners are more concerned withkeeping existing lines of credit rather thanincreasing them. Few business owners areoptimistic about improvements in the localeconomy during 2009. Technology firmsoperating at least partly in the governmentsector have been the least affected by thedownturn.

Overall•.•it seems the Howard Countyeconomy is in the midst of the economicdownturn. The biggest questions are howsevere is it going to be and how long will itlast? Bottom line is that no one knows. Theimpact of the federal stimulus package won'tbe known for a while but there is some indica­tion that homebuyers might be waiting to seehow it will affect their finances. The resalehousing market is seeing improved activity

AI Race Employrnent&Awrage\/\eeklylllBgefor Howard Counly, MD

f'I'2OOO.F'f2008

....~ "..x ......... ""-.

Jt' ..... ..... ...-.. .. ....,- ---- , ....

•

200l 2001 2002 2003 2004 2005 2006 2007 2008

- -I--

.....

I:i~~

1·1'to-

"""I--

to-"""

I--I;

110,000

120,000

130,000

100,CXXl

150,000

140,000

$<Ill,OOO,OOO

$35,000,000

$30,000,000

$25,000,000

$20,000,000

$15,000,000

$10,000 ,000

$5,000,000

$0

..Businesses that havedone all the rightthings for years arehaving difficulties,not as a result of any­thing they did."