Economic Analysis - Maryland economic index falls for the second

The RESI Maryland Leading Index fell by 0.3 percent in August, representing a second consecutive monthly decline for the index. Compared to last August, however, the index is up 0.9 percent. Components of the index that indicate upcoming economic weakness include unemployment claims, airport activity, sales and welfare levels. Components holding strong positions include construction and manufacturing activity.

The employment situation in August weakened a bit. After a strong showing in July, August payroll totals were off by 0.5 percent, yet remain 1.5 percent above last year's payrolls. Maryland residents also felt the job pinch as the unemployment rate rose by 0.2 percent to 4.3 percent, driven by an increase in the number of unemployed and a contracting labor force.

Initial unemployment claims rose by 0.8 percent in August, the largest monthly increase the state has seen since December 2003. The amount of benefits paid rose by 15.1 percent for the month. Despite the jump in first time jobless claims and benefits paid, they still remain below prior year levels by 6.1 percent and 5.4 percent, respectively.

August's consumer spending activity was mixed, yet again. Sales of durable goods items increased by 0.5 percent and were 11.9 percent above the sales from last August. As consumers picked up purchases of big ticket items, department store sales fell for the month. Tax receipts from the sale of general merchandise, apparel and furniture (GAF) decreased 2.9 percent for the month and were only 2.7 percent above prior year levels.

August sales of new and used automobiles suffered for the second consecutive month. New car sales dropped 3.8 percent and used car sales declined 1.1 percent for the month. Compared to last August, new car sales are lagging by 3.5 percent, but used car sales are up 2.6 percent.

More than 8,400 homes were sold in Maryland in August representing the highest level experienced statewide since September 2003, and 3.7 percent above sales in July. Homes pending sale rose 5.3 percent for the month, setting a record at 8,738 and ensuring that home sales should remain strong in upcoming months. For the first time in five months, the inventory of homes available for sale dropped 1.4 percent in August, yet remained 1.5 percent above last August's inventory level.

Home price appreciation was nonexistent in August. The average home sales price increased a scant $51 to $285,120, while the median home sales price actually declined 1.5 percent for the month. However, both measures remain well above prior year sales prices by 16.3 percent and 18.9 percent, respectively.

Building permit activity rebounded in August, increasing by 3.5 percent for the month and 8.1 percent above prior year permitting activity. The value of permits also rose by 23.0 percent for the month and was 30.9 percent above values recorded last August.

Activity at BWI Airport declined for the second consecutive month as passenger traffic dropped by 2.7 percent and freight tonnage declined 6.8 percent in August.

John Hopkins is associate director of applied economics and human services at RESI Research & Consulting in Towson. Mr. Hopkins compiles Maryland economic data and writes this column for The Daily Record every month.

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