Eastern Shore struggles with higher unemployment, more business closings than rest of Maryland

By Meg Tully

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When state Sen. Jim Mathias came to the Eastern Shore 42 years ago, Labor Day marked the end of Ocean City’s season.

Shops would close up, people would leave, and it was deserted.

“It was over,” he said. “To go out and find a sandwich was challenging.”

Gradually, over the years, business leaders helped lengthen the season and the town thrived. But when the recession hit recently, construction crews went away, and even wealthier people who owned a second home on the shore stopped showing up after the summer ended.

“It became very challenging for real estate,” Mathias said. “For a little while, the economy of the town resembled when I first came here.”

Eastern Shore losing business faster than rest of state

Between 2007 and 2011, the most recent available data, Maryland’s nine Eastern Shore counties averaged a loss of 11% of its business establishments employing people. Statewide, the loss was much less, declining 5.7%, according to data from the U.S. Census Bureau’s County Business Patterns survey.

Since 2000, the state of Maryland has actually gained businesses by about 4%, but the Eastern Shore is lagging with a gain of less than 1%.

Compare that with Howard County, one of the counties with the lowest unemployment rate – the county lost only 2.1% of businesses from 2007-2011, and gained 16% since 2000.

The Eastern Shore is also one of the hardest hit Maryland regions when it comes to unemployment. This July, seven of the state’s counties with the 10 highest unemployment rates came from the Eastern Shore. Somerset County’s rate, at 10.7% trails only Baltimore City in unemployment (Baltimore was 10.9%), according to the U.S. Bureau of Labor Statistics.

Eastern Shore historically underperforms

Even during good economic times, Shore unemployment figures tend to run a little higher than the rest of the state. And since much of Maryland’s economic recovery can be tied to its proximity to Washington D.C. and federal spending, the Eastern Shore has been isolated from that boost.

David Ryan, the executive director of Salisbury-Wicomico Economic Development – an area with one of the main hubs of economic activity in the region — said that the quality of life on the shore still attracts people, even if unemployment runs slightly higher.

Wicomico County has a history of manufacturing that helps keep people employed, he said. In the 1970s, that industry was textiles. As textiles moved overseas, the region picked up Reagan-era defense manufacturing, which eventually transitioned to wireless communications manufacturing in the 1990s until present.

Ryan anticipates the next big economic opportunity in the region will be in the health care industry, with medical billing companies and others related to health care starting up.

Manufacturing industry changing

“We’ve seen transitions from textiles to defense to electronics to health care,” Ryan said. “We know nothing lasts forever. We will continue to monitor those markets and capitalize as best we can.”

The local economy is also dependent on the housing market, which has been slow to recover. This year, Wicomico saw its first year over year increase in average housing prices since 2007.

But although the numbers don’t compare well with more metropolitan counties for business growth and employment, Ryan said that Wicomico hasn’t had any huge closings or downsizings.

In fact, the county just celebrated a ribbon cutting for the $10 million expansion of Jubilant Cadista Pharmaceuticals, which will double the size of the facility and result in hundreds of new jobs over the next five years.

“It may not be big news in Rockville,” Ryan said. “But it is a big deal here.”

The numbers still show the region lagging behind others.

“I don’t think the Eastern Shore is getting any worse, it’s just not getting any better,” said Daraius Irani, an economist at Towson University and executive director of the Regional Economic Studies Institute.

Incubators bring hope

Irani thinks some of the foundation has been laid for spectacular growth such as new incubators coming on line and the new tech centers at UMES and Washington College and Salisbury. The key to growing businesses in the area, however, is finding some entrepreneurs to take ideas generated out of the universities and be able to grow them into a business on the Eastern Shore, Irani said.

That matches up with what Ryan has seen in Wicomico County, where they are looking at more technology transfer initiatives. That allows them to identify products developed at universities and then promote entrepreneurship to manufacture them. They have helped eight companies start up through those initiatives, he said.

For instance, they are getting ready to announce a new medical products plant that will open next year.

“We think new companies will be more innovative, more organically grown,” Ryan said. “We’re a resilient county here with a strong fabric of community and a diverse economic base.”

Republican legislator calls for more focus on Eastern Shore economy

One industry unique to the Eastern Shore that has been struggling in recent years is the poultry industry, said Del. Michael McDermott, a Republican who represents Wicomico and Worcester counties.

He said Maryland has lost a lot of market share to Delaware because of a changing regulations at the state Department of the Environment and Department of Agriculture governing new poultry facilities. In 2011, hardly any were built in Maryland.

That is just one of many  examples McDermott cites when he talks about ways Maryland could be more business friendly as a whole. He criticized the General Assembly for turning down a suggestion from Republicans to cut the corporate income tax rate and for voting in favor of passing on offshore wind energy costs to consumers and businesses while rejecting natural gas fracking in the western part of the state.

But it is Maryland’s regulations – ranging from building inspectors to environmental requirements – that make businesses move to Delaware, he said.

“We’ve got to have investment down here on the shore and if people feel there isn’t a tried and true future for it, or things are going to get bleaker for them, that’s not going to encourage them to invest,” he said.

Continued below sidebar

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Sidebar: Western Maryland struggles as well

By Christopher Goins

For MarylandReporter.com

The Eastern Shore isn’t the only region of Maryland struggling economically. Two western Maryland counties were in the top 10 unemployment rates, including Allegany County at 8.9% and Washington County at 8.6%.

“Aside from the aesthetic point of view, both areas are wonderfully beautiful but unfortunately you can’t live on fresh air and love,” said Daraius Irani, an economist at Towson University and executive director of the university’s Regional Economic Studies Institute.

Both areas have trouble retaining young people with quality jobs, he said.

“A lot of kids would go to college outside of the Western region and not come back in,” Irani said. Or, they would work outside the county since there is very little inside the county to support them since it is a rural and tourist region.

“There are not a lot of good jobs available to attract people to live there.” The jobs that were there — the manufacturing jobs that existed in the 70s Irani cites as an example — just no longer are there.

“Those jobs aren’t growing in the state as much as they once did,” he said. He pointed out that manufacturing jobs tends to consistently shed jobs month after month.

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Closed stores and vacant buildings

McDermott has noticed many “mom and pop” stores closing up in Eastern Shore counties along Route 50 as he drives to and from Annapolis. Where there used to be established businesses, there are now for sale signs or just vacant buildings.

He said that Eastern Shore representatives bring the problem to the attention of leaders in Annapolis, but they aren’t driving through the area and seeing the job losses and empty buildings.

“The ability to garner support for something is relative to the number of votes you bring to the table and where people are looking to get that attention,” McDermott said. “It’s not like they don’t care, it’s just there’s a disconnect.”

A success story for the shore has been attracting space-related business due to its proximity to Wallops Island, the Virginia space facility. The Maryland Department of Business and Economic Development provided $50,000 in funding to evaluate how it can grow the aerospace industry on the shore.

McDermott said that the average salary for employees in the aerospace industry is $65,000-$70,000.

“That can turn into hundreds of millions of dollars reinvested locally on the shore,” he said.

The curious case of Queen Anne’s County

Unemployment across the eastern side of Maryland is above 7% with just one exception. Queen Anne’s County is at 6.5% as of July 2013 and has the 5th lowest unemployment rate in the entire state of Maryland.

That is due, in part, to its proximity to Baltimore and Washington D.C. The county offers a commuter bus to both cities.

Jean Fabi, the business and economic development liaison of Queen Anne’s County Planning and Zoning, pointed out that the commute is about an hour. Census data shows that about 86% of the county’s employed resident work outside of the county. Fabi suspects many of them are going to the larger metropolitan regions.

The county does boast a strong hospitality industry, as well as agriculture and manufacturing, she said.

“We’re having a slow, steady recovery here, and we’re seeing manufacturer type employers start adding jobs,” Fabi said.

One program the county offers that is not available in every county is a revolving loan fund. It allows the county to provide loans for businesses who are opening up or expanding. The maximum loan is $50,000, but that can be piggybacked on a state or private loan for a larger amount. The loans require specific job retention and creation goals, and as they are paid back, they bolster the original loan fund.

In order to improve the economy of the shore as a whole, Fabi said the state and federal government could help increase access to capital for business. She said it’s also important that programs are designed for small business.

For instance, Queen Anne’s County approved a commercial property tax credit in February 2012. In April 2013, the county reduced the requirement to qualify from creating 25 new jobs to creating 12 new jobs.

“Here on the shore, we need to right-size the programs,” Fabi said. “Our average employer here is about 15 employees. So we’re making an effort to right-size the programs to fit the businesses we have here.”

Steps toward improvement

Across the Eastern Shore, officials are fighting to bring up unemployment figures.

The state offers a tax credit to businesses that located in counties with higher unemployment numbers. On the Eastern Shore, that includes Caroline, Dorchester, Somerset and Worcester counties.

The credit requires that the business create at least 25 new, full-time positions within two years and keep those positions filled for at least a year.

“This program has been a huge job generator for the Shore, as it provides tax credits for projects, as well as startup costs,” said Karen Glenn Hood, a spokeswoman for the state Department of Business and Economic Development.

DBED representatives also met with 235 Eastern Shore businesses in fiscal 2013 and provided direct financial assistance and infrastructure projects for business parks.

Sidebar: Eastern Shore Economic Development Initiatives

Source: Maryland Department of Business and Economic Development

• Amick Farms: DBED provided a $150,000 conditional loan to expand the company’s poultry processing plan in Hurlock, helping to retain 800 jobs and create 50 new ones.
• Kraft Foods: purchased the former General Mills plant in 2010. DBED provided a $150,000 conditional loan to assist with company expansion in Caroline County. Company plans to retain 87 jobs and create 25 new ones.
• Piedmont Airlines: DBED provided a $500,000 conditional loan to Wicomico County to assist with costs to renovate the Salisbury-OC-Wicomico Regional Airport. The upgrades to the airport helped Piedmont maintain their operations in Maryland, retaining 190 jobs.
• Protenergy Natural Foods: DBED provided a $250,000 conditional loan and $1.5 million in the form of a loan guarantee to help this Canadian company expand in Cambridge. Plans to create 150 new jobs.
• Cadista Pharmaceuticals: Provided technical assistance from DBED international division and BioMaryland Center. Company plans to create more than 200 new jobs.
• Provided $1.6 million in funding to Somerset County to fund the final design and dredging of the Lower Thoroughfare Federal Navigation Channel in Wenona. The Shore’s commercial fishing community is totally is dependent on this Channel.

State infrastructure projects to help attract companies:

•  Town of Federalsburg Industrial Park: DBED provided $836,000 to assist with developing Park
•  Town of Denton Industrial Park: DBED provided $1 million to expand Park and also recently helped to fund the installation of a fiber optic cable from Rt. 404 through Park to attract businesses.
•  Town of Ridgely: DBED provided $3 million in funding to assist with development of Mid-Shore Regional Business and Technology Park.
•  Dorchester County: DBED provided $486,450 to assist with the development of the Dorchester Business and Technology Park. We are also currently working with county to help fund an incubator for emerging businesses.
•   DBED also provided $50,000 in funding for a Lower Eastern Shore study to evaluate how the region can grow the aerospace industry on the Shore, particularly around NASA/Wallops Island.

Workforce training

The Department of Labor, Licensing and Regulation (DLLR) has seen an increase in the past four years of Upper Shore residents taking advantage of workforce services programs. In fiscal 2010, 5,926 Upper Shore residents used the programs. That increased to 7,637 in fiscal 2013, of which 3,320 found jobs.

The state labor department is also launching a new program called EARN Maryland which will provide job training in specific areas where employers are looking for employees. The Upper Shore Workforce Investment Board, which covers Talbot, Caroline, Kent, Dorchester and Queen Anne’s counties is working with manufacturers to develop programs through EARN Maryland, said DLLR spokeswoman Maureen O’Connor.

Once in place, the program will offer formal career paths and job readiness training that includes GED preparation, occupational skills, literacy advancement, transportation and child care.

Business friendly

Another key to boosting the economy is making it more business friendly, said Mathias, the Democratic senator who represents Somerset, Wicomico and Worcester counties.

For instance, in the 2013 session Mathias was a sponsor on a bill that decoupled the real property tax and personal property tax rates. Personal property tax is charged on business property like inventory and machinery, and the bill will allow county officials to lower that tax.

Last year, the General Assembly also funded six new small business development centers across the state — one of which is located in Salisbury and helped the region qualify for more federal funding, he said.

“The next piece is keeping our well educated children here with a great career job,” said said Mathias, who supports more funding for universities and community colleges.

Reporter Christopher Goins contributed to this story.