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Baltimore saw massive economic growth last year. Why? Because of the pandemic.
While much of the world dealt with economic stress, Baltimore’s economy benefited from the stress on the global supply chain, experts told The Banner.
The city’s gross domestic product grew by 5.9% in 2022, outpacing nearly every other part of Maryland — and most large economies in the nation, according to data released last week by the Bureau of Economic Analysis.
But experts warn that kind of growth might not be sustainable.
“That’s a growth rate that we typically associate with the Chinese economy,” said Anirban Basu, chairman and CEO of Baltimore-based Sage Policy Group. “It’s a really good number, but it’s not sustainable.”
To understand why the city’s strong growth isn’t sustainable, you have to understand why the pandemic helped it grow so quickly in the first place.
2022 was a tumultuous time for the U.S. economy. The nation was reeling from pressure caused by the pandemic, driving inflation up. June 2022 was the lowest point for consumer confidence since data has been tracked — lower even than the economic recession of 2008.
Baltimore was in the perfect position to capitalize on the worldwide economic situation, Basu said.
Baltimore’s position as a major deepwater port, situated in a prime location on I-70, made it especially capable of helping with the nation’s crippled supply chain.
The service sector accounted for 4.9 percentage points of Baltimore’s 5.9% jump in GDP in 2022. The next biggest contributor to the city’s rise in GDP was manufacturing and information at 1.7 percentage points. Most other categories saw a decrease in GDP in 2022.
There was also a huge demand for blue-collar workers, which Baltimore had in high numbers. And extra spending money was more plentiful, boosting the city’s entertainment venues, from bars and restaurants to sporting venues and more, Basu said.
All those factors that helped contribute to Baltimore’s economic boom in 2021 and 2022 are the same things that make Basu skeptical that the boom will continue. Discretionary spending, he said, is drying up. The supply chain has drastically improved.
There are some parts of Baltimore’s economy that seemed to stay strong in 2023, especially in the entertainment sector. The Orioles had a banner season, and Camden Yards saw its largest average attendance since 2017. The Ravens remain a big draw, and the renovated CFG Bank Arena appears to have been a massive success, with Billboard naming it one of the top-grossing venues of its size in the world.
But while those kinds of major events are certainly good for the city, they aren’t exactly the economic drivers people might think they are, said Kerry Tan, associate professor of economics at Loyola University Maryland.
“The success of the sports teams surely provides a big boost to civic pride and morale,” he said. “But economists would typically say that the economic impact of hosting these sports teams may be overstated.
“That’s not to say they have no impact. The eight home games for the Ravens and 81 home games for the Orioles, that’s going to help drive economic activity a bit.”
Even if it’s not sustainable, the city’s economic growth over the past few years is obviously a good thing, said Daraius Irani, the chief economist for the Regional Economic Studies Institute at Towson University.
Private, service-providing industries were by far the biggest part of the city’s economy. That’s a big category. It includes things you might think of as service jobs, such as food service, retail and medical care. But it also includes things you might not think of, such as utilities, transportation and insurance.
Baltimore’s economy is more service-based than others in Maryland. About 78% of the city’s GDP in 2022 came from that sector, compared to 68% statewide. Only three counties — Howard, Calvert and Talbot — saw a higher percentage of their GDP come from service industry in 2022.
Service industries produced nearly $40 billion in GDP in Baltimore City last year, a 6.3% increase over 2021. The next highest growth was in Frederick County, which saw a 5.6% jump in service GDP.
But Baltimore’s economic growth is not going to make a big impact on most Charm City residents’ lives, Irani said. It’s possible that more economic activity can lead to more social services like trash pickup and road work, he said. But for the most part, GDP — and the more localized gross state product — are more important to economists than residents.
”It’s great that GSP [gross state product] is going up, that unemployment is going down. But for most people, if you already have a job, those numbers don’t matter to them at all,“ Irani said.
“Most households, what they see in front of their face is gas prices, grocery prices, how much rent is.”
Many of those pressures have cooled since 2022. Inflation has slowed in recent months, though prices remain high. Gas prices, after hitting an all-time high in 2022, have also come down some. And the city’s unemployment rate was down to 4.3% in 2022, its lowest rate in decades.
Tan was also skeptical, and said residents might consider being a little more careful with their money in the future.
“As a consumer, there is so much uncertainty about the economic future,” Tan said. “Instead of just continuing to splurge, it would be wise to see how the economy progresses in the future, before you make any rash economic decisions.”
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Ramsey Archibald is an award-winning data journalist originally from Birmingham, Alabama.
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