The tragic collapse of the Francis Scott Key Bridge last week claiming the lives of construction workers who were all Hispanic has rattled the Baltimore region to its core.
As the local community begins the difficult work needed to return to some sense of normality, experts say that, at the very least, the local economy will likely withstand the effects of the bridge’s collapse.
The collapse will indeed have some economic impact, but it will likely be limited. Baltimore’s regional economy has a lot going for it such as low unemployment and low inflation.
The Port of Baltimore is a key economic engine, employing tens of thousands, but it is currently immobilized with debris littering the Patapsco River. Officials have said they’re tapping into billions in emergency federal dollars to remove the wreckage to allow ship traffic and rebuild the bridge as quickly as possible. Insurers are also stepping in to cover costs.
“Baltimore County and the city have very high credit ratings, which means they have broad, diverse and strong tax bases that would be resilient to one-time shocks like this,” Orlie Prince, a senior vice president and manager at Moody’s Ratings, told CNN.
The firm assesses the creditworthiness of local governments, which takes into account the economy’s overall health, and stated in a recent analysis that “a successful resumption of port activity in coming weeks, combined with substantial federal funding for an eventual bridge replacement, will reduce risk of long-term damage.”
Here’s a snapshot of Baltimore’s regional economy and why it’ll be likely spared from an economic disaster.
The Baltimore metropolitan area, which encompasses the nearby cities of Columbia and Towson, registered a low 2.8% unemployment rate in January, according to Labor Department data.
That’s well below the national rate of 3.9% in February and ranks 43rd out of 389 regions across the country with more than one million residents. It’s lower than in other eastern US cities such as Boston, Orlando, and Atlanta and the same as Washington D.C.’s.
The region’s job market is diverse, powered by health care, education, financial services and government. The Port of Baltimore is also a big source of jobs in the region, accounting for about 19,970 direct jobs, or 1.4% of total nonfarm employment in the greater metro area, according to a Moody’s analysis.
The fate of those jobs is unclear at this point, but they probably won’t disappear permanently. The port will eventually reopen and there are other employers in the area doing similar work with similar jobs, so those workers could also easily find new employment if necessary.
“While the port is closed and debris is getting cleared up, you still have Tradepoint Atlantic, which is a private port facility that’s still open and there are companies in the area like Amazon which are looking to expand and fast track their plans to develop warehousing there as well,” Matt Jaffe, an analyst at Moody’s, told CNN.
“I think the job market is definitely resilient,” Jaffe said.
The US economy is still dealing with high inflation, but that’s not much of a problem for the Baltimore metro. Consumer prices in the region were up just 1.7% in February from a year earlier, according to the latest Consumer Price Index data. That’s much lower than the national rate of 3.2% that month and ranks among the lowest of the 23 metro areas with more than 2.5 million residents for which the Labor Department publishes inflation data, according to a CNN analysis.
That’s also below the Federal Reserve’s target for its preferred inflation gauge, the Personal Consumption Expenditures price index.
Inflation in Baltimore slowed dramatically last year from April to June, falling to a 2.8% annual rise from April’s 5.3%. Food and beverage prices fell 0.6% during that two-month period while the energy index saw an even steeper drop of 1.8%.
“Inflation continues to be lower in Baltimore than the national average, so the cost of living is cheaper here than elsewhere in the state and in the US as a whole and I think that that only helps make Baltimore an attractive city to call home,” Christina DePasquale, an associate professor of practice at Johns Hopkins Carey Business School, told CNN.
Like across the country, rising energy prices have recently pushed up overall inflation in the Baltimore metro.
Baltimore’s housing market is relatively decent. The median price for a home in the Baltimore metro was $383,900 in the fourth quarter of 2023, according to the National Association of Realtors. That’s just slightly below the national median price, which was $384,500 in February, NAR reported last month.
However, housing affordability nationwide became strained as the Fed began to jack up interest rates two years ago in a bid to combat the highest inflation in decades. The Fed doesn’t set mortgage rates, but its rate decisions do influence them.
The average 30-year fixed mortgage rate reached a two-decade high of 7.79% in late October, according to Freddie Mac, and the latest data show that it’s currently at 6.79%, but that’s higher than anything seen from 2008 to 2022.
Still, the monthly-mortgage-payment-to-income ratio and the median-home-price-to-income ratio were lower in Baltimore last year than in the nation as a whole, according to NAR’s analysis of the metro’s housing market.
The 12-month sum of building permits for one housing unit through December stood at 3,679, which was “below the long-term average,” but “construction is on the rise relative to [the prior] year, suggesting that the local inventory has stabilized,” the NAR report said.
