For the first time in the decade, Maryland has added jobs at a faster rate than Virginia this year.

Recent data show jobs in Maryland grew 2.5 percent and 2.4 percent in April and May respectively, versus Virginia's 2.3 percent and 2 percent for the same months. That feat made Maryland the 13th fastest job-creating state, improving from 23rd in January.

The annual unemployment rate in the state was 3.7 percent, compared with 5.1 percent in 1997.

"Rarely does one see almost all aspects of an economy functioning near capacity, but that's happening in Maryland," said Anirban Basu, senior economist at RESI, a research institute of Towson University.

The state's rapid job growth has taken more than 62 percent of the state's welfare dependents off the rolls since January 1995, when there were 227,887 people receiving support, compared with just 86,468 in June this year.

"Both the state's incentives to go off welfare rolls and the economy's ability to absorb those who did have contributed to this decline," said Mark Zandi, chief economist at RSA Dismal Sciences in West Chester, Pa.

Mining posted the highest rate of growth at 7.7 percent, followed by transportation at 4.3 percent and construction at 4.2 percent. But the two biggest nonfarm employers -- services and trade, which account for almost 6 out of every 10 nonfarm jobs -- grew less aggressively at 3.8 percent and 0.7 percent respectively.

"Maryland has a mature retail industry and doesn't need to grow so much," Zandi said.

The sluggish manufacturing sector continued to flounder, generating negative growth of 0.8 percent compared with May numbers last year.

"Maryland is unique in that its economic structure is dominated by slower-growing industries," said Stephen S. Fuller, a George Mason University professor of public policy.

The decline in manufacturing, however, is not hurting the state's average wage earner. The average per-capita income in 1998 was up to $29,943 from $28,674 the previous year, making Maryland the sixth-richest state.

At the same time, state residents bear a heavy tax burden, paying the sixth highest per-capita rate in the country.

Still, Maryland's median income has increased more than $6,500 since 1994 to $46,685 in 1997 -- the third highest in the country. Virginia's median income, by contrast, ranked eighth with $42,957 per capita.

"Maryland has been an extremely wealthy state. Many of its households are very rich, and it has less of a rural population," Zandi said.

But Maryland is not going untouched by the slowdown in economic growth being experienced throughout the metropolitan area and the United States.

For instance, there is a clear fall in the sale of new automobiles in Maryland. New auto registrations at 32,655 in May were 1.44 percent less than those in April..

Adding to the region's slower growth is the scarcity of labor. In addition, Maryland has the unique problem of not being able to find workers with skills to match the jobs being created. But, Basu of RESI said, the state economy has enough momentum to carry on without a blip this year.

It is quite possible that the year-end Christmas spirit could jumpstart the economy once again through strong retail sales.

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Maryland's job growth outpaced Virginia's in May:

Non-farm employment, percent change from a year ago

Maryland

Jan. 1999 2.2

F 2.2

M 2.1

A 2.5

M 2.4

Virginia

Jan. 1999 2.5

F 2.5

M 2.5

A 2.3

M 2.0

SOURCE: RSA Dismal Sciences