Maryland gained 8,100 jobs in July, but saw declines in government hiring, which had helped it get through the recession.
Private companies created 10,400 jobs, according to data released Friday by the U.S. Department of Labor, while government jobs fell by 2,300. About 1,500 of the government jobs were lost at the state and municipal level, according to the preliminary report.
Even as the number of jobs in the state grew, Maryland's labor force declined by slightly more than 7,900 workers. That meant unemployment in the state crept up to 7.2 percent, still far better than the national rate of 9.1 percent.
Federal spending helped the state weather the recession better than the nation as a whole, but Maryland has suffered since then amid wage freezes and other slowdowns and has seen cutbacks to federal agencies and contractors — a key part of the regional economy.
The Obama administration told federal agencies this week to expect 5 percent less funding and to develop plans for 10 percent less. State programs will also receive less federal funding.
Kurt Rankin, an economist with PNC Financial Services Group, said what happens in Washington has a direct impact on the state's job picture.
"This is not a trend we are going to see reversed anytime soon," Rankin said. "Government jobs are just not going to be grown with any consistency in the near future."
Local governments already are tightening their budgets.
"People are still being cautious about hiring at the state and local level," said Raquel Frye, an economist at RESI, Towson University's consulting wing. "They're being more fiscally responsible and cutting back on some of those positions that weren't being filled."
Gov. Martin O'Malley said Friday that Maryland cannot afford to lose government jobs "in this fragile economy."
"While our unemployment rate at 7.2 percent remains one of the lowest in the nation, it is unacceptably high," O'Malley said in a statement. "I urge Congress to come together for the sake of our jobs recovery, and to find a balanced, fiscally responsible approach that maintains the modern investments needed to create jobs in this modern economy."
The Labor Department also revised its June report, which had showed a decline of 300 jobs. The state actually added 4,500 jobs, according to the new data. Since January, Maryland has added a total of 13,900 jobs.
The state has shed 6,400 government positions, including 4,100 in local governments and 1,800 in the federal government, since July 2010.
Maryland's unemployment rate during the recession and recovery peaked at 7.7 percent in January 2010. After falling from that height, it has risen steadily this summer, to 6.8 percent in May and 7 percent in June.
Thirty-seven states saw their unemployment rate decrease in July from a year earlier, seven states and the District of Columbia reported increases, and six states had no change, according to the Labor Department.
Private-sector jobs have become a bright spot in Maryland's economy.
Joe Gonzales, a regional vice president based in Maryland for the staffing firm Robert Half International, said companies are now more willing to hire.
"Our local clients are more confident about their business prospects and certainly they want to hire," Gonzalez said. "Some are hiring now and some are waiting a little while, but they are definitely more optimistic about bringing in people, whether it is now or down the road."
But uncertainty remains.
Bank of America said Friday it is cutting 3,500 jobs as it continues to struggle with mortgage losses. The company declined to say how many jobs would be lost in Maryland.
"Certainly, you would like more stability," state Labor Secretary Alex Sanchez said.
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