About Daraius Irani

Dr. Daraius Irani serves as the Executive Director of the Regional Economic Studies Institute (RESI) within the Division of Innovation and Applied Research as well as the Division’s Associate Vice President. Daraius and his team are often called by state agencies, private companies and local government to provide insight into proposed policies, development or forecasting the economy. Numerous reporters in print, radio and television rely on Dr. Irani’s insight into the local and state economy and other issues. With a deep passion for all things economic, his blog posts focus on a wide range of topics from immigration to the super bowl.
Daraius

Daraius

With three golf majors in the books and Tiger Woods’s career seemingly stalling, this might be a good time to examine the economics of golf. While there has been much discussion in the popular press about the demise of golf as a sport, and while we are bombarded with the rhetoric of how bad golf viewership, participation, and spending are in the post-Tiger world—is it really that bad, and are there forces that can save it?

 

golf

Photo Credit: Flickr

The golf industry was a $68 billion industry in 2011. The sport has contributed nearly $3.9 billion to charities, and it has generated $167.8 billion in total economic impact. In Maryland, the size of the direct golf industry is about $730 million, its total economic impact is around $1.3 billion, and it employs nearly 15,000 individuals working in everything from real estate to golf course operations.
Many in the broadcasting field have lamented the loss of Tiger Woods as a regular contender in tournaments. This loss has manifested in significantly lower television viewership. It has been estimated that when Tiger is not involved in a tournament, viewership falls by about 25 percent. On the retail side, stores such as Dick’s Sporting Goods have laid off 2 percent of their PGA staff and missed $34 million in sales in the first quarter of 2014.

 

golf1

Photo Credit: Flickr

Two trends seem to be at play: the loss of Tiger as a contender and a decline in rounds played. The decline in the number of rounds played may be attributable to the time it takes to play a round, which at some courses approaches six hours. The number of rounds played last year was 462 million, the lowest since 1995. There has also been a 35 percent drop in participation of those aged 19 to 35. Fewer people are watching golf and fewer people are playing golf, which has translated in a drop in sales for many of the golf retailers. In addition, more golf courses closed (150) than opened (14) in 2013.

 

Is there a bright ray of sunshine in this otherwise dark and gloomy prognosis? The answer is yes—participation of women aged 6 to 17 is actually growing. Moreover, due to recent efforts by the Ladies Professional Golf Association (LPGA) in increasing the purse and number of events, viewership has increased by 31 percent between 2010 and 2014. The hope for golf may not lie in the resurrection of Tiger Woods’s career but the growth in the careers of young LPGA players such as Lydia Ko or Gee Chun, the recent winner of the 2015 U.S. Women’s Open at Lancaster Country Club in Lancaster, PA.


DaraiusAs we reach the halfway point of the 2015 spring season, several things have transpired.  First, American Pharaoh has a chance to become the next Triple Crown winner, the Orioles can still win the World series, Tiger Woods and Lindsey Vonn have separated (who did not see that coming), and bicyclists in Lycra shorts and brightly colored jerseys have been racing down the roads of Maryland with their two-wheeled machines.  Many cyclists navigated the roads of Maryland the Friday before Preakness Saturday as part of National Bike to Work Day.  Numerous jurisdictions and associations sponsored events to encourage and rally those individuals who rode their bikes to work that day.  Now I could wax nostalgically about my days of biking in California and the extensive bike path systems that were prevalent in most California cities, but the purpose of this blog is to discuss the benefits and the economic impacts of bicycling, not to reminisce about my past.

 

There are numerous health benefits of biking, such as reduced risk of coronary heart disease, stroke, and other chronic diseases; reduced health care costs; and improved quality of life.  Biking benefits the environment as well—using a bike for trips under three miles has the biggest environmental impact, as these trips in car are the least fuel efficient and produce high levels of emissions.  Further, in congested areas, going by bike may be quicker.  One need only see the bike messengers whizzing about the city streets to understand that concept.

 

bikingAccording to a University of Wisconsin study, 48 percent of adults engage in some sort of bicycling activity.  If we look at bike commuting by state, only 0.20 percent of Maryland commuters bike to work (41st in the nation), versus 3.1 percent in Washington, DC (first in the nation). I suspect that much of the riding in Maryland is recreational rather than to commute to work.  Moreover, biking vacations are third to camping and hiking activities in the US and I imagine that holds true for Maryland as well.  For Marylanders, there are plenty of places to enjoy biking, including the C&O Canal, the NCR Trail, and the Great Allegany Passage, to name a few.  Interestingly, several breweries have set up near riding areas, so that cyclists can enjoy a cold one after a ride without having to go far from the trail.  Numerous jurisdictions have been much more deliberate about implementing long range biking transportation plans by developing dedicated lanes or widening shoulders.

 

So what are the economic impacts of biking in Maryland?  Based upon data from Wisconsin and focusing on the retail establishments, the economic impact of bicycling in Maryland is probably around $70 million per year and supports 1,200 jobs.  This does not include any employment or output generated as a result of bike tourism or related activities, which in many estimations could triple the above data in terms of impact.  So today when you are driving home and you see a bicyclist, please give him/her at least three feet (as it may be me), and know that their riding helps our economic growth.

 


Daraius

Daraius

As the nation enters its 68th month of recovery with falling gas prices, falling deficits, rising job numbers, a recovering real estate sector, and a booming stock market, some may ask what happened to Maryland. While many—myself included—have proclaimed that Maryland’s economy can be described as “Eds, Beds, Meds and Feds,” this characterization exemplifies the problems facing Maryland going forward.

 

Our job growth has been in the bottom third of the nation recently, and while our real estate market did not suffer the plunges into the abyss as experienced by the sand states (AZ, CA, GA, FL, and GA), our foreclosure rates are among the highest in the nation. Most notably, Prince George’s County is still struggling to recover. Maryland’s dependency on the federal government applies to not only its labor force, of which an estimated 5 percent are employed by the federal government and an additional 10 percent are indirectly supported by the federal government, but also numerous installations and agencies located in Maryland. So, when the federal government cut back spending, Maryland felt the effects across many sectors in the local economy.

 

Reducing Maryland’s Dependency on the Federal Government

Recently, the Augustine Commission released a series of recommendation, and one of the more prominent recommendations was to reduce Maryland’s dependency on the federal government. While that is easier said than done as this dependency not only impacts our labor force, but the federal government is the primary customer (in some cases the only customer) for many Maryland-based businesses. Moreover, many businesses do not realize that their services and products may have nonfederal uses domestically as well as internationally. Two recent announcements by the Greater Baltimore Committee (GBC) and Maryland’s Department of Business and Economic development (DBED) will provide assistance in diversifying Maryland’s economy, and RESI will play a role in both.

GBC logo DBED logo

Joining an Economic Development Network

Baltimore, through the efforts of the GBC, was selected to join an economic development network created by the Global Cities Initiative, a five-year joint program of the Brookings Institute and JP Morgan Chase. This initiative is focused on assisting business and civic leaders with growing their metropolitan economies by strengthening international connections and competitiveness. According to some projections, nearly 80 percent of global GDP growth between 2013 and 2018 is expected to grow outside the U.S. Moreover, over 40 percent of job creation comes from existing firm expansion, but only 5 percent of U.S. firms have plans for expansion through exporting.

Global Cities Initiative Logo

Receiving an Office of Economic Adjustment (OEA) Grant

logo_oeaThrough the efforts of DBED, Maryland was awarded an Office of Economic Adjustment (OEA) Defense Industry Economic Diversification grant. This grant is intended to assist defense communities in developing strategies to increase economic diversification to minimize impacts on regional economies due to potential declines in the Department of Defense’s budget. For example, St. Mary’s County’s economy is nearly 80 percent economically dependent on NAS Patuxent River. As a result, any small decrease in defense spending at NAS Patuxent River would have a disproportionate impact on the local economy.

 

RESI is fortunate to be involved in both projects. Our initial role is to provide an assessment of what the local defenses supply chain looks like as well as the levels of exports from Maryland-based businesses. The title of this post suggests that we have three events converging into one goal, and that is increasing Maryland’s competiveness worldwide while reducing Maryland’s dependency on the federal government.


Daraius

Daraius

A few years ago, I wrote a piece on the economic impact of the Orioles’ opening day. Little did I know that I would be following up with an analysis of postseason play. While I do not want to get ahead of myself, the prospect of—wait for it—being in the World Series confers additional economic impacts. October could be an economic boom to Baltimore City.

 

In postseason play, the percentage of out-of-town visitors increases at each game. Moreover, the closer the race, the bigger the crowds at local watering holes and hotels. Based upon some prior studies, we estimate that each playoff game that the Orioles participate in during the post season will support 50 annual FTE jobs, $3.3 million in state GDP, and about $350,000 in state and local tax revenues.

orioles

For cities in the postseason play, there are some additional economic benefits beyond the traditional ones mentioned above. Interestingly, these additional benefits may be driven by psychological factors. Some studies have indicated that postseason appearances actually increase productivity. An early study in this field determined that home teams’ victories actually resulted in increased production, while losses resulted in increased workplace accidents. Because of the timing of postseason play, a winning season may result in increased holiday spending by the fans. Finally, there is some evidence that charitable giving is higher in cities as a result of postseason appearances.

 

While the economic benefits of postseason play will be driven by increased hotel activity, restaurants, and paraphernalia as Baltimore is hosting some of the games, Baltimoreans will also be more productive, be less prone to workplace accidents, give more to charities, and spend more money over the holidays as a result of the Ravens postseason play. When the Orioles win the World Series, Baltimoreans may even see an increase in personal income. Regardless of these economic benefits, it will still be great to see a sign on I-95 reading, “Welcome to Baltimore, home of the World Series Champions, the Baltimore Orioles!” However, these impacts do not include the lost productivity due to the spike in absenteeism during the playoff. So, as they say, “Play ball!”


Daraius

Daraius

Later this month, a fifth casino will open its doors in Maryland, and in about two years, a sixth casino will open its doors. My question is this: Is there a sufficient consumer base to support this growth, or are the new casinos cannibalizing revenues in Maryland and the surrounding states in the region (New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, and Virginia)?

 

About thirty years ago, two states—New Jersey and Nevada—had casinos. For New Jersey, Atlantic City was the gambling destination for the East Coast; Las Vegas was the gambling destination for everywhere else. Additionally, Indian casinos came into prominence in the 1980s due to a Supreme Court ruling. However, in the last decade, the nation and the Maryland region have experienced an explosion of casinos and other gambling venues. The adult population or, more specifically, those who identify as wanting to gamble is not keeping up with the growth in the number of casinos opening in the region. Between 2000 and 2012, the adult population in the region (New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, Virginia, and Maryland) grew by 9 percent. However, the number of casinos grew by 183 percent during that same period.

 

Declining Gambling Revenues
As a result of this explosive growth, the media are full of reports on the share of gambling revenues declining across the region. This decline has resulted in several casino closures in Atlantic City. The gambling revenue is down in Delaware as well. In fact, there is a proposal to provide a subsidy to the casinos there. Gambling revenue is also down in West Virginia and Pennsylvania. Hollywood Casino Perryville saw a drop in its revenues once Maryland Live! Casino opened in Arundel Mills. I suspect that, when the Horseshoe Baltimore casino opens at the end of this month, Maryland Live! Casino will see a similar drop in revenue. Furthermore, when the MGM National Harbor casino opens in two years, another drop in Maryland Live! Casino’s revenue is likely to occur.

 

Image credit: South Bmore

Image credit: South Bmore

What is the underlying trend fueling this growth in casinos?
First, many states introduced lotteries as a means to raise additional revenues earmarked for specific programs such as education. Many states saw the success of other state’s gambling ventures and began to introduce gambling in their own jurisdictions, partly to keep their residents’ gambling spending in the state and partly to attract out-of-state gambling expenditures. The tax rate on gambling revenues is usually very high, but casinos are willing to pay due to the profitability of gambling ventures. For Maryland, it is a means for generating additional revenue as well as an economic development opportunity.

 

The economic development aspect of introducing casinos is somewhat tricky, and timing is everything. Being the first state outside New Jersey to allow gambling allows that state to generate enormous tax revenues and economic opportunity, as many out-of-state visitors are attracted to the new casinos. However, being the last state to allow gambling means that the number of new gamblers visiting from out of state is very limited.

 

Furthermore, the shifting in-state spending from local restaurants to local casinos does little in the way of increasing local economic activity. However, if local casinos can capture out-of state spending, then there will be an increase in local economic activity. In the Mid-Atlantic region—New York, New Jersey, Pennsylvania, Delaware, West Virginia, District of Columbia, Virginia, and Maryland—all but two, Virginia and District of Columbia, have legalized gambling. For Maryland and West Virginia, this disparity has proven to be a great geographic advantage, as Virginians and Washingtonians who wish to gamble can go to either West Virginia or Maryland to spend their money. However, within Maryland, the share of clients to each casino will likely drop as the number of casinos increases.


Daraius

Daraius

A long time ago, in a business cycle far, far away there was a great recession. Before this recession, jobs were plentiful, high-paying, and secure. The recession officially ended in June 2009, and, according to economists, I included, the economy has been in recovery for the last 60 months – one of the longest periods of recovery in the post-war period.  The stock market has soared to new heights and while energy prices still remain high, they haven’t spiked too much in recent years. In fact, the US is now a leading producer of hydrocarbons. The US has also enjoyed one of the lowest interest rate environments in its history. As a result, the housing market has picked up and consumers are spending again. In spite of all of the signs of an economic recovery, it still does not feel like an economic recovery. There is a disturbance in the force.

 

The Number of Jobs Created & the Challenge of the Long-Term Unemployed
A couple of factors are driving that disturbance. While nationally, the number of jobs being created every month has been impressive, they have fallen short of the need to fill those jobs that were lost as well as those jobs that should have been created. The difference is noticeable, and I had to ask, “aren’t you a little short for a recovery?” Moreover, the challenge of the long-term unemployed continues to cast a shadow over the recovery and we often mutter a prayer that we are not one of them. While these two factors contribute to the feeling of recovery malaise, there are two other often over looked factors that also contribute to that disturbance—part time jobs and the wages of the post recessionary jobs.

 

Part Time Jobs
The percentage of jobs classified as part-time has risen quite dramatically as the economic recovery has evolved. Nationally, the part-time job percentage has gone from less than 16% to over 19%. This could be a result of the types of new jobs being created. In fact, nearly 40% of the new jobs created in the post-recession period were in retail, food service, and temp jobs, which tends to have more part-time jobs than say the manufacturing sector. It seems the recovery is trying to pull a Jedi mind trick on us, but these are, in fact, not the jobs we’re looking for.

 RESIemploystatusgraphic (2)_small

Wages of Post-Recessionary Jobs
The second factor is the quality of jobs being created and by quality I am implying wages. The National Employment Law Project recently published findings supporting our analysis. While the economy has created jobs, the median wages of the jobs created fall dramatically short of the median wages of the jobs lost. In the US, fewer mid and high wage jobs were created than were lost, but more low wage jobs were created during the recovery. Sadly, this same phenomenon is repeated here in Maryland as illustrated by the infographic below.

RESIjobsinfographic_small

The challenge before us is to ensure that we as a nation or as a state do not end up with a labor force comprised of part-time workers earning low wages. Are you worried? We find your lack of faith disturbing.

 


Daraius

Daraius

This past week, I attended my ninth Maryland Economic Development Association (MEDA) annual conference. Each time I attend, I come away feeling smarter and better networked into the community of economic development. This year’s conference theme, “Research to Revenue: Harnessing Maryland’s Intellectual Capital for Economic Growth,” was very timely and interesting. The panels and speakers ranged from venture capitalists to entrepreneurs to practitioners.

 

Conference Overview
One of the key takeaways from the conference speakers and panels was that conventional thinking and practices will get the same outcomes. If everyone is doing the same thing, nothing will change. The opening keynote speaker challenged the way economic development practitioners view technology transfer projects. The closing keynote, a venture capitalist, suggested that economic development may have added success if states or localities invest in start-up companies outside the region and, if successful, then bring them to the state or locality to permanently set up shop.

 

My Presentation
I had the opportunity to present our work on the National Establishment Time Series (NETS) data. These data have 45 unique attributes for each company such as number of employees and sales from 1990 through 2012. Moreover, all the data are geocoded, a feature that enables us to analyze business trends at the sub-county level. We hoped that this availability of data and our analytical and mapping expertise would enable local economic development organizations to have better information about their counties and the business districts within their counties.

 

Entrepreneurs at MEDA
There were several panels of entrepreneurs who spoke of their challenges with funding, hiring, and the culture within their organizations. While the cultures in each varied dramatically—from a very cerebral quiet office to a rather loud and rambunctious shop floor—all were in agreement that the state and local resources used to assist entrepreneurs were instrumental in their collective success.

 

Finally, the closing speaker offered a great story of combining a family business with technology. Hooper’s Island Oyster Company was started by a waterman using technology, university scientists, and passion to create a sustainably farmed oyster sold locally as well as in the mid-Atlantic region. Moreover, I can attest that the oysters were absolutely delicious. So, all in all, this past MEDA conference was a great success both for the mind and taste buds.


Daraius

Daraius

Every February, restaurant reservations at romantic spots become very scarce, heart-shaped gift boxes of chocolates sell like hotcakes, and the price of a dozen roses seemingly rises along with the stress level of any one who is in a relationship and is looking for that perfect Valentine’s Day gift.  According to the National Federation of Retailers, an American will spend $133.91 on average on Valentine’s Day gifts, compared to $130.97 in 2013. However, only 54% of those surveyed will celebrate the holiday—down from 60% in 2013.

 

With the advent of the internet and smart phones, Valentine’s Day gift giving patterns may be changing. More than 40% of consumers will shop online or use their smart phones to purchase a Valentine’s Day gift. So, gone are the days of men (I say men as a majority of the Valentine’s Day spending, by over half, is done by men) dashing into a florist or jewelry shop to buy whatever is available on the way home from work. This is important, as over half of the women would dump their boyfriends if they did not get something for Valentine’s Day. Even a card would suffice, and Valentine’s Day is the next most popular holiday after Christmas for cards.

 

However, while the means to purchase Valentine’s Day gifts has changed, the mix of gifts have not changed; it is still cards, candy, flowers, dining, jewelry, or some combination of the above. Gifts of gym memberships or fitness equipment are usually not well received.

 

Women prefer to receive their gifts in the evening after nice dinners, while men prefer to get their gifts in the morning. With the exception of friends, most people will spend more on their pet for Valentine’s Day than on their coworkers, classmates, and teachers. Condom sales spike by nearly 30% on Valentine’s Day, and the month of March is usually the biggest month in sales of pregnancy tests. This figure is not surprising as 85% of men and women consider sex an important part of Valentine’s Day. Moreover, over 10% of couples get engaged on Valentine’s Day.

 

While Valentine’s Day retail sales are nearly $20 billion, Christmas retail sales are nearly $270 billion. However, forgetting a gift on Christmas may not have as significant an impact on your romantic relationship as forgetting a gift or getting the wrong type of gift on Valentine’s Day.

Image credit: Tada - click the image to view full Valentine's Day infographic

Image credit: Tada – click the image to view full Valentine’s Day infographic


Daraius

Daraius

As we are carving into our turkey (or tofurkey if you don’t eat meat) and enjoying the company of our families and loved ones (dysfunctional as they all may be), many retail employees will have already have worked a full day. Many stores will have been open since 6:00 a.m. to offer great, budget-pleasing deals to hardy shoppers.  This raises the question: why?

 

There are two challenges that face retailers. First, how do you squeeze out more shopping time between the Friday after thanksgiving and Christmas morning? Second, how do you top last year’s deals?  According to many sources, about 20 percent of the retail industry’s sales occur between Black Friday and Christmas.  Retail sales are expected to rise by about 4 percent. The holiday season can make or break a retailer, so this is a very important period.

 

Image credit: Joe Heller

Image credit: Joe Heller – Click the image to view more cartoons

A little history: the Friday after thanksgiving was named “Black Friday” by Philadelphia merchants in the early ‘60s.  It was considered a negative as it was named to describe the downtown crowds and traffic on both Friday and Saturday.  Now, it’s considered to be the official start of the holiday shopping season.  As internet shopping became more commonplace, and online retailers inevitably participated in this bacchanalia of shopping, a new term was coined in 2005: “Cyber Monday.” The term refers to the Monday following Thanksgiving. Cyber retail sales have more than doubled from $600 million to just over$ 1.4 billion between 2005 and 2012.

 

Retailers have addressed the first challenge, in effect, by creating one more shopping day—Thanksgiving Day.  The logical question, then, is whether this current event is a one-off or whether it will become the norm.  Will we soon have “Purple Wednesday,” the day before Thanksgiving Day, as a shopping day?

 

Retailers try to address the second challenge by offering goods that have very high perceived value: flat screen TVs, laptops, computers, etc., at a very low price.  Although this is becoming harder and harder with each passing year, I suspect that retailers will figure it out.  I am hoping that one day soon I can buy a new car as a gift on “Green Tuesday” at 1:00 a.m. for very little money, assuming I am one of the first five people in the door.


Daraius

Daraius

As August winds down, a mounting gloom begins to infect many school-age children as they realize that the lazy days of summer are coming to an end, and soon they will be back in school. For parents, there is both joy and sadness with this change of season. The joy is that the kids will be out of the house and in school. However, that joy is tempered with the fact that they will have to shell out anywhere from $285 to $635 to properly attire and equip their children for school, according to two surveys conducted by the National Retail Federation and International Council of Shopping Centers. For retailers, this is a little taste of Christmas in August. To lessen the financial impact on many families, seventeen states offer some sort of holiday from sales tax during August on clothing and school supplies.

 

These numbers are slightly down from last year, but still represent s a substantial amount of spending by consumers in a short period. For Maryland retailers, this translates into an additional $600 million to $1.3 billion in spending in August over what households would normally spend. To ensure that households spend all their back-to-school funds in one place, many retailers are advertising that they are a one-stop shop for everything related to going back to school and that they have the lowest prices.

 

So what does this “dog days of summer” spending translate into for Maryland’s economy? For every one million dollars spent on retail goods, nearly 22 jobs are supported, from direct jobs at the retail establishments to indirect and induced jobs at logistic firms, supermarkets, and other businesses. So, while many school-age children are bemoaning that the last weeks of summer vacation are whipping by like the Grand Prix racers in Baltimore, retailers are relishing the back-to-school season.