March 14, 2016

No easy fix for NM’s economic woes

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Economic headlines for New Mexico have rarely been good in recent months.

Bag o CashIn November and December, the state led the nation in highest unemployment rate. In January, New Mexico improved, but only to 49th. Stories abound of people moving out of the state to states with better economic climate.

Which brings to mind the “r” word that everyone dreads when it comes to the economy: Recession. But one local economist argues that economic reporters shouldn’t be quick to jump the gun.

“There’s a great deal of room between ‘everything is great’ and ‘we’re in a recession,’” Jeff Mitchell, the director of the Bureau of Business and Economic Research, or BBER, told NM Political Report.

New Mexico, according to Mitchell, is actually in that wide gulf between a recession and a healthy economy.

Conversation of another downturn came after reports that Moody’s Investor Services considered New Mexico at risk of entering a recession. Moody’s made this judgement because of falling energy prices.Some areas of the state largely rely on drilling of oil and natural gas, which plays in with the state economy as a whole.

It could be some time before we find out if New Mexico is in a recession in the technical sense. Recession are defined as two consecutive quarters of negative gross domestic product (GDP) numbers, Gerry Bradley—the staff economist at New Mexico Voices for Children and former Bureau Chief of the Economic Research and Statistics Bureau at what was then called the New Mexico Labor Department—explained.

The most recent numbers on the state’s GDP are from the third quarter of 2015—the first quarter of 2016 ends in four weeks.

“In the case of New Mexico, data on GDP is either very late and/or unreliable,” Mitchell said.

Instead, Mitchell explained, economists largely look at job numbers.

These numbers show that New Mexico is by no means booming, but don’t warrant talks of a recession.

New Mexico is actually increasing jobs—albeit at a very low rate.

Albuquerque’s economy is growing

Albuquerque, Mitchell says, is a bright spot right now—a change from even just two years ago when the city was dragging the overall state economy down. At that time, other areas of the state, particularly the oil patch in Eastern New Mexico, were booming.

Now that picture is playing in reverse. As oil and gas producing areas see a rough road ahead, Albuquerque is rebounding.

“We’re having a difficult time getting all the different parts pulling together, all the different regions pulling together,” Mitchell said.

“Clearly Albuquerque is pulling the economy along” when it comes to job numbers, Bradley said, noting that non-farm job growth was just 2,600 in the state in the latest numbers but Albuquerque saw an increase of 5,000 jobs.

He saw a particular bright spot with the professional business services employment increases, which tend to be higher-paying jobs with a more highly skilled workforce.

It’s this kind of workforce that New Mexico largely lacks.

The game changed

Mitchell sees this as a possibly fundamental and structural change that came out of the national recession last decade.

“We’re shifting to a heavy reliance on very high level skills, which is why you have a class of people doing very, very well and and a class of people doing not well,” he said.

It’s the class of people who are not doing well who were “New Mexico’s bread and butter in a way” before the recession hit.

Bradley focused more on the construction industry, which was at the higher end of the pay scale for blue collar, middle class workers.

During the housing bubble, New Mexico had 60,000 construction jobs. Now, it’s closer to 40,000, according to Bradley.

“Maybe we could never expect it to come back, maybe it was never going to, but it sure hasn’t,” Bradley said. “Those are pretty good blue collar jobs that just kind of evaporated.”

Diversifying the economy

The answer to many of the problems the state faces in the face of declining oil and gas prices and shrinking federal spending is diversification.

Roundhouse“Diversification would be good,” Bradley said. “I had high hopes 20 years ago when Intel was expanding in the early to mid-90s that that was going to balance out the Albuquerque and even the New Mexico economy to some degree.”

He has hopes that the improving national economy will help New Mexico—but there could be a negative impact on the state if it doesn’t.

“We’re part of a national labor market and if the labor market is improving in the rest of the country and not here, people will move to the rest of the country,” Bradley said.

No one answer, of course, will fix all of New Mexico’s economic problems.

Mitchell ticked the boxes of significant obstacles, which included social issues, education, systemic poverty and more.

“It took us a long time to get there and it’s going to take us a long time to resolve those issues,” he said.

One problem Mitchell sees is the media coverage of economic issues.

“In my mind, that’s the story,” he said. “It’s not a sexy story.”

“It takes leadership that can look down the road,” Mitchell continued, “and do something that won’t show up this year or two in the next election cycle. And that’s a hard case to sell.”

Correction: This piece originally said a recession is two consecutive months of negative GDP growth; it is actually two quarters.

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