April 12, 2024

What the low unemployment rates for months means for NM’s economy

Post-pandemic, New Mexico has had an extended run of low unemployment rates. New Mexico’s unemployment rate has remained stable at 4.0 percent since October 2023 with the state’s all-time lowest unemployment rate being 3.4 percent in August 2022, according to the Department of Workforce Solutions. Generally, a 4.0 percent unemployment rate is considered low and […]

Nicole Maxwell

Post-pandemic, New Mexico has had an extended run of low unemployment rates.

New Mexico’s unemployment rate has remained stable at 4.0 percent since October 2023 with the state’s all-time lowest unemployment rate being 3.4 percent in August 2022, according to the Department of Workforce Solutions.

Generally, a 4.0 percent unemployment rate is considered low and can have positive effects on the overall economy.

“Low unemployment usually indicates that businesses are expanding, consumers are spending, and overall economic activity is strong,” Legislative Finance Committee Chief Economist Ismael Torres told the NM Political Report.

Because of the low employment rate, it is of the utmost importance to grow the labor pool, Torres said.

“Typically, when you have a very low unemployment rate, that I think would be a positive sign for the economy,” University of New Mexico Bureau of Business and Economic Research director Michael “Mo” O’Donnell told the NM Political Report. “The problem this time is I think, there are a few other elements kind of dragging things down.”

These elements include elevated inflation and labor force participation.

The Consumer Price Index, the most widely used inflation measurement, in New Mexico was 3.4 percent in April 2024.

“It’s still above where people would like to see it. It was elevated, quite high, you know, a year and a half, two years ago and I think that there’s still a feeling that households and decision makers are still trying to catch up from that,” O’Donnell said.

As to workforce participation, the age ranges in New Mexico that have the highest unemployment rates are the 25-34 year olds with 7.0 percent unemployment and those aged 65 and up with 6.7 percent unemployment, according to the current New Mexico Labor Market Review.

“So if you compare the labor force participation rates, kind of pre- and post-pandemic, we’re still below where we were prior to the pandemic,” O’Donnell said. “And so, you know, I think that that is having an effect on businesses, because businesses are still having difficulty actually recruiting staff to come work for them, which, of course, is also contributing to inflationary factors.”

The current unemployment rate also reflects a change in worker attitudes since the COVID-19 pandemic when pandemic-based layoffs were rampant and workers felt confident to move on to other jobs, UNM Associate Professor of Finance Reilly White told the NM Political Report via email.

“Workers don’t wait by the phone for their old job to call them back – rather, they find new and better opportunities that award them with higher pay and benefits. We’ve seen this across the last few years, with both hiring and quit rates reaching historic highs in 2022,” White said. “The job market has since cooled somewhat, but we still see more job openings than the number of unemployed people (this is due to a skills mismatch between the jobs employers want to fill and the jobs people want to take).”

White also said that the New Mexico labor market was supported by immigrants, “with perhaps half the growth of last year’s job numbers coming from immigrants.”

There have also been other economic shifts in the 21st century, he said.

These shifts, influenced by globalization, technological advances and changing social attitudes towards work, include a decline in union membership, reevaluation in compensation for essential workers, remote work and technological advances including artificial intelligence, White said.

“The gradual decline in union membership has affected workers’ ability to negotiate for higher wages and better working conditions. This has broader implications for wage growth and income inequality, factors that in turn influence economic health and consumer spending,” White said.

In 2023, about 10 percent of workers nationwide were union members compared to 1983 when more than 20 percent of workers were union members, according to the Bureau of Labor Statistics.

Essential workers’ value was emphasized during the COVID-19 pandemic which led to compensation reevaluation in the more traditionally lower wage sectors, White said.

“This shift towards demanding better wages and benefits represents a structural change in the labor market and poses significant challenges for small businesses and certain sectors adjusting to higher labor costs (notably, leisure and hospitality),” White said.

Working from home, which many found out during the pandemic could be done easily, has remained a part of negotiability for workers “as flexibility commands a premium,” White said.

Technological advancements including artificial intelligence proliferation could allow for a workforce shift over the long term, White said.

“Immediate or catastrophic changes are unlikely – but the workforce will shift and employers will respond to higher labor costs by changing the way they do business,” White said. “The future is still unknown – since the pandemic represented a very extraordinary economy followed by an equally extraordinary recovery, the trends we’re seeing may not be sustainable in the years ahead.”