Just in time for Thanksgiving, we finally have some good economic news. Without anybody really paying attention, New Mexico’s economy seems to have quietly turned the corner.
Although the evidence is tentative and not easy to read, for the first time since the Great Recession struck seven years ago, substantial signs suggest the New Mexico economy is slowly dragging itself out of the swamps. While one or two months may not establish a trend, these signs have been visible long enough that it is reasonable to conclude New Mexico has hit bottom and is starting to bounce back.
There are really two bits of good news, bits that point in the same direction but don’t always go hand in hand. First, for five consecutive months New Mexico has added jobs—not many jobs, and not the best jobs, but still jobs. Second, the unemployment rate continues to shrink.
The latest job picture, released Friday, shows, according to the state Department of Workforce Solutions, “New Mexico’s seasonally adjusted unemployment rate was 6.5 percent in October 2014, down from 6.6 percent in September and down from 6.8 percent a year ago.”
The report continues, “The rate of over-the-year job growth for non-farm payroll employment, comparing October 2014 with October 2013, was 1.1 percent, representing a gain of 9,100 jobs. Net job gains have been steadily increasing since June 2014 after eight months of year-over-year losses. Gains in nine industries more than offset losses in four others.”
Historically, New Mexico has always been later than the rest of the country to catch economic chills, and equally slow in healing. The last recession didn’t really hit New Mexico until late 2008. As of the autumn of 2008 (nine months after the start of the national recession) the state’s economy was so strong that Gov. Bill Richardson, in one of the most titanic errors he ever made, called the Legislature into special session to cut taxes because the state’s general fund was running such a large surplus. By the time the Legislature assembled for its regular session the following January, the surplus had disappeared and the recession had overtaken us.
Officially the national recession ended in June 2009, but New Mexico, even more belated than usual, remained in a land of hurt for another five years. Now maybe, just maybe, the worm has turned.
There are a couple of reasons it is so difficult to figure out what is really happening with New Mexico’s economy. One is that the reporting is so unreliable. TV stations, obsessed with visuals, have a visceral dislike of economic stories. And the Albuquerque Journal, which has always deemphasized economic news and given its business department few resources, sometimes simply gets it wrong. Here, for example, are the first two paragraphs of the story in Saturday’s Journal reporting the Friday jobs news:
“New Mexico’s unemployment rate and its job growth rose slightly in October, according to figures released Friday.
“The state’s seasonally adjusted unemployment rate was 6.5 percent, down from 6.6 percent in September and from 6.8 percent a year ago.”
So which was it, did the unemployment rate rise slightly, as the first sentence states, or go down, as in the second sentence. In fact, the first sentence is wrong and the second one right.
The second reason was explained in another Journal story in Sunday’s newspaper. The Journal’s able Washington correspondent was tasked with finding out what has been happening with federal spending in New Mexico, a key ingredient of the state’s economy. Because of a combination of factors, including reduced data gathering due to budget cutbacks and division of spending into numerous categories by many agencies and departments, the story concluded that there is no way of knowing how much Washington spends here or what the spending trend is. It did find out that Federal contracts in New Mexico declined by 17 percent over the past five years, while employment in professional and business services in the state have shrunk by almost 11 percent since 2007. Business and professional services notably include subcontractors of the Department of Energy, Kirtland Air Force Base, and Los Alamos and Sandia national labs.
While New Mexico is starting to show a steady pattern of job growth, the news is not all good. There are three reasons.
First, because the size of the state’s job force (people employed plus people actively looking for work) continues to shrink, the unemployment statistic is less meaningful than the steady decline would suggest.
Second, the Albuquerque metropolitan area, which includes the East Mountains and Torrance County, as well as Sandoval, Valencia and Bernalillo Counties, lags behind the rest of the state. This is highly unusual. Ever since World War II, growth in New Mexico has been centered in Albuquerque, which has led the state in jobs and prosperity. Because most of the modern economy is focused in the city, including export industries and what little manufacturing we have, it is hard to see how the state can prosper in the long term if the metropolitan area that accounts for nearly half of its residents remains in the doldrums.
Third, and perhaps most significant, the categories of jobs that are growing fastest pay the least and offer the worst benefits and job security, while the categories with the best jobs are still in decline. Government, construction, professional and business services, and manufacturing lost a combined 3,700 jobs. A majority of the total job growth over the past year (4,900 out of 9,100) was in education and health services.
What are the chances of the good news continuing? The signs are contradictory. The latest report on home sales, for example, shows substantial growth in sale prices and number of sales over the past year. New home construction, however, has yet to recover. And the number of sale, rental and lease signs at businesses in Albuquerque as well as Tijeras, Cedar Crest and even Madrid suggests businesses are still hurting. A drive along North 14 in Cedar Crest is downright depressing.
However, nationally the economy grew an unexpectedly strong 3.9 percent in the third quarter, the federal government reported Tuesday. Over the past six months, the growth has been stronger than any time in the past decade, suggesting that the lackadaisical national recovery from the recession is finally perking up. That national growth may help pull New Mexico along in its wake. It was also reported Tuesday that Albuquerque has the cheapest gas in the country, clearly a boon to our numerous long-distance commuters.
While New Mexico exports grew in the past year and for the first time topped $1 billion, much of that growth is in oil and natural gas. With their prices unusually low and threatening to go even lower (Brent crude is down to $80 at this writing and U.S. crude at $76), the value of New Mexico exports will decline. The federal government predicts low oil prices will continue for at least a year.
Meanwhile, the state budget, which depends on oil and gas for 30 percent of its revenue, is facing a severe squeeze over the next couple of years. Because most state spending is siphoned through municipalities, counties and school districts, local governments are also going to be squeezed.
How the state will respond—if at all—to these threats remains to be seen. The Legislature, meeting for its long 60-day session in January, will get proposals for expanded spending on economic development. The powerful Legislative Finance Committee is currently working on a $70 million package. The Legislature will also face renewed demands to use some of the income of the state’s two multi-billion-dollar permanent funds to finance early child education and perhaps other programs linked to long-term economic improvement. Gov. Susana Martinez, most Republicans and a few influential Democratic lawmakers led by Sen. John Arthur Smith, chair of the Senate Finance Committee, have until now opposed these initiatives.
So the good news is coming in small doses. Nevertheless, good news is still good news, and this is the time of year to give thanks for whatever we can get.
(Image by HonestReporting / CC)
November 26, 2014