2009 New Mexico Economic Outlook Conference 7 January 2009 Dr. Lawrence A. Waldman The New Mexico Economy: Recent Developments and Outlook BBER Bureau of Business & Economic Research

New Mexico employment growth has been consistently slowing since the second quarter of 2006, with only a single exception.

Even so, New Mexico employment growth has outpaced the national economy.

New Mexico personal income growth has kept up with the rest of the country, and has recently exceeded it.

The unemployment rate has remained very low for much of the time, but is now on the rise

Why has New Mexico economic growth slowed? CONSTRUCTIO N Housing: double-digit declines in new housing permits in each of the last ten quarters. Total permits peaked at 5,076 units in the second quarter of 2005, but reached only 1,958 units in the second quarter of 2008, and 1,216 units in the third quarter of Rising prices of construction materials. Credit crunch. Rising unemployment. Consumer sentiment at recessionary levels.

Why has New Mexico economic growth slowed? MANUFACTURING LAYOFFS Intel Eclipse Emcore CLOSURES DFA Cheese Plant Sparton Electronics Millennium Transit Windsor Foods

Why has New Mexico economic growth slowed? MINING Mining employment began to grow vigorously in early 2006 as oil prices eclipsed $70/barrel, and copper prices reached $3.50/lb. Most of the new jobs were in oil & gas exploration, drilling, and productivity enhancement, but several hundred came at the copper operation in Grant County. Employment growth later slowed, because it takes not just high but increasing oil & gas prices to continue to stimulate exploration, and there is also evidence that there was some difficulty in finding qualified oil field workers. In addition, employment in copper mining has ceased growing, and in fact is facing a layoff of at least 600 miners in early 2009.

Where have the jobs come recently? New Mexico Net Job Gains 2008:3 Total net new jobs = 4,967 (Net job gain = 9,466) (Net job loss = 4,499)

How have New Mexico’s Metros Fared? ALBUQUERQUE MSA THE STORY Weaknesses Housing Construction employment growth negative, last seven quarters Manufacturing employment growth negative last six quarters. Professional & business services growth slowing rapidly, last four quarters, negative in 2008:3. Financial activities employment growth negative, last two quarters Strengths Health care growth near 3.0% Local government employment growth at 3.0% in third quarter, reflecting expansion at Native American enterprises (casinos, resorts, hotels).

How have New Mexico’s Metros Fared? LAS CRUCES MSA THE STORY Weaknesses Manufacturing Information Construction Government Strengths Health care Professional and business services Leisure & hospitality

How have New Mexico’s Metros Fared? SANTA FE MSA THE STORY Weaknesses Manufacturing Construction Leisure and hospitality Professional & business services Government (local and federal) Strengths Health Care

How have New Mexico’s Metros Fared? FARMINGTON MSA THE STORY Mining (Natural gas) Construction

The shape of things to come For the next two years

The shape of things to come For the longer term

Sources of Strength

Additional Sources

THE OUTLOOK FOR THE METROS

Summary The pace of economic expansion in New Mexico has been on the decline for the last two-and-a-half years (2006:2 – 2008:3). Still, New Mexico economic performance was better than in the nation as a whole during that period. The causes of the continuing slowdown and slide into recession for New Mexico can be traced in major part to several sectors: construction, mining, and manufacturing. The New Mexico economy is slated for a mild recession in 2009, with a slow recovery beginning at the end of the year. Employment growth will increase slowly for the next few year, reaching 1.9 percent by Strength during the recovery period will come from the health care sector throughout, and from construction, manufacturing, and professional and business services in the later years.