new mexico economy: recent developments and outlook...new mexico economy: recent developments and...
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New Mexico Economy:Recent Developments and Outlook
Revenue Stabilization and Tax Policy CommitteeNovember 20, 2017
Since 2016 election, US outlook is stronger in theshort-term but slightly weaker in the long-term
Source: IHS Global Insight
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2017 2018 2019 2020 2021 2022
17-Oct 17-Apr 16-Oct
IHS Global Insight US GDP Growth Forecasts
New Mexico Economic Current Situation
o QCEW says NM lost 537 jobs (-0.1%) in 2017Q1 after a loss of 2,500 (-0.3%) – first loss in two consecutive quarters since 2010.
o CES shows +0.7 for both 2016Q4 & 2017Q1, and +0.9% and 0.7% for 2017Q2 and Q3; BBER estimates 0.2% for 2017Q2 and Q3.
o Changing pattern–in 2017Q1 Mining -1,390 jobs, Healthcare +1,480 (in 2016, Mining -5,700 jobs and Healthcare +4,625 jobs).
o Personal income growth weak (2.0% in 2017Q1 & Q2). Compared to past two years, wage & salaries less of a drag (1.9%; 2016=0.5%) and transfers no longer a positive factor (-0.1%; 2014-2015=8.6%).
o Public finances much improved – Gross Receipts & Personal Income taxes up; oil production and revenues up.
Changing Patterns of Job Growth
First consecutive quarters of job loss since 2011 occurred in 2016Q4 & 2017Q1
Source: US Bureau of Labor Statistics, QCEW.
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
5,000
10,000
15,000
20,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Preliminary survey data has been optimistic. BBER offers a more cautious estimate of recent growth
Sources: CES data available at time of FOR-UNM forecasts (pre-benchmarked); QCEW data current.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2015Q1 Q2 Q3 Q4 2016Q1 Q2 Q3 Q4 2017Q1 Q2 Q3
CES (Survey) QCEW (Actuals)
BBER Estimate
0.2% 0.2%
Gains/Losses in Healthcare and Mining are moderating
Source: US Bureau of Labor Statistics, QCEW.
8,000
6,000
4,000
2,000
0
2,000
4,000
6,000
8,000
10,000
2011 2012 2013 2014 2015 2016 2017
Healthcare Mining Government Other
Increased drill rig activity and oil production with WTI prices near $50/barrel
Source: EIA, Baker Hughes, ONGARD, IHS Global Insight.
0
20
40
60
80
100
120
0
50
100
150
200
250
300
Dri
ll R
igs
& W
TI P
rice
/Bar
rel
Pro
du
ctio
n In
dex
Oil Production Index Drill Rigs (Right) WTI Price (Right)
Change in Medicaid Payments
Source: US Bureau of Economic Analysis, Table SQ35.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
-$600
-$300
$0
$300
$600
$900
$1,200
$1,500
$1,800
%
Mill
ion
s $
Increase in Medicaid Transfers - Left
Increase as % of Total Personal Income - Right
Regions in New Mexico have not been pulling in the same direction
-6%
-4%
-2%
0%
2%
4%
6%
Albuquerque Non-Metro
Source: US Bureau of Labor Statistics
Improving State Finances
Consensus Revenue Forecast (FY17 and FY18)
Source: NM Legislative Finance Committee
Preliminary
FY17
Estimate
FY18
Total Recurring Revenue $5,905.5 $5,941.1
Total Nonrecurring Revenue $556.1 $18.7
TOTAL Revenue $6,461.6 $5,959.8
Total Recurring Appropriations $6,103.6 $6,082.2
Total Nonrecurring Appropriations $27.0 $0.0
TOTAL Appropriations $6,130.6 $6,082.2
Balance $331.0 ($122.4)
Beginning Reserves $147.7 $504.8
Ending Reserves $504.8 $382.4
Reserves as % of Recurring Appropriations 8.3% 6.3%
Gain/Loss in General Fund Accruals (FY17 v FY16)
Source: NM Legislative Finance Committee
$38.1
$1.6
$11.9
$53.5 ($48.3)
$61.8
$69.4
($31.5)
$39.1
($60) ($40) ($20) $0 $20 $40 $60 $80
Gross Receipts
Compensating Tax
Selective Sales *
Personal Income Tax
Corporate Income Tax
Mineral Production
Rents & Royalties
Investment Income
Other Recurring
Millions $
Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2
Source: NM Taxation & Revenue Department, RP-80s
(15,000) 0 15,000 30,000
San Juan
Otero
Rio Arriba
Cibola
Colfax
Taos
Santa Fe
Curry
San Miguel
Luna
Torrance
Chaves
Valencia
Remaining Counties
Los Alamos
Eddy
Lea
Bernalillo
Net $106 million, 12%
Gross Receipts Gross Taxes
$ Thousands
(150,000) 100,000 350,000 600,000
Otero
Chaves
Rio Arriba
Taos
Lincoln
San Miguel
Roosevelt
DONA ANA
Quay
Other 17 Cos
San Juan
Unclassified
Santa Fe
Torrance
Valencia
Eddy
Lea
Bernalillo
Net $.8 billion, 6.8%
Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2
Net $106 million, 12%
Gross Receipts Gross Taxes
($100,000,000) $900,000,000
Utilities
Mgt of Companies
Private Education Srvs
Public Administration
Arts, Entertainment,…
Agriculture
Information
Adminitrative…
Hospitality
Finance & Insurance
Healthcare
Profession & Tech
Other Services
Real Estate
Wholesale
Construction
Transportation
Manufacturing
Mining
($50,000,000) $0 $50,000,000
Unclassified
Agriculture
Arts, Entertainment,…
Public Administration
Private Education Srvs
Transportation
Manufacturing
Adminitrative Services
Mgt of Companies
Retail
Finance & Insurance
Hospitality
Utilities
Real Estate
Wholesale
Other Services
Healthcare
Mining
Profession & Tech
Construction
Net $1.8 billion, 6.8%
Source: NM Taxation & Revenue Department, RP-80s
$ Thousands
Tax Stabilization Reserve Fund (‘Rainy Day’ Fund)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
-$200
-$150
-$100
-$50
$0
$50
$100
$150
$200
Res
erve
Fu
nd
($
Mill
ion
s)
Actual Change in Balance
Projected Contributions under 2017 Legislation
$ Oil Value (Right)
o 2017 Special Session HB2 bill to tie funding of Tax Stabilization Reserve Fund (‘Rainy Day’ Fund) to Oil is a significant step forward.
o Best Practices suggest a need for clearer guidelines for withdrawals.
Changes to Tax Stabilization Reserve Fund (Actual vs. 2017 Legislation) and Value of NM Oil Production N
M O
il Sales ($ M
illion
)
Slow population growth and
declining labor force participation –
a cause and an effect of slow job growth
Migration, population and Labor Force Participation
BLS, through September 2017
-0.25%
0.00%
0.25%
0.50%
0.75%
1.00%
1.25%
1.50%
40%
41%
42%
43%
44%
45%
46%
47%
48%
Employment/Population
Labor Force/Population
Population Growth
Number leaving for 100 entering
< 63 63-80 81-110 111-149 150+
New Mexico net domestic migration
(-42,000)
Recovering residential market
but new little building
Building Permits and Housing Sales by Region
Source: NM Realtors Association; BBER
-
500
1,000
1,500
2,000
2,500
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2010 2011 2012 2013 2014 2015 2016 2017
Bernalillo Co Santa Fe Co Dona Ana Co San Juan Co Oil Patch Other Permits
Res
iden
tial
Sal
es
Un
its
per
mit
ted
fo
r C
on
stru
ctio
n
New Mexico Economic Outlook
Narrative Moving Forward
o For most of post-Recession, the state’s economic narrative has been driven by ‘external factors’ – oil boom & bust, Obamacare, even Intel job losses and uncertainty at national labs.
o In recent months, the state’s economic narrative is less about external factors – oil prices and production are relatively stable, the economic gains due to Obamacare are largely absorbed (and now the state is beginning to pay its share).
o How does the state economy move forward on its own?
New Mexico Economic Outlook: 2018-2022
o Improved outlook to stable job growth, slightly higher than labor force growth, allowing for gradual reduction in unemployment.
o Addition of 4,500 (0.6%) jobs in 2017Q4, closing the year +1,750 jobs (0.2%).
o Continued uptick in 2018 (6,900 jobs, 0.9%), and 8,725/year (1.1%) in 2019-2022. Job count to reach pre-recession high by end-2019.
o Income growth a drag on state’s economic growth through 2020. Most new jobs in relatively lower-wage sectors; lower expectations for growth of investment/proprietors’ incomes (from IHS Global Insight) and slow growth of federal transfers (e.g. Medicaid, SNAP, etc.)
o Oil production to increase gradually, given slightly weaker price outlook.
o Impacts of pessimistic (20%) greater than optimistic (15%) scenario.
FOR-UNM Employment Forecast
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3 2020Q3 2021Q3
Source: BBER FOR-UNM, October & July 2017
FOR-UNM Forecast Job Creation by Sector, 2018-2022
(1,000) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
Fed. Govt.
State Govt. Local Govt.
Accom. & Food Svs.
Arts & Recreation
Healthcare & Soc. Asst.Educ. Svs.
Admin. & Waste Mgmt.
Prof.& Tech. Svs.Real Estate & Leasing
Finance & Insurance
InformationTransport. & Warehsng.
Retail TradeWholesale Trade
Manufacturing
ConstructionMining
Source: BBER FOR-UNM, October 2017
Average annual job gains
(4,000)
(2,000)
0
2,000
4,000
6,000
8,000
10,000
12,000
2017 2018 2019 2020 2021 2022
Albuquerque Farmington Las Cruces Santa Fe Non-Metro
Source: BBER FOR-UNM, October 2017
FOR-UNM Forecast Job Creation by Region
FOR-UNM Personal Income Forecast
-4%
-2%
0%
2%
4%
6%
8%
2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3 2020Q3 2021Q3
Source: BBER FOR-UNM, October & July 2017
Forecast Personal Income Growth, by Component
Source: BBER FOR-UNM, October 2017
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Mill
ion
s $
Other Labor Income
Farm Proprietors' Income
Nonfarm Proprietors' Income
Transfer Payments
Dividends/Interest/Rent
Government Wages & Salaries
Private Wages & Salaries
Social Security Adjustment
2017 2018 2019 2020 2021 2022
FOR-UNM Employment Forecast, Alternative Scenarios
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2015 2016 2017 2018 2019 2020 2021
Baseline Scenario Pessimistic Scenario Optimistic Scenario
Source: BBER FOR-UNM, October 2017
BBER Provides New Mexico –
o Economic forecasts and analysis
o Customized data access and visualization tools
o Contract research
Jeffrey Mitchell, PhDDirector
Jennifer Esquivel505.277.8300
@UNMBBERbber.unm.edu