New Mexico's Economy: Recent Developments and Outlook

New Mexico Data Users ConferenceAlbuquerque NM

November 13, 2014

Jeffrey MitchellDirector, BBER

Bureau of Business & Economic ResearchUNM

UNM Bureau of Business & Economic Research 2

Recent economic news from New Mexico

o Governor Martinez re-elected, in office through 2018; State House moves from Democrat to Republican (1st time since 1956).

o Union Pacific railroad –completion of $400 million hub facility in southern NM in May 2014. Border connection?

o Tesla – NM was one of five southwestern states competing for 6,500 job ‘Giga-factory’; NV received commitment in September.

o Emcore (successful tech firm) relocating HQ to California.

o State permanent funds – strong performance (value ~$20 Bn ~$1.15 Bn in new revenues in 2014). Ranks 3rd after Texas & Alaska. WY: 4th $5.6 Bn.

o Oil prices drop sharply – from $107 (June) to $79/barrel.

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Recent economic data from New Mexico

o Almost non-existent recovery from the Great Recession – employment remains 4% below pre-recession levels (2008).

o With exception of mining, employment growth mainly low wage sectors (e.g. administrative, hospitality).

o Health care – 2013-2014Q1 lowest rate of employment growth since at least 1990.

o Residential construction – currently 30% of pre-recession peak; improvement in 2012 & early-2013 but renewed slump in late-2013 & 2014.

o Mining/oil & gas – a bright spot (oil production & mining employment up 15%/year since 2010) but little impact on rest of the state economy.

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2002Q3

2003Q2

2004Q1

2004Q4

2005Q3

2006Q2

2007Q1

2007Q4

2008Q3

2009Q2

2010Q1

2010Q4

2011Q3

2012Q2

2013Q1

2013Q4

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

New Mexico United States

New Mexico & US employment growth: history

Sources: New Mexico – FOR-UNM; US – IHS Global Insight

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2009 2010 2011 2012 201395

97

99

101

103

105

107

109

111

USAZCONVNM

Employment growth: NM and Neighboring States, (2009=100)

Source: BLS Quarterly Census of Employment and Wages

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Employment growth: ABQ MSA and nearby MSAs

2007 2008 2009 2010 2011 2012 2013 2014

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Albuquerque Phoenix Denver Austin Salt Lake Las Vegas

Source: BLS Quarterly Census of Employment and Wages

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US & NM residential construction, 2001-2014Q3

20012002

20022003

20042005

20052006

20072008

20082009

20102011

20112012

20132014-0.5

0.5

1.5

2.5

3.5

4.5

5.5

0.0

0.5

1.0

1.5

2.0

2.5

NM Permits (Thousands, Left Axis) US Starts (Millions, Right Axis)

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Why is New Mexico’s recovery so weak?

oLoss of federal money – o Growth of federal spending is slower, and New Mexico is in a

weaker bargaining positon (Domenici/Bingaman effects).o Growth employment, procurements and transfers (including

income support programs) slower.

o No lead sector – Oil & Gas has minimal impacts. No growth in historically leading sectors (e.g. construction; professional & technical services, including national labs; government).

o Change in global & national patterns of economic growth – toward higher skill industries & occupations (e.g. Prof & Tech Services).

o Decline of local and regional banks and limited access to capital.

o Changing demographic patterns – cause or effect?

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Impacts of Oil & Gas development in New Mexico

Lubbock, TX

Las Cruces

Santa Fe

Midland-Odessa, TX

ABQ MSA has 44% of all jobs in NM.

Employment impact:100 jobs in oil & gas exploration and related services (NAICS 211 & 213) in the 3 NM counties in Permian Basin.

Source: IMPLAN

Fiscal impact:Taxes collect from oil & gas royalties contribute substantially to state financing, especially education, but contributions do not change automatically.

Region Jobs

SW NM 160 Rest of NM 31 Rest of US 121 Total 313

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New Mexico employment: rate of growth and state ranking by industry sector

Source: BLS Quarterly Census of Employment and Wages

%/yr Rank %/yr Rank Private 4.3% 8 0.7% 44

Natural resources and mining 1.5% 17 8.0% 4 Oil and gas extraction 4.2% 12 4.9% 16 Construction 3.8% 11 -1.2% 46 Manufacturing -1.7% 18 0.1% 40 Trade, transportation, and utilities 1.1% 10 0.8% 38 Information -1.1% 10 -2.9% 41 Financial activities 1.0% 27 -0.1% 41 Professional and business services 3.4% 6 -0.4% 50 Education and health services 4.6% 5 1.9% 23 Leisure and hospitality 1.9% 25 1.9% 41 Other services 1.8% 7 -1.0% 44

Public 1.6% 6 -1.3% 41 Total 2.0% 7 0.4% 49

2001-2007 2010-2014

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Job Growth in Prof & Tech Services: NM and Neighboring States (2009=100)

2009 2010 2011 2012 201390

95

100

105

110

115

120

125

USAZCONVNM

Source: BLS Quarterly Census of Employment and Wages

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New Mexico private employment: rate of growth and state ranking by establishment size

Source: BLS Quarterly Census of Employment and WagesNote: Data include only first quarter of each year.

%/yr Rank %/yr Rank

Private 3.4% 8 0.9% 47 Fewer than 5 employees per establishment 2.3% 19 -0.3% 48 5 to 9 employees per establishment 1.7% 18 0.6% 20 10 to 19 employees per establishment 2.8% 11 1.4% 19 20 to 49 employees per establishment 2.6% 19 2.6% 12 50 to 99 employees per establishment 2.4% 24 0.9% 48 More than 100 employees per establishment 5.2% 4 0.0% 50 Public 1.4% 15 -1.1% 40 All Establishments 2.9% 10 0.4% 49

2001-2007 2010-2014

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New Mexico: components of population change

Source: Census Bureau, 2000 and 2010 Decennial; 2012 and 2013 Population estimates.

Births Deaths Int'l Domestic

1990-1999 143,072 254,934 111,862 80,606 38,267 42,339 223,6782000-2009 129,591 265,766 136,175 70,558 47,343 23,215 200,149

2010-2013 36,121 88,993 52,872 (9,750) 5,837 (15,587) 26,3712012-2013 10,674 27,146 16,472 (8,809) 1,717 (10,526) 1,865

Total Population

Change

Natural Increase Net Migration

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New Mexico’s economic outlook

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New Mexico & US employment growth: forecast

Sources: New Mexico – FOR-UNM; US – IHS Global Insight

2010

2010

2011

2011

2011

2011

2012

2012

2012

2012

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

2017

2017

2017

2017

2018

2018

2018

2018

2019

2019

2019

2019

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

New Mexico United States

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New Mexico & US income growth: forecast

Sources: New Mexico – FOR-UNM; US – IHS Global Insight

2010

2010

2011

2011

2011

2011

2012

2012

2012

2012

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

2017

2017

2017

2017

2018

2018

2018

2018

2019

2019

2019

2019

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

New Mexico United States

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Western Blue Chip: forecasted employment and income growth, 2015

US New Mexico Arizona Colorado Nevada Texas Utah 0%

1%

2%

3%

4%

5%

6%

7%

1.8%

1.2%

2.8% 2.8% 2.8% 2.6%3.1%

4.6%4.1%

5.3% 5.3%

3.6%

6.2%

5.1%

Employment Personal Income

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New Mexico employment growth forecast: 2014-2018 (average annual rates)

Mining

Constructi

on

Manufactu

ring

Wholesa

le Trade

Retail Tra

de

Transp

ort. &

Ware

hsng.

Information

Finance

& In

sura

nce

Real Esta

te & Le

asing

Prof.&

Tech. S

vs.

Admin. & W

aste M

gmt.

Healthca

re &

Soc.

Asst.

Arts &

Recreation

Accom. &

Food Sv

s.

Other Servi

ces

Govern

ment

L

ocal G

ovt.

S

tate Govt.

F

ed. Govt.

NM M

ilitary

-3%

-2%

-1%

0%

1%

2%

3%

4%

Source: FOR-UNM

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New Mexico employment growth forecast, 2014-2018 (Number of Jobs)

Mining

Constructi

on

Manufactu

ring

Wholesa

le Trade

Retail Tra

de

Transp

ort. &

Ware

hsng.

Information

Finance

& In

sura

nce

Real Esta

te & Le

asing

Prof.&

Tech. S

vs.

Admin. & W

aste M

gmt.

Healthca

re &

Soc.

Asst.

Arts &

Recreation

Accom. &

Food Sv

s.

Other Servi

ces

Govern

ment

L

ocal G

ovt.

S

tate Govt.

F

ed. Govt.

NM M

ilitary

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

Source: FOR-UNM

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New Mexico Housing Permits: Single & Multi-Family Units, 2014-2018

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

NM Housing Permits (Multi Family) NM Housing Permits (Single Family) Growth (Total)

Source: FOR-UNM

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Employment growth by region, 2014-2018

Source: FOR-UNM

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Albuquerque Las Cruces Santa Fe Non-Metro

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Employment gain/loss by region, 2014-2018

-6-4-202468

10Albuquerque MSA

-2

-1

0

1

2Las Cruces MSA

-2

-1

0

1

2Santa Fe MSA

-6

-4

-2

0

2

4

6

8

10Non-Metro

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New Mexico employment growth forecast: alternative scenarios

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

2017

2017

2017

2017

2019

2019

2019

2019

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

Baseline Scenario Pessimistic Scenario Optimistic ScenarioSource: FOR-UNM

New Mexico's Economy: Recent Developments and Outlook

New Mexico Data Users ConferenceAlbuquerque NM

November 13, 2014

Jeffrey MitchellDirector, BBER

Bureau of Business & Economic ResearchUNM