New Mexico looked as though it was headed for a double-dip recession, but new data compiled for the Journal’s twice-yearly Economy Watch indicate the worst is over and a rebound has begun.
Albuquerque’s economy is lagging but seems to be stabilizing.
“We spent the past year talking about numbers which have been crazy,” said Lee Reynis, director of the University of New Mexico Bureau of Business and Economic Research, which compiles and evaluates Economy Watch data.
“The New Mexico economy seemed to be heading to a second recession, even though the nation wasn’t,” Reynis said. “Official employment statistics showed we were sliding further and further from the expansion path we thought we were on briefly.”
However, revised and more-accurate numbers show employment grew in New Mexico 0.4 percent in the last year. Total personal income for the fourth quarter was the highest it has been in at least two years, although growth in wage and salary income is lagging the nation’s along with the state’s employment growth.
Even the long-suffering construction sector is showing signs of life.
“We have a number of areas of the economy that seem to be doing well,” Reynis said.
Job growth improves
Employment growth was especially strong during the fourth quarter of 2012 in the transportation and warehousing sector, she said. Investments in New Mexico by Union Pacific and BNSF Railway, the emergence of Albuquerque and Santa Teresa as intermodal transportation centers, and a revival of commerce nationally have contributed to the sector’s strength.
Mining and extractive industries “continue to be a plus,” Reynis said. “Year-over-year increases published every month are not as large as they have been in the past couple of years, but they are still positive.” Oil prices remain strong, copper demand is recovering globally, and two major potash facilities have been opened in Carlsbad, she said.
“We’ve had some improvement in the outlook for construction,” Reynis said. “I think construction is indeed coming back. I can see a lot of life that I haven’t seen for a while. It’s encouraging.”
Census Bureau surveys indicate that for the first time in years there will be no year-over-year declines in construction employment in March, and there was a slight increase in construction employment year-over-year in December, she said.
F.W. Dodge surveys show commercial contractors are getting busier. Permits issued for home construction “clearly show improvement,” Reynis said. Permits were valued at $201.7 million in the fourth quarter and at $263.2 million in the third quarter, year-over-year increases of 25.3 percent and 50.4 percent respectively. “I think the underlying improvements in the housing sector are there,” she said.
Federal spending a concern
Declining federal spending continues to be a concern. Professional and business services, which includes work done by contract researchers, “have done terribly,” Reynis said. “It reflects cutbacks at Los Alamos. It probably reflects the research and development, a lot of it high tech, that depends on federal grants and federal contracts. I worry about that sector in particular. That sector is a pretty important barometer of what’s happening and how we’re doing.”
Although the spending cuts required by the sequestration process haven’t been fully implemented, federal agencies that contract with New Mexico firms “were clearly holding back on spending in anticipation” of sequestration.
Health and education employment continues to be strong, but the growth in employment has been slowing.
“Over the past few months, that particular sector statewide in different communities has not performed as well as it has historically,” Reynis said. “There are months when we’ve had declines year over year in employment. It’s become a sector about which there are some concerns.”
Health industry hiring accounted for 30 percent of the jobs added between 200 and 2008. Reynis sees “net job growth, but we also see a little bit of weakness,” possibly because other states are outbidding New Mexico for health-care labor.
‘Still the laggard’
“Albuquerque is still the laggard” in employment growth in the state and nationally, “although there has been improvement,” Reynis said. “We’re seeing improvement in construction activity, though I don’t have a positive number yet. Year-over-year declines are not as large as previously.”
Total Albuquerque-area employment declined 0.1 percent between the fourth quarters of 2011 and 2012, but previous quarters saw year-over-year declines of as much as 1.2 percent.
Construction employment was down more than 1,000 jobs in January from a year earlier, Reynis said, but permits for resident housing have increased in every quarter since the fourth quarter of 2011.
Albuquerque area employment in manufacturing, retail trade, professional and business services, and in government has declined in the last year.