The New Mexico and national economies are restrained by significant cuts in government spending and hiring but still should improve this year, according to economists who addressed the annual Economic Outlook conference Thursday in Albuquerque.
Wells Fargo Senor Economist Eugenio J. Alemán predicted the nation’s gross domestic product will grow 2.4 percent this year and 3 percent in 2015, after an estimated 1.7 percent growth rate last year.
Lee Reynis, director of the University of New Mexico Bureau of Business and Economic Research, said New Mexico employment should grow around 1.4 percent per year through 2018. The state’s employment grew only 0.2 percent in the 12-month period ending Nov. 30, the latest period for which Department of Workforce Solutions data are available.
Reynis forecast personal income will grow in New Mexico 4.3 percent this year, compared to a 1.8 percent increase in 2013. Some of that will be the result of increased spending on Medicaid funded by the federal Affordable Care Act.
“It’s easy to find evidence of improvement,” Reynis said. Most employment sectors are adding jobs. Nearly all sectors were losing jobs in 2010. That same year 27 New Mexico counties were losing jobs. Last year 10 counties lost jobs.
Both economists said local, state and federal government policies have slowed economic growth.
“The biggest difference between this recovery and previous recoveries is that growth was much stronger,” Alemán said. Recoveries generally mean 3.5 percent growth, rather than 2 percent growth, and employment usually grows by 200,000 jobs a month instead of the 180,000 jobs the economy is generating in this recovery.
The difference is in government hiring, mostly at the state and local level.
“The government destroyed 1.5 million jobs” and the private sector isn’t making up the difference, Alemán said.
Federal civilian and military employment constituted almost 14 percent of jobs in New Mexico before the recession. Today that segment is about 5 percent of employment, Reynis said.
Concerns about federal deficits are misplaced, Alemán said. Total federal government expenditures are now about 20 percent of gross domestic product, which is the average for 60 years, he said. The $800 billion federal deficit that Barack Obama inherited when he took office in 2009 is now down to $615 billion.
“The biggest thing we have to do is grow,” Alemán said. “Once growth comes back strong, the deficit takes care of itself.”
A real concern for both economists is the labor participation rate, which reflects the number of workers who have retired or who have given up looking for work. Nationally, about 60 percent of the work force is participating, compared to almost 70 percent before the recession.
A big reason is the number of baby boomers who are retiring, about 10,000 every business day. Alemán said younger workers often do not have the skills and training to replace those older workers, which could damage labor productivity and, therefore, GDP growth in the future.
New Mexico’s unemployment rate would be 14.1 percent instead of the official 6.7 percent if workers who have given up looking for jobs and people involuntarily working part time were counted, Reynis said. “We’ve had a very severe problem of joblessness in New Mexico,” she said.
One result is slowing population growth. New Mexico’s population grew 1.4 percent in 2009 and slowed to 0.1 percent in 2013 because more people are moving out of the state than moving in, Reynis said.
New Mexico’s recovery is also jeopardized by the state’s low wages, disparity in employment among ethnic groups, a declining middle class and a work force that is not equipped to handle 21st-century jobs, Reynis said.