Esther George, president of the Federal Reserve Bank of Kansas City, on Wednesday highlighted three recent economic trends in New Mexico.
First, state and local government comprises about a quarter of all employment here, which creates a “drag” on the economy when that sector contracts, George said at an event at the Embassy Suites by Hilton Albuquerque.
Second, the number of adults ages 25 to 54 has declined in New Mexico over the past decade, which could challenge growth prospects for the state economy. Lastly, employment demands in New Mexico appear to be shifting to low-skill jobs, while the demand for high-skill jobs is holding steady. Nationwide, jobs that require a middle range of skills are disappearing.
“The question for New Mexico, and for the nation as a whole, is how we prepare young people for success in this type of economy,” George said. “It’s not a near-term issue, it’s a long-term one, but it’s important.”
In comments on the national economic outlook, George said indicators like high levels of employment and modest inflation mean interest rates will continue to rise gradually.
Alison Felix, Federal Reserve Bank of Kansas City vice president and Denver Branch executive, also spoke at the event. Among her takeaways on New Mexico’s economy:
— The state’s employment growth over the past year has picked up considerably, going from an average of -1.1 percent over the past decade to 1.4 percent over the past year.
— Most industries here have added jobs over the past year, particularly in construction, financial activities, natural resources and the mining sector, which includes oil and gas.
— Oil production has reached record levels in New Mexico, and the sector is up due to rising prices. Oil prices are expected to remain around $60 for the next two years.
— Out-migration from the state appears to be slowing.
— Home prices are nearing previous peak levels, but residential construction activity still remains at pre-recession levels.
— The tourism sector remains a key driver of growth. Hotel occupancy rates are at a 10-year high.
— Farm income is expected to decrease slightly in 2018, due to decreases in revenues for some commodities that offset increases for others.
Felix noted that the state’s export sector is heavily dependent on trade with China and Mexico, meaning that a protracted trade war could have a significant impact.
She also said it’s important to remember that New Mexico’s unemployment rate — at 5.8 percent, it is currently the second-worst in the nation — is about a percentage point higher than its average since 1980.
“Things are improving, and we’re seeing a lot of substantial gains,” said Felix. “But New Mexico still has a long way to go.”