Copyright © 2021 Albuquerque Journal
State and local experts expect New Mexico’s economy to grow quickly in 2021, but say it will take time before the damage wrought by 2020 is fully undone.
During New Mexico State University’s virtual Economic Outlook Conference Thursday, Charles Dougherty, vice president and economist at Wells Fargo Securities, said he expects the national gross domestic product to grow by around 5% in 2021, as restrictions on business operations continue to loosen.
Still, Dougherty said disruption from the pandemic was so severe that even steep growth likely wouldn’t be enough to get the economy back on the pace it was on until at least 2022.
“So clearly, we’re digging ourselves out of a hole,” Dougherty said.
Dougherty said the United States lost more than 22 million jobs during the depths of the downturn caused by the pandemic, about half of which have been recovered at this point. Spending on services remains well below where it stood before the virus began to spread.
Even if GDP does grow by about 5% in each of the next two years, as Dougherty predicts, it still won’t put the country’s GDP back on pre-pandemic rate of growth until 2022 or 2023, he said.
“We’re certainly not back to where we were at the start of 2020,” Dougherty said.
Still, Dougherty said there are reasons for optimism. Thanks in part to several rounds of federal stimulus, Dougherty said Americans have increased their savings by a “historically large” amount since the pandemic began.
“This is a lot of money that’s available to be spent over the next year,” he said.
Assuming new virus cases – which have declined sharply in recent weeks in New Mexico and across the country – continue to fall, Dougherty said business restrictions should continue to loosen.
The combination of safer access to shopping and restaurants and high levels of saving means consumer demand for in-person services should accelerate beginning in the second quarter of 2021.
“We’re probably going to see a burst of spending on these services,” Dougherty said.
Jim Peach, professor emeritus of economics at NMSU, said during the webinar that New Mexico may face a longer road to recovery than the nation as a whole, due to long-term structural issues.
Peach said the state’s unemployment rate, which stood at 8.2% in December, remains higher than the national rate. He said the pandemic may exacerbate New Mexico’s already high poverty rate for years to come.
“Recessions always hit the poor hardest,” Peach said.
Peach said New Mexico’s oil and gas industry has seen demand recover slightly since the middle of 2020, but described the market as volatile. He said New Mexico’s heavy reliance on the industry leaves it vulnerable to future ebbs and flows.
“We have a long road to recovery … and I don’t think we return to a pre-pandemic world,” Peach said.