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NM’s economy veers off track

mb00_jd_24apr_job-growthWhat’s happening with New Mexico?

A state that long enjoyed an unemployment rate lower than the nation’s is now used to having among the highest rates. Lately, it has been the worst in the nation.

New Mexico’s job growth, also sunny at one time, has slowed to a crawl.

And it’s been this way for years.

mb00_jd_24apr_unemployment-rateIn fact, New Mexico has fewer jobs now than it did at the start of the recession in December 2007.

“This isn’t a one- or two-year blip,” said Jeff Mitchell, director of the University of New Mexico’s Bureau of Business & Economic Research. “Clearly something is different now than before the recession. It’s something that is significant and not just data noise or a bad day.”

Some of the reasons for New Mexico’s stagnant economy are obvious: The state’s oil and gas sector has been hard hit by the slump in oil prices at the same time federal jobs and dollars have been dropping, economists say.

Also, manufacturing jobs have been shrinking for years, while the construction industry has yet to fully recover from the Great Recession, said Jim Peach, New Mexico State University economist.

Mitchell adds that it’s possible New Mexico’s “relatively low-skilled workforce” is hurting the overall picture.

“Places that have well-educated labor forces are doing well around the country and around the world,” Mitchell said. “The people with skills and education are finding work and (good) wages. The places not known very well for a high-skilled workforce are doing poorly.”

Another issue is access to capital for small businesses following post-recession banking restrictions, Mitchell said.

“My guess is the explanation is not just one of these,” he said. “All of the above are playing out.”

But Mitchell offers another reason for why the state has suffered much more than other states and the nation as a whole: the rate at which New Mexico businesses are closing or shrinking their operations.

Bad news outweighs good

mb00_nm-vs-us-job-gains-and-lossesFirst, some good news: New Mexico, since 2010, has mostly outpaced the national average when it comes to the growth of new businesses. And when it comes to expansion of existing business, the state also has done relatively well: exceeding the nation in some years and at least staying even in other years.

But the bad news appears to outweigh the good, and that’s because of the rate at which businesses in the state are shedding jobs – either by shrinking or shutting down altogether.

In other words, New Mexico is losing more jobs than it’s adding. That’s why it’s been among the 10 worst states for overall number of jobs for at least nine years – many other states and the nation as a whole have seen a rising number of overall jobs.

“Even in the worst of times, New Mexico has outperformed the nation in job growth in new businesses,” Mitchell said.

However, states with healthy economies are focused more on their existing businesses than on bringing in new ones, he said.

“The point I would make is that … in New Mexico, our job creation strategy is lagging behind the rest of the country,” Mitchell said. “It very much focuses on attracting new businesses, and more recently even in establishing new small businesses. This is not how states that are doing well are growing.”

Peach agrees.

“Doing well on (job) openings doesn’t mean the entire economy gets some sort of boost,” he said. “We’re in a hard situation here.”

Matthew Geisel, New Mexico economic development secretary, says New Mexico’s job situation gets back to the state’s reliance on two shrinking sectors – oil and gas, and government.

Both have suffered losses, as have related businesses, such as those that provide services to oil and gas drillers, Geisel said.

He said one encouraging sign is that “we do see private-sector job growth in New Mexico.” State figures show that excluding the oil and gas sector, overall total nonfarm private employment increased by 1.03 percent in February compared to a year ago, according to preliminary numbers.

Geisel said it’s wrong to think the state is more interested in luring new jobs than in supporting what’s currently here.

About 59 percent of the Local Economic Development Act, a key state economic development fund, has been devoted to existing businesses since fiscal 2014, according to Geisel’s office.

“There is this misperception out there that all we do is support big corporations to move to New Mexico,” Geisel said. “The contrary is that a big chunk of our work is supporting these companies that are already here.”

Geisel said the state must diversify as it both brings in new businesses and helps existing ones so they don’t close or shrink.

“There’s a certain value that comes from 10 companies that create 50 jobs and there’s a certain value that comes from one company that creates 500 jobs, and they’re both important,” he said.

While New Mexico has had its ups and downs over the decades, Mitchell’s view is that the Great Recession has brought deep and structural changes to the state’s economy.

“This recession was not a sort of cyclical” event, he said. “It’s very clear that something’s changed, and no one really has a good answer or response to the problem.”

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