Thursday, January 08, 2009
N.M. Econ Advice: Shut Eyes in '09
By Winthrop Quigley
Journal Staff Writer
Economists warned on Wednesday that the nation, the state, Albuquerque and Santa Fe will lose jobs for most of this year, and a spike in inflation looms when the recession ends.
On the plus side, Farmington and Las Cruces should avoid a recession, and smart investors could make a lot of money this year if markets recover as expected, according to speakers at the Annual Economic Outlook Conference, attended by about 500 people at the Embassy Suites in Albuquerque.
Eugenio J. Alemán, senior economist with Wells Fargo & Co., joked that if anyone has a pill allowing him to sleep through 2009 he'd be well advised to take it. "No doubt about it, this recession is going to get worse," he said.
Wells Fargo, a conference sponsor, expects the United States to lose 5.5 million jobs before the economy recovers in the second half of 2009, making this the worst recession since the 1930s. The United States lost about 2 million jobs in 2008.
The University of New Mexico Bureau of Business and Economic Research, another sponsor, believes New Mexico lost jobs in the fourth quarter of 2008 and will lose more jobs for at least the first three quarters of this year.
"New Mexico's economy is not yet in a recession," said BBER economist Larry Waldman, who defined a state-level recession as two consecutive quarters of declining employment. "(But) it's coming."
That would make this the first time New Mexico has joined the United States in a recession since the 1950s, according to the BBER.
Even so, BBER expects the state recession to be mild. Waldman said job growth should average a negative 0.2 percent in 2009. Personal income, which grew an estimated 5.4 percent in 2008, should grow only 1.9 percent in 2009.
Waldman said Albuquerque lost jobs in the third quarter, probably lost jobs in the fourth quarter and may not see job growth until early next year. Data for the fourth quarter is not yet available.
He said Santa Fe could rebound as soon as the second quarter of 2009 after spending three quarters in a recession.
Las Cruces job growth is being sustained by tourism, health care, and professional and business services. Farmington continues to gain oil and natural gas extraction jobs, as well as construction jobs related to the extraction industry, Waldman said.
New Mexico's recession is being led by losses of construction, manufacturing and finance jobs, he said. Declining employment is being mitigated by strength in health care and Indian casino-related hiring.
The biggest problem facing the national economy is consumer spending, which has declined for the past five months, Alemán said. "Retail experienced the worst holiday season probably in recorded history," he said.
Consumer spending accounts for about 70 percent of national economic activity. Spending is down partly because consumers cannot access as much credit as they once did, and partly because people have rediscovered saving.
"Why are we saving?" Alemán asked. "We're about to lose our jobs."
Federal efforts to stimulate the economy are necessary but come with a price, because for the foreseeable future the government is going to print money. "Inflation is going to come with a vengeance when we solve the recession," Alemán said. "Government has to get in and get out very fast" if serious inflation is to be avoided.
New Jersey-based financial manager Stewart Massey said conditions today are "dire," but stock market bargains will emerge at the end of what will be a volatile year. "There is tremendous value to be had," Massey said. "Fortunes will be made."
"We're not entirely through with the housing debacle," he said. Stock market prices these days generally have little to do with the value of the companies that issued the shares. "Fear rules the day. We still have more negative surprises on the horizon." Even the wealthy have stopped spending. "Small businesses are dying on the vine."
But the longer term looks promising, Massey said.
Tax rates will be stable or reduced, home buying incentives will begin to appear, mortgage rates will decline, and federal programs will reignite growth, he predicted.
"This is going to pass," Massey said. "This is not the end of the world."