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New Mexico Economy:Recent Developments and Outlook
Senate Finance CommitteeJanuary 10, 2018
New Mexico Economic Narrative
• For most of post-Recession, the state’s economic narrative has been driven by ‘external factors’ – oil boom & bust, Obamacare, even Intel job losses and uncertainty at national labs.
• In recent months, the state’s economic narrative is less and less about external factors – oil prices and production are relatively stable, the economic gains due to Obamacare are largely absorbed (and now the state is beginning to pay its share).
• Where does the state on its own?
New Mexico Economic Current Situation
• QCEW says NM lost 537 jobs (-0.1%) in 2017Q1 after a loss of 2,500 (-0.3%) – First loss in two consecutive quarters since 2010.
• CES shows +0.7 for both 2016Q4 & 2017Q1, and +0.9% and 0.7% for 2017Q2 and Q3; BBER estimates 0.2% for 2017Q2 and Q3.
• Changing pattern–in 2017Q1 Mining -1,390 jobs, Healthcare +1,480 (in 2016, Mining -5,700 jobs and Healthcare +4,625 jobs).
• Personal income growth weak (2.0% in 2017Q1 & Q2). Compared to past two years, wage & salaries less of a drag (1.9%; 2016=0.5%) and transfers no longer a positive factor (-0.1%; 2014-2015=8.6%).
• Pressure on public finances less severe – Gross Receipts up 6.9% in 2017Q2; oil prices & production up.
Recent employment data based on surveys is strong. BBER is more cautious.
Sources: CES data available at time of FOR-UNM forecasts (pre-benchmarked); QCEW data current.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017Q1 Q2 Q3 Q4
CES (Survey) QCEW (Actuals)
BBER Estimates
0.5%
0.7%
1.0%
1.3%
4
New Mexico’s employment comparisons are improved.
Source: US Bureau of Labor Statistics, CES.
Growth
y/y Rank
Growth
y/y Rank
Growth
y/y Rank
Total Nonfarm 0.3% 45 0.7% 39 1.3% 18
Total Private 0.5% 45 0.8% 36 2.0% 12
Mining -19.4% 31 -20.0% 41 -1.7% 37
Construction 0.0% 39 -0.3% 34 6.2% 10
Manufacturing -0.1% 32 -4.4% 46 0.0% 38
Wholesale Trade -0.5% 38 -0.6% 40 -0.9% 35
Retail Trade 0.6% 41 -0.2% 42 0.9% 12
Transportaion & Utilities -0.3% 44 -0.1% 40 4.6% 8
Financial Activities 0.5% 41 -0.4% 45 4.0% 2
Professional & Business Services 1.0% 41 1.9% 23 2.3% 23
Education & Health Services 4.4% 5 3.9% 6 1.3% 35
Leisure & Hospitality 2.4% 34 3.3% 16 3.2% 6
Total Government -0.2% 34 0.2% 40 -1.1% 46
Local Government 0.2% 24 0.3% 36 -1.0% 47
State Government -1.1% 36 -0.1% 37 -1.7% 40
Federal Government 0.6% 33 0.5% 43 0.1% 16
2016Q42015Q4 2017Q4
5
Gains/Losses in Healthcare and Mining are moderating.
Source: US Bureau of Labor Statistics, QCEW.
6
Only recently are signs positive in bothAlbuquerque and Non-Metro regions
Source: US Bureau of Labor Statistics
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
Albuquerque Farmington Las Cruces Santa Fe Non Metro
7
General Fund benefitting from higher Gross Receipts and oil revenues (FY18 v FY17, through October)
Source: NM Legislative Finance Committee
$114.0 $6.6
$22.8
$22.2
$24.2
$81.1
$1.0
$22.0
$0 $20 $40 $60 $80 $100 $120
Gross Receipts
Compensating Tax
Selective Sales *
Personal Income Tax
Corporate Income Tax
Oil & Gas Revenues *
License Fees
Investment Income
Millions $
8
Increased drill rig activity and oil production with WTI prices near $60/barrel
Source: EIA, Baker Hughes, ONGARD, IHS Global Insight.
9
Sharp decline in Medicaid transfers, slowing job growth in Healthcare in New Mexico
Source: US Bureau of Economic Analysis, Table SQ35.
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
-$600
-$300
$0
$300
$600
$900
$1,200
$1,500
$1,800
Hea
lth
Car
e Em
plo
ymen
t G
row
th %
Gai
n/L
oss
in M
edic
aid
Tra
nsf
ers
(Mill
ion
s $
)
Increase in Medicaid Transfers - Left Healthcare job growth -- Right
10
Increased residential sales, but no growth in new home building
Source: NM Realtors Association; BBER
Res
iden
tial
Sal
es
Un
its
per
mit
ted
fo
r C
on
stru
ctio
n
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2010 2011 2012 2013 2014 2015 2016 2017
Bernalillo Co Santa Fe Co Dona Ana Co
San Juan Co Oil Patch Other
Building Permits (Right)
11
Economic Outlook
New Mexico Economic Outlook: 2017-2022
• Weaker near term forecast due to disappointing 2017Q1 QCEW employment data, slow single family housing construction, and weaker IHS Global Insight forecast, especially for incomes.
• Jobs forecast gain 4,500 (0.6%) jobs in 2017Q4, closing the year +1,750 jobs (0.2%).
• Jobs forecast gain 6,900 jobs (0.9%) 2018, and 8,725/yr (1.1%/yr) in 2019-2022. This forecast is ~ 1,600 jobs (-0.2%) lower July forecast.
• Income forecast marked down further – 2.7% in 2018, average 4.2% in 2019-2022. This forecast marked down -0.8% in 2018 and -0.3% 2019-2022 due to weaker jobs forecast, lower investment/proprietors’ incomes (from IHS Global Insight) and very weak transfers.
• Oil production to increase gradually, given slightly weaker price outlook.
• Impacts of pessimistic (20%) greater than optimistic (15%) scenario.
Global Insight, January 2018 and October 2017
US Employment Forecast
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
January 2018 October 2017
14
New Mexico Employment Forecast
Source: BBER FOR-UNM, January 2018 and October 2017
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
January 2018 October 2017
15
Job Growth by Sector, 2018
Source: BBER FOR-UNM, January 2018
(1,000) 0 1,000 2,000 3,000
Fed. Govt.
State Govt.
Local Govt.
Accom. & Food Svs.
Arts & Recreation
Healthcare & Soc. Asst.
Educ. Svs.
Admin. & Waste Mgmt.
Prof.& Tech. Svs.
Real Estate & Leasing
Finance & Insurance
Information
Transport. & Warehsng.
Retail Trade
Wholesale Trade
Manufacturing
Construction
Mining
-2% -1% 0% 1% 2% 3% 4%
Fed. Govt.
State Govt.
Local Govt.
Accom. & Food Svs.
Arts & Recreation
Healthcare & Soc. Asst.
Educ. Svs.
Admin. & Waste Mgmt.
Prof.& Tech. Svs.
Real Estate & Leasing
Finance & Insurance
Information
Transport. & Warehsng.
Retail Trade
Wholesale Trade
Manufacturing
Construction
Mining
16
Annual Job Growth by Sector, 2019-2022
Source: BBER FOR-UNM, January 2018
-1.0% 0.0% 1.0% 2.0% 3.0%
Fed. Govt.
State Govt.
Local Govt.
Accom. & Food Svs.
Arts & Recreation
Healthcare & Soc. Asst.
Educ. Svs.
Admin. & Waste Mgmt.
Prof.& Tech. Svs.
Real Estate & Leasing
Finance & Insurance
Information
Transport. & Warehsng.
Retail Trade
Wholesale Trade
Manufacturing
Construction
Mining
(3,000) 0 3,000 6,000 9,000 12,000
Fed. Govt.
State Govt.
Local Govt.
Accom. & Food Svs.
Arts & Recreation
Healthcare & Soc. Asst.
Educ. Svs.
Admin. & Waste Mgmt.
Prof.& Tech. Svs.
Real Estate & Leasing
Finance & Insurance
Information
Transport. & Warehsng.
Retail Trade
Wholesale Trade
Manufacturing
Construction
Mining
17
New Mexico Employment Gains/Losses by Region, 2017-2022
Source: BBER FOR-UNM, January 2018
18
Source: BBER FOR-UNM, January 2018 and October 2017
-4%
-2%
0%
2%
4%
6%
8%
10%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022January 2018 October 2017
New Mexico Income Forecast
19
New Mexico Income growth by component
Source: BBER FOR-UNM, January 2018
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Mill
ion
s $
Private Wages & Salaries Government Wages & SalariesDividends/Interest/Rent Transfer PaymentsNonfarm Proprietors' Income Farm Proprietors' IncomeOther Labor Income Social Security Adjustment
20
New Mexico Employment Forecast, Alternative Scenarios
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2017 2018 2019 2020 2021
Baseline Scenario Pessimistic Scenario Optimistic Scenario
Source: BBER FOR-UNM, January 2018
21
BBER Provides New Mexico –
Economic forecasts and analysis
Customized data access and visualization tools
Contract research
Jeffrey Mitchell, PhDDirector
Jennifer Esquivel505.277.8300
@UNMBBERbber.unm.edu